False Claims Act Defense for Food and Agriculture Companies

Your company takes federal money. Maybe it arrives as SNAP redemptions at the register, maybe as a USDA supply contract, a crop insurance indemnity, a research grant, or the duty calculation on an imported container.

Whatever the channel, the paperwork behind it gets handled as an accounting function. Somebody in operations fills in a form, somebody in finance sends the invoice, and nobody in the building thinks of any of it as a legal filing. Federal prosecutors and whistleblower counsel work in exactly that gap, and False Claims Act defense begins the moment it closes.

Between us we handle FDA and USDA enforcement and administrative matters, False Claims Act defense, and more than 100 SNAP administrative and judicial review proceedings before the Food and Nutrition Service and in federal district courts around the country, alongside the firm’s broader food and agriculture practice. The pattern we see is consistent. The first sign of trouble is rarely a lawsuit. It is a request for documents that arrives without a filed complaint attached, and the company answers it the way it would answer an auditor.

This article covers the ground a food or agriculture business needs before that request lands. What the statute prohibits, and why a routine billing error can satisfy it. How a sealed whistleblower suit works, and what the government’s intervention decision means for your exposure. What a Civil Investigative Demand is and the 20-day clock it carries. What treble damages and per-claim penalties cost at current 2026 figures. And where the federal program track runs on a separate, much faster schedule than the litigation does.

Why Food and Agriculture Companies Now Need False Claims Act Defense

The False Claims Act is a Civil War statute that Congress rebuilt in 1986, and for most of the four decades since, industry read it as a health care and defense problem. That reading no longer holds. In the fiscal year ending September 30, 2025, the Justice Department reported more than $6.8 billion in False Claims Act settlements and judgments, the highest single-year total in the statute’s history, against a running total above $85 billion since 1986.

Look past the headline number and the picture sharpens for food and agriculture. Health care accounted for $5.7 billion of that total. The balance sits in the Department’s third bucket, matters where the client agency is neither HHS nor Defense, and that bucket alone produced $532.6 million in settlements and judgments in a single year. USDA, the Food and Nutrition Service, the Risk Management Agency and Customs and Border Protection all live in that bucket.

The Department also stood up a cross-agency Trade Fraud Task Force in the same period, aimed squarely at importers who misrepresent the type of goods, disguise merchandise, or misstate country of origin to reduce duties owed. That is a reverse false claim under section 3729(a)(1)(G), and it is the fastest-growing exposure for any company that imports ingredients or finished product.

Two features of the statute do most of the work against defendants. The first is the definition of knowledge. Under section 3729(b)(1), a person acts “knowingly” if they have actual knowledge, act in deliberate ignorance of the truth, or act in reckless disregard of it, and the section closes by stating that these terms “require no proof of specific intent to defraud.” Nobody has to have meant to cheat.

Second is the definition of “obligation” in section 3729(b)(3), which reaches “the retention of any overpayment.” Money you were paid by mistake and kept becomes an obligation you avoided. For a company that discovers a decade of small overpayments in a program reconciliation, that sentence is the whole problem.

Qui Tam Suits and the Government’s Intervention Decision

Most False Claims Act cases do not begin with the government. They begin with a person, usually a former employee and sometimes a competitor or a consultant, filing a qui tam complaint on the government’s behalf. Section 3730(b)(2) requires that the complaint “be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.” That single procedural fact shapes False Claims Act defense more than any other.

Read that sentence twice, because the practical consequence is the whole ballgame. A lawsuit naming your company exists, and you are not told. Section 3730(b)(3) then lets the government move for extensions of the seal for good cause, and in practice those extensions stack. Companies routinely learn about a complaint that has been under seal for two or three years, during which the government has interviewed the relator, subpoenaed third parties, and built its theory without hearing a word from you.

At the end of the seal the government makes its election under section 3730(b)(4). It either proceeds with the action, taking primary responsibility for prosecuting it, or notifies the court that it declines to take over. Whistleblower recovery tracks that decision directly. Under section 3730(d), a relator receives “at least 15 percent but not more than 25 percent” when the government proceeds, and “not less than 25 percent and not more than 30 percent” when it declines and the relator carries the case alone.

The volume behind all of this is climbing sharply. Whistleblowers filed 1,297 qui tam suits in fiscal year 2025, breaking the previous record of 980 set the year before, and the government opened 401 new investigations of its own.

The Civil Investigative Demand, and Why It Is Not an Audit Letter

For most companies the first contact is a Civil Investigative Demand, issued under 31 U.S.C. 3733. It looks bureaucratic. It is not. The statute authorizes the Attorney General or a delegate to issue one “before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b).” Practical False Claims Act defense starts here, with a document most companies mistake for routine correspondence.

