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Qui Tam Lawsuits Under the False Claims Act
The False Claims Act seeks to empower employees to report instances of fraud committed by their employers, by rewarding the employees for coming forward and protecting them from retaliation.

In 2010, fraud committed by companies and government contractors against the United States government cost taxpayers over three billion dollars. In many cases, the fraud never would have been discovered if it weren’t for the courageous acts of employees and others who came forward to report the fraud. The False Claims Act seeks to empower employees to report instances of fraud committed by their employers, by rewarding the employees for coming forward and protecting the employees from retaliation.

The False Claims Act

The False Claims Act (FCA) prevents a person or entity from knowingly presenting a false claim against the federal government. A claim is considered money or property that is owed to the government. In other words, the FCA is intended to prevent individuals or companies from defrauding the United States government. Some common types of fraud that the FCA is intended to protect against are:

  • Securities fraud
  • Social Security fraud
  • Tax fraud
  • Medicare fraud
  • Government contracts fraud

The FCA, first passed in 1863, includes a legal device called a “qui tam” provision. The qui tam provision encourages private citizens to act as watchdogs against fraud, waste or abuse against the government, by giving the citizen a share of the money that is recovered in the lawsuit.

The qui tam provision allows a private person, known as a “whistleblower,” to bring a lawsuit on behalf of the United States, when the private person has information that someone has knowingly submitted or caused the submission of false or fraudulent claims to the United States. To bring a lawsuit, it is not necessary for the whistleblower to have been harmed by the fraudulent activity. 

False Claim Lawsuit Process

Due to the need to protect whistleblowers, the FCA lawsuit process is initially less public than an ordinary lawsuit. The lawsuit begins when the whistleblower files a complaint. The complaint is filed under seal, meaning that all of the records that are filed are kept secret. Only the judge, the U.S. Attorney, and select representatives from the U.S. Department of Justice (DOJ) see the complaint.

In addition to the complaint, the whistleblower must file a disclosure statement with the DOJ containing all of the evidence that he or she has to support allegations outlined in the complaint. This disclosure statement is not filed in court and is kept private from everybody except the DOJ.

Once the complaint has been filed, it remains under seal for 60 days. During this time, the DOJ must investigate the violations alleged in the complaint. The DOJ may work with the FBI or other law enforcement agencies in the investigation. If more time is needed to complete the investigation, the DOJ can ask the court to extend the time that the complaint remains under seal.

Once the DOJ has completed its investigation, it will typically do one of three things:

  • Intervene in the lawsuit. This means that the lawsuit will continue with the government directing the lawsuit. The government may limit the whistleblower’s participation in the lawsuit. The government typically intervenes in fewer than 25 percent of qui tam lawsuits.
  • Decline to intervene. If the DOJ declines to intervene, the whistleblower may continue the lawsuit on the government’s behalf. The government is not considered a party to the lawsuit, but reserves the right to recover its share if the lawsuit is successful.
  • Ask the court to dismiss the whistleblower’s complaint because there is no case or the case conflicts with the government’s interests.

Once the government has decided whether to intervene, the complaint is unsealed and must be served on parties accused of defrauding the government when the court orders. The lawsuit then continues like an ordinary lawsuit, but with minor variations.

Penalties for Violation of FCA

The penalties for violating the False Claims Act are steep in order to deter fraud against the government. Any person or entity that violates the FCA is liable for three times the amount of damages that the government has sustained as a result of the wrongdoing. In general, the government’s damages are the amount it paid to the wrongdoer over and above what it would have paid if the claims to be paid had not been fraudulent.

In addition to damages, any violator of the FCA is liable to the government for penalties of $5,500 - $11,000 per violation. If the government cannot prove that it suffered any damages, it still is entitled to penalties for each violation.

Whistleblower’s Share

The whistleblower is entitled to recover a percentage of the money recovered by the lawsuit. In general, if the government intervenes and succeeds in the lawsuit, the whistleblower is entitled to 15 - 25 percent of the proceeds. If the government does not intervene, the whistleblower can recover 25 – 30 percent of the proceeds.

In addition to the share of the proceeds, the whistleblower can also recover reasonable attorney’s fees and costs of bringing the lawsuit.

Protection Against Retaliation

The FCA protects whistleblowers who are retaliated against as a result of bringing a lawsuit under the FCA. The FCA empowers a whistleblower to file a lawsuit against his or her employer seeking the following:

  • Reinstatement: the whistleblower can ask a court to force his or her employer to reinstate him or her as an employee. The FCA requires that the whistleblower be reinstated at the same level of seniority. If reinstatement is not practical, the court can award the whistleblower money to put him or her in the same position that he or she would be in if he or she had been reinstated.
  • Back pay: the FCA allows the whistleblower to recover twice the amount of back pay plus interest.
  • Attorney’s fees: the whistleblower can recover the cost of bringing the lawsuit plus attorney’s fees.

A Whistleblower Attorney Can Help

Employees who discover that their current or former employer is doing something unethical often are torn between their moral conscience and the fear of being fired for speaking up. Proper representation by an experienced qui tam attorney can make it easier to do the right thing. Unlike other lawsuits, qui tam lawsuits require a potential whistleblower to be represented by an attorney.

If you are considering exposing your employer’s fraud against the government, contact an experienced qui tam attorney who can advise you on the specifics of your case, as well as whistleblower protections and compensation.

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