False Claims Act (FCA) is the U.S Government’s main tool for combating fraud and recovering taxpayer funds. This federal law, established in 1863, has been revised three times over its 160-year existence.
The FCA includes qui tam provisions that allow private individuals, known as “relators,” to sue on the government’s behalf if they’re aware of fraudulent actions against it. Whistleblowers receive a financial reward, typically 15% to 30% of the total recovery made by the government in a qui tam lawsuit.
Due to the success of qui tam lawsuits in recovering taxpayer funds, many states and cities have enacted their own versions of the FCA. While most of these laws exclude tax-related cases, some jurisdictions, including New York State, Illinois, Maryland, and the District of Columbia, do allow for tax claims to varying degrees.
While the relevant portions of the FCA refer to a “private person” and a “qui tam plaintiff,” the term “relator” is typically used to identify the person who files a qui tam action on behalf of the government.
The terms “relator” and “whistleblower” are often used interchangeably; however, whistleblower is a generic term that can refer to someone who files a claim under one of the federal agency whistleblower programs. In modern vernacular, a whistleblower can also refer to anyone who public discloses information about illicit or corrupt behavior by an individual or organization, regardless of whether they file a lawsuit.
Qui tam is derived from the Latin phrase, qui tam pro domino rege quam pro sic ipso in hoc parte sequitur, which means “who as well for the king as for himself sues in this matter.” A qui tam action is a lawsuit brought by a private individual on behalf of the United States government.
A qui tam action can be brought for any violation of the False Claims Act. Fraud in healthcare and government contracting typically account for the largest percentage of recoveries in False Claims Act cases. Examples of violations include a healthcare provider that bills Medicare or Medicaid for medically unnecessary services or a contractor that participates in a bid rigging scheme to win a government contract. Both can serve as the basis for a qui tam action.
The most significant difference between most civil lawsuits and a False Claim Act case is that the complaint in an FCA action is filed under seal. The complaint is not served on the defendant until the government completes its investigation and notifies the court as to whether it will intervene in the case.
In addition to the complaint, a relator must serve a “disclosure statement” on the Department of Justice in a qui tam action. The disclosure statement contains a detailed explication of the specific allegations, the evidence supporting those allegations, and a list of prospective witnesses. Unlike other lawsuits, the relator in a qui tam action is prohibited from discussing the case with anyone (excluding their attorneys and the U.S. attorneys) while the complaint remains under seal.
The applicable statute of limitations depends on the circumstances of a particular case. The False Claims Act contains two limitation periods that apply to an action brought under 31 U.S.C.S. § 3730. In Cochise Consultancy, Inc. v. U.S. ex rel. Hunt, 139 S. Ct. 1507 (2019), the Supreme Court held that in action filed by a qui tam plaintiff in which the government does not intervene, the suit must be brought within either (i) six years after an FCA violation occurred under 31 U.S.C. § 3731(b)(1) or (ii) three years after the United States official charged with the responsibility to act knew, or should have known, of the relevant facts, whichever period is longer. In no circumstance can an action be brought more than 10 years after a violation occurred.
Yes. You do not waive your right to bring a qui tam action by reporting information to the government before filing a qui tam complaint. However, your action could be barred if it is based upon the same allegations or transactions which are already known to the government or if the allegations are the subject of another FCA suit filed by another whistleblower, unless you are the original source of the information.
During the period when the qui tam complaint remains under seal, you will remain anonymous to the public and the defendant, but your identity will be known to the government. Once the seal is lifted, the qui tam complaint becomes a public document and your identity will be revealed.
There are circumstances in which you may be able to voluntarily dismiss a qui tam complaint during the seal period without the defendant learning your identity, but there is no guarantee of anonymity. There are also strategies that your attorney can utilize to reduce the possibility that your identity will be disclosed. However, it is a rare exception when a relator is able to remain anonymous indefinitely, and you should expect that your identity will eventually be revealed if you file a qui tam complaint.
If the government intervenes in a qui tam action, it assumes primary responsibility for prosecuting the case against the defendant. If the government declines intervention, the relator is responsible for pursuing the action. In either case, the government remains the real party in interest.
When the government intervenes, the relator can receive an award ranging from 15% to 25% of the recovery. If the government declines to intervene, and the relator successfully prosecutes the case, the range increases from 25% to 30%. The award percentage is based on a number of factors, and the court can reduce the percentage below the statutory minimum in certain circumstances.
The defendant is liable for three times the amount of damages that the government sustains as a result of the defendant’s conduct. In addition, the defendant must pay a civil penalty for each violation of the False Claims Act ranging from $13,508 to $27,018 as adjusted for inflation in 2023.
A relator is paid by the government from the proceeds collected from the defendant(s) through a judgment or settlement. Subject to eligibility requirements, a relator is entitled to receive between 15% and 25% of the amount recovered when the government intervenes in the action. If the government declines to intervene, the relator’s share is increased to 25% to 30%.
If a qui tam action is successful, the relator also is entitled to legal fees and other expenses of the action. These costs are paid directly to the relator by the defendant.
In some cases, the government may pursue a different proceeding other than an FCA action. This is known as an alternate remedy in the FCA. If the alternate remedy is based on the relator’s original information, the relator is entitled to receive the same share of the recovery as would have been awarded through the relator’s FCA suit.
The Department of Justice considers a number of factors in determining whether to increase or decrease the relator’s share. Some of the factors considered for increasing the share include the timeliness of the relator’s reporting the fraud to the government; the degree of assistance provided by the relator during the investigation and trial; and the significance of the relator’s information in securing a recovery from the defendant.
Some of the factors that DOJ considers in decreasing the percentage of the relator’s share include the relator’s participation in the fraud; the extent that the relator’s knowledge is based on public information; and significant delays in reporting the fraud.
In certain circumstances, the court has discretion to reduce the relator’s share to a maximum of 10%. If the relator is convicted of a crime involving the fraud that is the subject of the qui tam action, the court must dismiss the relator from the action and bar them from any recovery.
In FY 2021, the Department of Justice announced that it recovered more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government. Qui tam suits filed by whistleblowers accounted for more than $1.6 billion of the total amount recovered.
Yes, a whistleblower must be represented by an attorney to file a qui tam action under the False Claims Act. To fully protect your interests in this specialized and complex area of the law, it is critical to select an established law firm with significant experience in False Claims Act litigation.
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