False Claims Act: A Step-by-Step Whistleblower Guide

Original Enactment (1863)

The False Claims Act (FCA), often referred to as the “Lincoln Law,” was enacted on March 2,1863 during the American Civil War to combat widespread fraud by contractors who were billing the Union Army for goods and services that were never delivered or were of inferior quality.

This law was designed to deter fraud by incentivizing private citizens to sue on behalf of the government and share a mandatory portion of the funds recovered from a successful recovery. This provision is called qui tam, or “Who as well for the king as for himself sues in the manner.”

This law became relatively unused and was weakened through various amendments, leading to a decline in its effectiveness. This was until 1986, when Senator Chuck Grassley revived the FCA to turn it into a powerful tool to fight fraud against the government and recover billions for taxpayers with the help of whistleblowers.

Strengthening Amendments (1986)

It wasn’t until 1986 when Senator Grassley passes significant amendments that revitalized the FCA, which aimed to increase the potential for a whistleblower to receive a portion of the recovery, strengthen protections for whistleblowers, and expanded the scope of the law to cover a wider range of fraud, misconduct, or abuse within government contracts.

Today’s False Claims Act

Today, the FCA is one of the most powerful tools for combatting government contract fraud, especially in various sectors such as healthcare, where Medicare fraud runs rampant, and in the defense industry, where overbilling and double billing occurs all too frequently.

Given the success of the FCA and qui tam provision, Congress has passed other whistleblower award laws and implemented whistleblower programs, which have been used jointly with the FCA to hold fraudsters accountable.

• Dodd-Frank Act Programs: the Dodd-Frank Wall Street Reform and Consumer Protection Act established a whistleblower program for the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). Whistleblowers who voluntarily provide original information to the SEC about FCPA violations may be eligible for awards of 10% to 30% of the monetary sanctions collected.
• IRS Whistleblower Program: there is also the Internal Revenue Service (IRS), which has a whistleblower program that allows individuals to report tax fraud. Whistleblowers who provide original information to the IRS about tax fraud may be eligible for awards of 15% to 30% of the additional taxes, penalties, and interest collected from of the information provided.
• FinCEN Whistleblower Program: Congress recently enacted amendments to the Anti-Money Laundering Act to establish a whistleblower program administered by the Financial Crimes Enforcement Network’s (FinCEN) and Department of Justice. This whistleblower program rewards individuals who provide original information about violations of the Bank Secrecy Act (BSA), FinCEN regulations, or OFAC sanctions. The BSA’s anti-money laundering laws and regulations apply to a wide range of financial institutions, such as: banks, credit unions, broker-dealers, credit card system operators, mutual funds, insurance companies, check cashers, money transmitters and fintech companies.
• DOJ Corporate Whistleblower Awards Pilot Program: in August of 2024, the Department of Justice (DOJ) announced a new whistleblower awards pilot program. Whistleblowers can submit original information to DOJ’s Criminal Division about certain types of corporate crime. If DOJ’s prosecution results in asset forfeiture, the whistleblower may be eligible for a portion of that forfeiture as a monetary award.
• State False Claims Acts: many states have enacted their own False Claims Acts, which are often modeled after the federal qui tam law. These state laws allow individuals to sue on behalf of the state government to recover funds lost to fraud and corruption and these states pay whistleblowers a qui tam award in much the same way as the federal FCA does..

Reverse False Claims

The 2009 Fraud Enforcement and Recovery Act further strengthened the FCA, expanding liability for making false or fraudulent claims to the federal government. Reverse false claims refers to the idea of wrongdoers preventing the government from receiving its due. For instance, with customs fraud: by undervaluing or misclassifying imported goods, fraudsters can avoid paying the correct tariffs and duties, depriving the government of revenue.

Because of the FCA’s historic success, several states have enacted local versions of the law. These states are listed below. States with an “*” have a limited False Claims Act law that only covers fraud in Medicaid programs.

States with State False Claims Acts:

• California
• Colorado*
• Connecticut
• Delaware
• District of Columbia
• 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*
• Vermont
• Virginia
• Washington*

The following local jurisdictions have enacted False Claims Act laws:

• Allegany County, Pennsylvania
• Chicago, Illinois
• New York City, New York
• Philadelphia, Pennsylvania

There are many different forms of fraud against the government which spans several sectors. Greed is often the primary motive behind government contract fraud. Contractors may seek to maximize profits by cutting corners, inflating costs, or engaging in other fraudulent practices. Here are some of the types of government contract frauds that occur:

• Healthcare Fraud: this includes Medicaid and Medicare fraud, such as upcoding or false billing, but also pharmaceutical fraud like false claims regarding drug pricing or rebates, as well as medical device fraud or false marketing claims. FCA liability also attaches when kickbacks are paid to cause providers to submit false claims to government healthcare programs, such as Medicare, Medicaid and Tricare.
• Procurement Fraud: this includes fraud related to government contracts, collusion among contractors to manipulate bidding processes (also known as bid-rigging), small business and veteran set-aside contract fraud, Buy America Act violations, false certifications, knowingly overcharging the government, overtime fraud, or kickbacks and bribery to influence contract award amounts.
• Defense Contracting Fraud: this often refers to the fraudulent practice of charging excessive prices for products or services, false certifications, as well as kickbacks and bribery to secure large government defense contracts.
• Customs Fraud: customs fraud occurs when an individual falsely declares the value or origin of goods, but also extends to smuggling and the evasion of customs duties or taxes.
• Conflicts of Interest: this involves government officials or employees using their positions for personal gain, such as bribery and kickbacks, self-dealing or the misuse government resources for personal gain.
• Disaster Relief Fraud: this includes fraudulent activities related to disaster relief programs, such as falsely claiming losses or damages, fraudulent contracts for disaster relief services, or the theft of disaster relief supplies, such as food, water, or other resources.
• Grant Fraud: this occurs when recipients make false statements on their grant application or reports or use grant funds outside of the purposes that were approved. However, this can also occur when recipients fail to comply with grant regulations.
• Cyber Fraud: this type of fraud involves fraudulent activities that exploit computer systems and networks, such as hacking and data theft, phishing or cybercrime, and making false claims related to cybersecurity products and services.

Qui tam is a Latin phrase meaning “who as well for the king as for himself sues in this matter.” Under the FCA, qui tam suits (also known as qui tam actions) allow whistleblowers to help uncover and prosecute fraud against the government, which essentially protects American taxpayers.

Under the FCA, whistleblowers who provide original information leading to a successful fraud case can receive a substantial share of the recovery. This is paid directly by the government and can range from 15% to 30% of the money recovered.

Whistleblowers have played a critical role in these recoveries. In FY 2023 alone, the government recovered over $2.68 billion in settlements and judgments related to fraud, with whistleblowers involved in recovering over $2.3 billion in a record-breaking 543 cases.

The law firm of Kohn, Kohn and Colapinto has a successful track record in helping whistleblowers recover awards in FCA qui tam cases.

Under Section 3730(h) of the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise retaliated against for taking actions to promote the purposes behind the FCA can file an employment discrimination claim in federal court. This action can be filed as part of a qui tam reward case or filed as a stand-alone cause of action. The law provides for a jury trial and full “make whole” relief, including reinstatement, double back pay, and compensation for any special damages (treble damages), including litigation costs and reasonable attorneys’ fees.

Filing a FCA case can be complex, and an attorney is required. Thus, the first step in reporting your concerns to the U.S. government is to seek legal assistance from a reputable attorney who fully understands the law. Below are some of the general steps in the process:

1. Identify the Fraud: clearly identify the fraudulent activity, gather evidence to support your claims, and consult with your attorney on other ways to strengthen your case. Keep in mind, you must also be the first to file – no exceptions.
2. Work with Experienced Attorneys to Make Disclosures to the Government: the FCA has many technical requirements such as making disclosures to the government before filing a case in court. Experienced FCA attorneys can help navigate these pre-filing procedures to avoid problems later in the case.
3. File a Sealed Complaint: with your attorney, your case must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. The complaint should detail the fraudulent activity and the government’s losses in accordance with heightened pleading standards and you should separately submit only to the government written allegations and evidence to support the complaint.
4. Government Review: the complaint initially remains under seal for 60 days while the government investigates the allegations. The seal is often extended for months or years. The sealed complaint and its contents must be kept confidential until the seal is lifted.
5. Government Intervention: the case is taken out of seal once the government makes its decision whether to intervene and take over the whistleblower’s qui tam case. Then the case may proceed out of the seal, like any other civil case.
6. Legal Proceedings: some cases resolve relatively quickly while other cases proceed to full litigation and may continue for several years before there is a final decision or settlement. Your identity may be kept confidential during the investigation and legal proceedings, but it is critical that whistleblowers work with experienced FCA counsel to obtain the best results and protections..
7. Qui Tam Award: if the case is successful, you may be eligible for an award, typically between 15% and 30% of the recovered funds. The exact amount of the reward depends on various factors, including the complexity of the case and the value of your information, and whether the case is resolved either with or without the government’s intervention.

It’s important to note that if the government decides not to intervene, a whistleblower may pursue their case alone. If they succeed, they may be entitled to 25% and 30% of the total recovery. However, they must first file their original complaint with the help of an attorney and go through the proper procedures.

Why Hire an Attorney?