That second clause is the tell. A CID can be issued before the government decides whether to intervene in a qui tam action, which means a sealed complaint naming your company may already be sitting on a docket. When we see a CID arrive at a food company, our working assumption is that a relator exists until the record shows otherwise.

A CID also reaches further than a subpoena. It can require a company to produce documents, to “answer in writing written interrogatories,” to “give oral testimony,” or any combination of the three. Written interrogatories under oath and compelled testimony are not tools a grand jury subpoena gives the government, and both create sworn statements that follow the company into litigation.

The deadline is short and it is easy to miss. A recipient may petition to modify or set aside the CID within 20 days after service, or at any time before the return date specified in the CID, whichever is earlier. Miss that window and the objections you had about scope, burden, or privilege are largely gone.

Confidentiality is narrower than most executives assume. Material produced is restricted to Justice Department personnel unless the producing party consents, or unless disclosure runs to Congress or another agency in furtherance of its statutory responsibilities. For a food company, “another agency” often means USDA, FDA or CBP.

Treble Damages, Per-Claim Penalties, and the Program Consequences

The remedy structure is what makes False Claims Act defense different from ordinary contract or regulatory work. Section 3729(a)(1) imposes three times the damages the government sustains, plus a civil penalty on each violation. Those penalties are adjusted for inflation, and the figures most articles quote, $5,000 to $10,000, are the 1986 statutory numbers. They are roughly a third of what applies today.

The current amounts sit in 28 C.F.R. 85.5. For penalties assessed after July 3, 2025, the range is $14,308 to $28,619 per claim. The Justice Department confirmed in a July 15, 2026 notice that there is no cost-of-living adjustment for 2026, so the 2025 levels stand. Anyone building a False Claims Act defense on the older figures is understating the exposure by roughly two thirds.

Section 3729(a)(2) offers one meaningful reduction, down to double damages, and its conditions are strict. The company must furnish officials with all information known about the violation within 30 days of first obtaining it, must fully cooperate with the investigation, and must act before any criminal, civil or administrative action has commenced and without actual knowledge of an existing investigation. In practice, the third condition means the 30-day clock expires the day a CID lands.

The limitations period under section 3731(b) is longer than most companies expect. An action may be brought within six years of the violation, or within three years after the responsible federal official knew or should have known the material facts, but never more than ten years after the violation, whichever is later. A ten-year lookback across a claim file is why per-claim penalties, rather than damages, usually drive settlement.

Building the Defense While the Case Is Still Sealed

Everything worth doing in False Claims Act defense happens before the complaint is unsealed, and it comes down to three questions the government has to answer and most investigations answer weakly.

Was the requirement material? Not every regulatory violation supports liability. Materiality is a high bar, and the strongest evidence of immateriality is usually the agency’s own behavior. If the government kept paying claims after it learned of the practice, that fact does real work. It also means the payment history sitting in your own files is defense evidence, which is another reason the litigation hold matters more than it looks.

Did the company actually know? Deliberate ignorance and reckless disregard are broad, but they are not negligence. A company that read an ambiguous rule, reached a defensible interpretation, and documented it sits in a very different position from one that was warned and carried on.

The Barco Uniforms complaint the Justice Department filed in fiscal year 2025 is instructive on the wrong side of that line. The government alleged the defendants continued to underpay duties even after a third-party auditor recommended they double-check their calculations. Written warnings you did not act on are the scienter case.

Is the claim count real? Because penalties attach per claim, the government’s arithmetic is worth attacking directly. What counts as a claim, whether an invoice and its underlying line items are one violation or many, and whether the alleged practice actually touched every transaction in the file are all contestable, and they move the exposure figure by orders of magnitude.

One structural question is worth watching alongside all of this. In 2024 a federal district judge held the qui tam provisions unconstitutional under the Appointments Clause, and no other court has followed. Every other district court to reach the merits since has rejected the challenge. The question now sits with two appellate courts. The Eleventh Circuit heard argument in December 2025 and the Third Circuit in March 2026, and neither had ruled as this article was published. It is not a defense you can build a case on today, but it is a live issue your counsel should be preserving.

How OFW Law Defends False Claims Act and Program-Integrity Matters

OFW Law has represented food, agriculture and FDA-regulated companies before the federal agencies that refer these cases for as long as those agencies have been referring them. It matters more than it sounds. A False Claims Act case against a food company is almost never only a Justice Department case. It runs alongside an FNS charge letter, an FSIS enforcement action, an FDA warning letter, or a CBP penalty proceeding, and the positions you take in one bind you in the others.

