False Claims Act FAQs
What is the False Claims Act?
The False Claims Act, including its qui tam whistleblower provisions, is a federal law that was enacted by Congress during the Administration of President Abraham Lincoln to address rampant fraud on the Union Army. The False Claims Act is a civil statute. It imposes monetary liability on those who knowingly make or cause the making of false claims for funds or property owned or administered by the Government, including government money that is disbursed through a third party, such as a state or a government contractor, to further a federal government program or interest. The False Claims Act also imposes monetary liability on those who:
i) Knowingly make false statements material to the payment of such claims;
ii) Conspire with others to commit a violation of the False Claims Act; or
iii) Knowingly retain a government overpayment despite an obligation to return it.
In its current form, the law authorizes the United States to recover treble damages (i.e., three times its losses) and civil penalties of $10,781 to $21,563 for each violation of the law.
What are the qui tam provisions?
In enacting the qui tam whistleblower provisions of the False Claims Act, our Congress has recognized that effectively detecting and prosecuting fraud against the Government will almost always require the cooperation of insiders to the fraud. Few witnesses to fraud will come forward voluntarily without legal incentives and protections. Moreover, resource constraints sometimes limit the executive branch’s ability and inclination to remedy fraud. To overcome these obstacles, Congress included whistleblower reward and anti-retaliation provisions in the False Claims Act and authorized private persons to act in the shoes of the Government and bring False Claims Act actions on its behalf.
History of “Qui Tam”: The provisions incentivizing and deputizing private whistleblowers are collectively referred to as the “qui tam” provisions of the False Claims Act, with the private person who brings the case referred to as a qui tam plaintiff” or “relator.” The False Claims Act’s qui tam provisions are derived from ancient legal principles popular in English common law and Roman law. The phrase “qui tam” is short for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “[he] who sues in this matter for the king as [well as] for himself.”
The qui tam provisions in the original False Claims Act have strong bipartisan roots. Originally enacted during the Lincoln Administration, they were considerably strengthened during the Administrations of Ronald Reagan and Barack Obama. Champions of the provisions in the current Congress include prominent Republicans and Democrats.
Deputizing private parties: The False Claims Act’s qui tam provisions are far more than a “tipster” program. They empower the citizenry to force action by its Government. The Department of Justice is required by law to investigate “diligently” allegations in a qui tam plaintiff’s complaint. If the United States ultimately declines to join the lawsuit, the qui tam plaintiff may proceed with the case, litigating on behalf of the Government.
How are eligible qui tam plaintiffs rewarded under the False Claims Act?
The United States pays eligible qui tam plaintiffs a reward out of its recovery in the qui tam action. The False Claims Act provides that an eligible qui tam plaintiff ordinarily shall receive 15 to 25% of the Government’s recovery if the Government intervenes in the matter (i.e., formally joins the case as a party). If the Government declines to intervene, and the private person proceeds to litigate the case on behalf of the United States, that person ordinarily is entitled to 25 to 30% of any recovery.
What if a state is the victim of fraud? Are there similar state statutes?
Yes. As of September 2016, at least 28 states and the District of Columbia have false claims statutes with qui tam provisions. Most of these statutes are modeled after the federal False Claims Act. States with qui tam provisions include California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Washington, and the District of Columbia. In addition, New York City, Chicago, Philadelphia, and Allegheny County, Pennsylvania, have their own versions of the False Claim Act with qui tam provisions.
Do I have any protection from being fired or discriminated against if I blow the whistle?
The False Claims Act provides a remedy of double back-pay, interest, special damages and reinstatement for those who suffer employment-related retaliation as a result of steps they or their associates have taken to bring a False Claims Act action or otherwise stop a violation of the False Claims Act. This protection applies to those working as contractors and agents of the entity engaging in retaliation, as well as those considered employees within the ordinary definition of the term.
Other federal laws, such as the Sarbanes-Oxley law available for those reporting securities violations, and many state laws also prohibit retaliation against whistleblowers.
The statute of limitations (legal deadline) for bringing a legal action under the False Claims Act’s anti-retaliation provision is three years from the date of the retaliation. The deadlines for bringing actions under other federal laws and state laws protecting whistleblowers are often considerably shorter.
Is there a deadline for filing a qui tam action?
Yes. A False Claims Act lawsuit must be filed by the later of six years after the False Claims Act violation, or three years after Government officials responsible for enforcement of the False Claims Act learn of the violation, with the caveat that the action may never be filed more than ten years after the False Claims Act violation.
Can anyone bring a qui tam action?
With two exceptions, anyone with legal capacity and specific information about a violation of the False Claims Act may bring a qui tam action, whether the qui tam plaintiff is a citizen or foreign national, an individual or a corporation, an outsider to the fraud or even a participant in the fraud. The two exceptions are:
i) A current or former member of the Armed Forces may not bring an action against another current or former member of the Armed Forces for matters arising during the course of the latter’s employment with the Armed Forces; and,
ii) A person convicted of criminal misconduct may not bring a qui tam action involving the same misconduct.
