The basic principle of the False Claims Act (FCA) is simple. The law empowers whistleblowers to sue contractors that are allegedly defrauding the government and share in any recovery. The goal was to incentivize those with information about fraud against the government to come forward, report the fraud, help recover taxpayer dollars lost to fraud, and, hopefully, deter other contractors from committing fraud against the United States. The law was enacted during the American Civil War, with a backdrop of allegations circulating that unscrupulous profiteers were selling lame mules to the Union army claiming that they were battle-ready horses, or that glued together rags constituted as army uniform. Since 1863, however, the size and complexity of federal contracting has grown exponentially.

On Monday, the Supreme Court heard arguments in a case that put those modern complexities front and center: Wisconsin Bell v. U.S. ex rel. Heath. The factual allegations concern fraud against the “e-rate” program, set up by congress to help certain organizations, such as schools and libraries, pay for telecommunication services. The program provided subsidies as well a mandate that telecom providers offer participants the lowest price charged to similarly situated non-residential customers. Wisconsin Bell, a telecom provider, is accused of treating e-rate participants the same as other customers and not providing them the mandated specially discounted price, resulting in additional subsidies.

The complexity comes in with how the program is administered. Instead of the government directly operating the program, it is run by a nonprofit called the Universal Service Administrative Company, which is funded by mandatory fees imposed on telecom carriers by Congress and the Federal Communications Commission. Because the money at issue never literally entered the coffers of the US treasury, Wisconsin Bell put forward an argument that no “claim” was ever made to the government and that the FCA does not apply. The Seventh Circuit Court of Appeals resoundingly rejected this argument. It ruled for the whistleblower, finding that Universal Service was acting on behalf of the government and that the government was extensively involved in the company’s creation and operations, hence the FCA applied. Wisconsin Bell appealed, leading to this week’s argument.

At Monday’s argument, the justices seemed unlikely to accept Wisconsin Bell’s extremely narrow reading of the FCA, requiring money to literally pass through the US treasury for it to be subject to FCA liability. Counsel for the whistleblower argued that if something is set up by the government to further the government’s goals, and is funded by government action, then the specific logistics of how the program is administered should not welcome fraud against the program. Basically, if it walks like a duck, and quacks like a duck…

Several of the justices, notably Justice Sotomayor and Justice Jackson, seemed to agree. Several other justices noted that the government did provide at least some money directly to the e-rate fund (about $100M out of billions), and that could be a reason for FCA liability attaching to Wisconsin Bell’s claims.

Time will tell how broad the justices are willing to go but the decision is likely to have ripple effects far beyond the government’s involvement in paying for telecom services and the e-rate program. Large portions of Medicare and Medicaid, for example, are administered by intermediaries who are not directly a part of the government yet oversee tens of billions of dollars of government spending. Similarly, Fannie Mae and Freddie Mac, who administer the oversight of federally backed mortgage loans may also be implicated. Companies who work with private entities who further federal policy, as well as potential whistleblowers in the space, should take note of the upcoming ruling.