The Federal False Claims Act is widely regarded as the most effective tool in combating fraud against the federal government. Congress enacted the Federal False Claims Act during the Civil War to combat fraud against the federal government by suppliers to the Union Army. The False Claims Act, often referred to as “Lincoln’s Law,” was used relatively sparingly as an enforcement tool during the century that followed its enactment. Despite some use during World War II, the False Claims Act was largely ineffective at combating fraud against the federal government until the statute was dramatically revamped in 1986.
Since the 1986 amendments were passed, the False Claims Act has become the federal government’s most effective and successful tool in combating waste, fraud and abuse in federal spending. From 1986 to 2006, the federal government recovered in excess of $20 billion as a result of cases filed under the False Claims Act. Nearly one-half of all recoveries, and the majority of the largest settlements, have come from health-care related cases. The False Claims Act also has been very effective in combating fraud and abuse in government contracts for defense, energy, construction, housing, natural disaster recovery, Iraq War reconstruction, and other forms of government procurement.
The success of the False Claims Act has resulted in large measure from lawsuits brought by whistleblowers (otherwise known as “Relators”), under the qui tam provisions of the False Claims Act. In general, the qui tam provisions permit any person or entity to file a False Claims Act case on behalf of the federal government. The motivation behind the qui tam provisions of the False Claims Act was the recognition that the government lacks the information and resources to pursue all those who submit false and fraudulent claims to the government. Private citizen-whistleblowers have proven to be a vital resource for the government by bringing to light evidence of fraud that would have otherwise have gone undetected. Nearly one-half of the $20 billion recovered since 1986 has come from False Claims Act lawsuits brought by whistleblowers. Whistleblowers have been paid upwards of $2 billion in statutory rewards for filing False Claims Act cases on behalf of the federal government.
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FEDERAL FALSE CLAIMS ACT: HOW DOES IT WORK?
The False Claims Act allows private persons (known as “relators”) to file a lawsuit against those individuals, businesses and other entities that have directly or indirectly defrauded the federal government. Although the federal government can file its own False Claims Act lawsuit, the true success of the statute has come in cases that were filed by whistleblowers.
How Cases Are Filed
Whistleblowers who bring cases under the False Claims Act must file their Complaints under seal in a United States District Court, and provide a copy of the complaint, as well as a written statement of all material evidence supporting their allegations to the Attorney General of the United States and the local United States Attorney. Because the Complaint is filed under seal, neither the defendants nor the public are aware that a Complaint has been filed. The Complaint remains under seal for 60 days, while the government investigates the whistleblowers allegations. This seal is frequently extended for months or years.
Before the whistleblower’s Complaint becomes public, the government notifies the whistleblower and the Court of whether it will intervene, or become formally involved, in the case. If the government intervenes, it assumes the lead role in litigating the case against the defendant. The whistleblower and his or her attorney remain involved in the case, and often prove to be critical partners to the government’s prosecution of the case. If the government declines to intervene, the whistleblower may continue to litigate the case on his or her own on behalf of the government.
Filing a case under the False Claims Act is complex and there are many substantive and procedural provisions in the law that can adversely impact the success of a qui tam whistleblower’s case. For example, the False Claims Act provides that only the first whistleblower who files a lawsuit raising the defendant’s fraud can continue on behalf of the government, and share in any recovery that might result. In addition, failing to file and serve the Complaint in the manner required by the False Claims Act can result in a dismissal of the whistleblower’s lawsuit. As a result of these and other complex provisions of the False Claims Act, it is critical that whistleblowers seek the assistance of experienced legal counsel who can help ensure their claim is filed and litigated properly and in a manner that protects their rights. Our attorneys have substantial experience in all aspects of False Claims Act litigation, having represented qui tam whistleblowers under the False Claims Act for twenty years.
Damages Owed By the Defendant
Defendants who are found to have violated the False Claims Act are required to pay the federal government three times the amount of damages sustained by the government and civil penalties of between $5,500 and $11,000 for each false or fraudulent claim. In addition to these damages and penalties, violations of the False Claims Act can trigger a host of potential collateral consequences for defendants, such as disqualification from all future federal and state government contracts.
Whistleblower’s Potential Reward
As a reward for reporting fraud, the whistleblower is awarded a share of 15% to 30% of any recovery that the government receives under the False Claims Act. A number of factors can impact the precise share that a whistleblower receives in any given case. Although there is no precise formula applied in every case, the more that a whistleblower and his or her counsel contribute throughout the case the greater the chances are that the whistleblower will be able to advocate for receiving a larger share of the government’s recovery. In addition to a share of the government’s recovery, the whistleblower is entitled by the False Claims Act to reasonable attorney’s fees and costs, to be paid by the Defendant.
Statute of Limitations
Potential whistleblowers should carefully consider that the False Claims Act contains a statute of limitations which may be as short as six years. Statutes of limitations are important in all cases because they can impact whether claims can be brought under the False Claims Act. The calculation of the statute of limitations can be complex and is best done with the advice of experienced qui tam whistleblower counsel.