Also, a qui tam plaintiff’s award can be reduced below the normal statutory minimum if the plaintiff planned and initiated the fraudulent scheme.
Are there other bars to a qui tam action?
The following circumstances can operate to bar a qui tam plaintiff’s case:
i) The case is filed after the False Claims Act’s statute of limitations (deadline for filing) has passed;
ii) The case is filed after the filing of another qui tam action based on the same facts, so long as the earlier-filed case remains pending;
iii) The case is filed after a government civil action or civil monetary penalties administrative proceeding based on the same allegations or transactions;
iv) The case is filed after a public disclosure of substantially the same allegations or transactions in a federal lawsuit or administrative proceeding in which the United States or its agent is a party, in a federal hearing, audit or investigation, or in the news media, unless either:
i) The Government objects to dismissal of the qui tam plaintiff’s case;
ii) The qui tam plaintiff voluntarily had disclosed the information supporting his or her allegations to the Government before the public disclosure;
iii) The qui tam plaintiff has knowledge that is independent of and materially adds to the public disclosure, and brought his or her information to the Government before filing suit.
v) The case is filed against a member of Congress, a member of the judiciary or certain senior executive officials and is based on information already known to the Government.
vi) The case concerns tax fraud.
How do I file a qui tam case?
A qui tam action is filed in United States District Court under seal, i.e., secretly, off the public record. The complaint is served on the Attorney General of the United States and on the U.S. Attorney for the judicial district in which the case is filed. The complaint is not served on the defendant or otherwise disclosed.
Simultaneously, the qui tam plaintiff must disclose in written form to the Attorney General and the U.S. Attorney “substantially all material evidence and information” relating to the False Claims Act violations in his or her possession.
What is the purpose of the seal on the case?
The False Claims Act provides that the United States will have sixty days, plus any extensions of this period granted by the court for “good cause,” to investigate the qui tam plaintiff’s allegations and decide whether to intervene in the case while the case remains under seal. As a practical matter, the United States routinely requests, and the courts routinely grant, multiple extensions of this seal period. Many qui tam actions are kept under seal for two years or longer while the Government investigates.
The seal on the case is designed to protect the confidentiality of the Government’s investigation, enabling the Government to utilize investigatory techniques that depend upon secrecy and surprise for their success, such as search warrants and consensual monitoring. By concealing the identity of the Government’s main source of information, the seal also serves to deter defendants from destroying or altering evidence even after they have become aware that they are under investigation by the Government.
What does the government do to investigate a qui tam action?
The Government ordinarily will seek to interview the qui tam plaintiff within several months of the filing of the qui tam action. In addition, the Government may use the following methods to investigate and, if necessary, quantify the damages from the alleged misconduct, often in roughly the following chronological order:
i) Interviewing employees of the affected governmental agency concerning their interpretation of program or contractual requirements and any communications they may have had with the defendant;
ii) Obtaining contractual and claims records from the affected governmental agency;
iii) Interviewing witnesses, such as former employees of the defendant;
iv) Using compulsory process, such as an Office of Inspector General subpoena, U.S. Department of Justice civil investigative demand (CID), or “HIPAA” subpoena to obtain documents and/or testimony;
v) Retaining experts to consult on complex technical, scientific or medical issues, or to quantify damages.
When will the defendant learn my identity as the whistleblower?
Once the defendant realizes it is under investigation — for example, at the time it receives a subpoena from Government investigators — it may realize that there is probably a qui tam case, and it may be able to figure out who has blown the whistle. Even so, the defendant cannot officially learn or confirm the identity of the qui tam plaintiff until the court lifts the seal on the case. If the Government sees merit in the qui tam plaintiff’s allegations, once its investigation is substantially complete, the Government will often seek a “partial lifting” of the seal to allow disclosure only to the defendant. The purpose of the partial lifting of the seal is to allow the Government to discuss the specifics of the qui tam plaintiffïs allegations with the defendant and see whether the matter can be resolved without litigation through a settlement or otherwise. Ordinarily, the seal is completely lifted on the case after the Government notifies the court that it wishes to intervene in the case, or after the Government declines to intervene and the qui tam plaintiff decides to proceed with the case.
The usual policy and practice of the U.S. Department of Justice is to seek a complete lifting of the seal even when it declines to intervene and the qui tam plaintiff agrees to voluntarily dismiss the case without service of the complaint on the defendant. VS&G disagrees with this government policy because it can facilitate illegal retaliation by the defendant against the qui tam plaintiff. Our firm has challenged this policy in several cases, and we have sometimes been successful in persuading courts to keep cases under seal.
The anti-retaliation provisions of the False Claims Act continue to apply even if the Government and the qui tam plaintiff ultimately decide not to proceed with a False Claims Act lawsuit. Under these whistleblower anti-retaliations provisions, a whistleblower who has suffered employment-related retaliation as a result of his or her efforts to blow the whistle may be able to recover double back-pay, interest, special damages and reinstatement.