Our False Claims Act work sits inside that agency practice rather than beside it. Mason Weeda handles FDA and USDA enforcement and administrative matters, class action defense, and False Claims Act defense. Stewart Fried has handled more than 100 SNAP and WIC administrative and judicial review proceedings covering trafficking, authorization withdrawals, business integrity issues and SAM List removal, before FNS and in federal district courts across the country.

For importers, our customs and international trade team handles the duty-evasion theories the Trade Fraud Task Force is now pursuing under this same statute.

If a Civil Investigative Demand has arrived, or an FNS charge letter is sitting on someone’s desk, the useful move is a conversation before anything is produced or answered. Our litigation practice handles these matters from the first CID through resolution, and our government relations group works the policy side where a program-wide interpretation is what is really in dispute.

Common Questions About False Claims Act Defense

What are common defenses in a False Claims Act case?

The recurring ones are materiality, scienter, the claim count, and the timing bars. Materiality asks whether the requirement the company allegedly violated actually mattered to the government’s payment decision, and continued payment after the agency learned of the practice is strong evidence it did not. Scienter asks whether the company had actual knowledge, was deliberately ignorant, or acted in reckless disregard, which a documented and reasonable reading of an ambiguous rule can defeat. The claim count matters because penalties attach per claim. The public disclosure bar and the first-to-file bar can remove a relator entirely, and the limitations period in 31 U.S.C. 3731(b) can cut off older conduct.

What is the difference between a subpoena and a Civil Investigative Demand?

A Civil Investigative Demand is issued under 31 U.S.C. 3733 by the Attorney General or a delegate, before a civil action is filed or before the government elects whether to intervene in a sealed qui tam case. Unlike a grand jury subpoena, it can compel three different things. Production of documents, written answers to interrogatories under oath, and oral testimony, or any combination of them. It is a civil tool used in a civil fraud investigation, and the material produced is restricted to Justice Department personnel unless the producing party consents or the disclosure runs to Congress or another agency acting within its statutory responsibilities.

What are the elements the government must prove in a False Claims Act case?

In the standard presentment case under 31 U.S.C. 3729(a)(1)(A), the government must show a claim was presented for payment or approval, that the claim was false or fraudulent, that the defendant acted knowingly, and that the falsity was material. Section 3731(d) requires the United States to prove every essential element, including damages, by a preponderance of the evidence rather than the criminal standard. Section 3729(b)(1) closes the door on an intent defense, because the statute states expressly that these terms require no proof of specific intent to defraud.

Are Civil Investigative Demands confidential?

Partly, and less than most executives assume. Section 3733 restricts the material a company produces to Justice Department officers and employees, but it permits disclosure to Congress and to other agencies in furtherance of their statutory responsibilities. For a food or agriculture company that usually means USDA, FDA or CBP may see what you produce. There is also no statutory gag on the recipient, so nothing stops you from telling your insurer, your auditor or your board, and in most cases you should.

How much can a False Claims Act case cost a food or agriculture company?

Three times the government’s actual loss, plus a civil penalty of $14,308 to $28,619 on each individual claim, under 31 U.S.C. 3729(a)(1) and the adjusted figures in 28 C.F.R. 85.5. On a high-volume file the per-claim penalty dominates, and a few thousand invoices can generate a statutory maximum in the tens of millions on a six-figure loss. A company that discloses within 30 days of learning of the violation, cooperates fully, and gets there before any action commences can have damages reduced to double under section 3729(a)(2). Program consequences run separately, including suspension, debarment and, for a SNAP retailer, permanent disqualification.

If the government declines to intervene, does the case go away?

No. A declination improves your position substantially, but under 31 U.S.C. 3730(c)(3) the relator has the right to conduct the action alone, and the relator’s share rises to between 25 and 30 percent when they do. In agencies outside HHS and Defense, declined qui tam cases have produced more than $913 million in recoveries since 1986. A defendant who prevails can recover reasonable attorneys’ fees under section 3730(d)(4), but only where the court finds the claim was clearly frivolous, clearly vexatious, or brought primarily for harassment, which is a high bar.

Primary sources. The statute sits at 31 U.S.C. 3729, with the qui tam procedure at 31 U.S.C. 3730 and the Civil Investigative Demand authority at 31 U.S.C. 3733. Current per-claim penalty amounts are published at 28 C.F.R. 85.5. The fiscal year 2025 figures come from the Justice Department’s annual False Claims Act statistics release.