Filing a FCA case is a serious and complex matter that requires (by law) the expertise of a federal whistleblower attorney. Many courts have held that a whistleblower cannot proceed with a qui tam complaint pro se and that an attorney must represent the whistleblower because a pro se whistleblower cannot represent the government in litigation. An attorney can help ensure your concerns are addressed according to the rules set forth in the FCA. An attorney can also help you:

• Evaluate Your Case: carefully evaluate your claims to determine if they have merit under the FCA, anticipate potential defenses, and help you understand the potential risks and rewards involved in pursuing the case.
• Draft the required Disclosure and Complaint: draft a well-crafted disclosure (with supporting evidence) and a complaint that accurately and persuasively outlines the fraudulent activity and file the complaint to maximize the chances of a successful outcome.
• Representation: represent you during the government’s investigation and in court, handling all aspects of the litigation process, including discovery, motions, and trial. If necessary, they can represent you in appeals.
• Protection: They can ensure that your rights under the FCA whistleblower protections are upheld and take steps to protect you from retaliation by your employer or other parties.
• Award Claims: They will negotiate with the government to secure a fair and equitable share of the recovery.

By hiring an experienced FCA attorney, you can increase your chances of success and maximize your potential relators “award” share, which can be substantial because there are no “caps” on awards; the value of the information the whistleblower provides serves as the basis for the award.

The statute of limitations for civil actions under the False Claims Act (FCA) is outlined in 31 U.S.C. § 3731(b).

Generally, an FCA lawsuit must be brought within six years of the violation. However, there is an extension: the action can be brought up to three years after the United States knew or should have known about the material facts of the violation, but in no case more than ten years after the violation occurred.

Importantly, where we represented amicus curiae in a case filed to the Supreme Court on behalf of a qui tam whistleblower (the Supreme Court’s decision in Cochise Consultancy Inc. v. United States, ex rel. Hunt) clarified that this longer limitations period applies to both government-initiated and qui tam (whistleblower) lawsuits. The “official of the United States charged with responsibility to act” whose knowledge triggers this three-year extension is typically the Attorney General or their designees within the Department of Justice.

It’s also worth noting that a separate statute of limitations of three years applies to whistleblower retaliation claims under 31 U.S.C. § 3730(h)(3), running from the date the retaliation occurred.

In Fiscal Year 2023, the federal government committed about $759 billion on contracts, an increase of about $33 billion from Fiscal Year 2022 after adjusting for inflation. This makes the government contract a massive target for fraudulent activity. Below are some of the largest fraud cases we’ve seen in the last few decades:

Raytheon (2024)

Raytheon, a major defense contractor, has agreed to pay over $950 million to settle allegations of fraud and corruption. The company admitted to defrauding the U.S. government by providing false and fraudulent information on contracts for military systems, including the PATRIOT missile system and a radar system. Additionally, Raytheon was found guilty of bribing a foreign official to obtain lucrative defense contracts in Qatar.

Booz Allen Hamilton Holding Corporation (2023)

Booz Allen Hamilton, a major government contractor, has agreed to pay $377 million to resolve allegations of fraudulent billing practices. The company improperly charged costs to government contracts that should have been allocated to commercial and international business. This resulted in overcharging the government for services that did not directly benefit the government.

The settlement was reached because of a whistleblower lawsuit filed by a former Booz Allen employee. The case highlights the importance of government oversight and the role of whistleblowers in uncovering fraud and abuse.

Tenet Healthcare (2006)

Tenet Healthcare Corporation, a major US hospital chain, agreed to pay over $900 million to resolve allegations of fraudulent billing practices related to Medicare. The settlement addressed several issues, including excessive outlier payments, physician kickbacks, and upcoding. The settlement was a result of a whistleblower lawsuit, highlighting the importance of the False Claims Act in uncovering and punishing healthcare fraud.

The Healthcare Company (2000)

HCA, the largest for-profit hospital chain in the U.S., has agreed to pay over $840 million in fines and penalties to settle allegations of widespread healthcare fraud. These allegations include fraudulent billing practices, kickbacks to physicians, and false claims for medical services. The settlement is one of the largest healthcare fraud settlements in U.S. history.

Please visit the U.S. Department of Justice Fraud Section to view more recent cases.

Our team has helped lead the fight to pass amendments which would strengthen the FCA. Furthermore, we’ve filed numerous amicus curiae briefs with the Supreme Court championing FCA whistleblowers’ rights. In July 2023, with the input of Kohn, Kohn & Colapinto, Senator Grassley and a bipartisan group of Senators, the False Claims Amendments Act of 2023 was introduced.

Key clients include Bunnatine “Bunny” Greenhouse, who exposed a $7 billion no-bid Defense Department contract; Dr. Aaron Westrick blew the whistle on defective bullet proof vests, saving thousands of lives; and Daniel Richardson, a former Senior District Business Manager for Bristol-Myers Squibb (BMS), prevailed in one of the largest qui tam whistleblower cases filed against a major pharmaceutical company for “off label” marketing and illegal kickbacks.

If you know of contract fraud or abuse that violates the FCA and abuses taxpayer dollars, there is no better firm than Kohn, Kohn and Colapinto. Reach out to one of our leading attorneys for a free consultation to better understand your rights and legal options.