AI companies, meet the False Claims Act



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Artificial Intelligence (AI) companies are locked in an arms race, vying for venture capital dollars and qualified engineering talent. They are also fighting for lucrative government contracts to support the relentless growth-mentality so rampant in Silicon Valley and beyond. Most of those government dollars currently flowing to these firms are coming from one sector in particular: the defense industry.

To no one’s surprise, the U.S. military is desperate to get its hands on all this cutting-edge tech. Whether or not the companies live up to their promises of laser targeted weaponry and advanced intelligence systems remains to be seen. And while we’re all waiting to find out if they can, it would behoove these companies to learn that lying to the government carries some pretty strict penalties.

It’s time, in fact, for these tech firms to learn the lessons of a Civil War-era law.

During the Civil War, President Abraham Lincoln confronted a rash of companies trying to sell the Union Army fake goods. Lincoln knew that the best way to stop companies from cheating the government was to incentivize individuals to come forward and tell the government directly. Thus, he created the False Claims Act, to stop what we would now call defense contractor fraud.

The False Claims Act provides that any individual who knows about a company cheating the government can step into the shoes of the government and sue the company on its behalf. The government then has the right to investigate the claims brought by the whistleblower (or “relator” as whistleblowers are officially known in the False Claims Act) and decide whether to take on the case as its own.

The law provides that the government may recover up to three times the amount it was defrauded, plus penalties. And if the government does act on the whistleblower’s information, the whistleblower is entitled to a share of whatever it recovers.

The False Claims Act was mostly dormant for years, until a rash of defense contractor fraud in the 1980s encouraged Congress, led by Sen. Chuck Grassley (R-Iowa), to amend and strengthen its provisions. Since then, the False Claims Act has become the government’s main tool for recovering funds from shady companies.

The goods bought by the army may look a little different these days, and the companies that sell these goods may also look more sophisticated. But unfortunately, it remains as crucial today as before to stop the scourge of defense contractor fraud.

More and more AI companies (and tech companies more generally) are actively joining the defense industry. Companies are advertising to the military that their systems can, for example, provide enhanced data analytics allowing the government to better surveil intelligence targets. Others are advertising increased drone warfare accuracy. Still others are selling the military on the idea that AI can aid in the development of more accurate mapping systems.

As these companies get deeper into the defense contracting business, it’s time they learned about how the False Claims Act works, and what risks they run if they lie about their technical capacities. Government prosecutors and whistleblowers have not been shy about bringing cases against defense companies for doing just that.

For example, Northrop Grumman paid millions of dollars to the U.S. government for allegedly failing to ensure that its component parts in a navigation system could sustain extreme temperatures. In another example, the predecessor company to ATK Launch Systems paid millions for selling the government signal flares that allegedly didn’t work.

Reasonable minds may disagree about whether AI or the related concept of machine learning is a true watershed moment in the history of tech development. But there is no question that these companies have done an excellent job of selling themselves as such.

Whether their technology lives up to the hype is no longer just a concern for their venture capital backers, however. With their full entry into the government contracting business, it’s now a concern for the American taxpayer as well.

AI companies would be well-served to learn the lessons of their defense contractor predecessors and acquire a healthy fear the power of the False Claims Act. American taxpayers don’t like paying for goods that don’t work as advertised, particularly not when their military depends on them. AI companies need to know that there is a high price to selling the American public on Big Tech dreams that cannot be realized.

Poppy Alexander is a whistleblower attorney at Whistleblower Partners LLC.



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