False Claims Act Whistleblower Protections and Rewards
What Is The False Claims Act?
On March 2, 1863, President Abraham Lincoln signed the original False Claims Act (FCA) into law. The purpose of the FCA is to incentivize citizens to help the federal government police rampant military contracting fraud during the U.S. Civil War. The original law went mostly unused until 1986 when the U.S. Congress modernized its procedures and approved significant amendments. The original “Lincoln law” and its 1986 amendments are now the model for all highly successful modern whistleblower laws.
The False Claims Act qui tam provision empowers whistleblowers who have firsthand knowledge of frauds/violations to report them to the appropriate government officials, and to incentivize the whistleblowers to work directly with government investigators, often in the capacity of a confidential informant. The False Claims Act qui tam law sets mandatory minimum payments to whistleblowers to help convince “insiders” to take the risk of losing their jobs or suffering other harms. This mandatory minimum is enforceable in court. The guaranteed minimum payments, which are often in the millions of dollars, are essential for convincing otherwise skeptical potential whistleblowers to step forward.
How Did Congress Use Qui Tam To Promote Whistleblowing?
Qui tam is short for a Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “who sues in this matter for the king as well as for himself.” At the time of the American Revolution and up through the Civil war, the United States enacted multiple qui tam statutes to assist the government in enforcing the law.
In 1863, Senator Jacob Howard explained why he was introducing a qui tam reward provision in the original False Claims Act, “the bill offers… a reward to the informant who comes into court and betrays his co-conspirator, if he be such, but it is not confined to that class…I have based the (False Claims Act) upon the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’ which is the safest and most expeditious way I have ever discovered of bringing rogues to justice.”
Read Stephen Kohn’s testimony on qui tam rewards under the False Claims Act before the House Oversight Committee: “Restoring the Power of the Purse: Legislative Options.”
What Is The Mandatory Minimum And Maximum Of An Award?
Under the False Claim Act’s qui tam reward provision, if your original information results in a sanction against a fraudster, you are entitled to a minimum payment of 15% and a maximum payment of 30% of the proceeds collected by the government. The government is required to make these payments. If the government refuses to pay the required reward, you can challenge that denial in court.
There are no “caps” on awards; the value of the information the whistleblower provides serves as the basis for the amount of the award. The better the information, the larger the sanction. The larger the sanction, the larger the award. The False Claims Act qui tam provision incentivizes whistleblowers to provide the government with the best evidence, related to the biggest frauds.
Can I Obtain A Reward Under The False Claims Act If I Provide Information To The Government About Fraud?
No. To qualify under the qui tam reward provisions, you must strictly follow the procedures outlined in the False Claims Act. You must file a qui tam lawsuit in federal court to qualify for a reward. Only disclosing information to the government will not meet the requirements.
In addition to filing a formal lawsuit in federal court, you must also comply with the other requirements of the law, including the following: (a) The complaint must be filed under “seal,” that is secret and not in public. The complaint is strictly confidential when first filed. (b) You must be the “first to file.” If another whistleblower files a claim based on the fraud you are alleging before you file your lawsuit, this disqualifies you from the qui tam process. (c) You must file a “disclosure” statement with the U.S. Attorney General and the local United States Attorney’s Office where the complaint is filed. This disclosure statement must contain “substantially” all of your evidence, and you can also file documents as part of the disclosure. (d) The complaint is not served on any of the defendants. The whistleblower serves the complaint on the local U.S. Attorney’s Office and the United States Attorney General. Until the court orders the “seal” removed, you must keep the fact that you filed a False Claims Act case strictly confidential.
Merely giving evidence of wrongdoing to the government will not qualify you for a reward. You must follow these procedures. Given the importance of meeting the strict rules for filing a False Claims Act qui tam case, you must have an attorney helping you in this process. Most courts do not permit pro se individuals to file False Claims Act cases.
What Happens After I File The False Claims Act Qui Tam Complaint?
Once the complaint is filed in court and served on the U.S. Attorneys Office and the Attorney General, the United States is required to investigate the information provided by the whistleblower. After completing the investigation, the United States decides whether or not to “intervene” in the case. Once the United States communicates its decision as to whether it will intervene to the presiding judge, the case is usually taken out of “seal” and filed on the pubic docket. Although the whistleblower is confidential when filing the lawsuit, once a case is out of seal, the whistleblower’s identity is on the public record. However, for a good cause, a whistleblower can ask a Court to keep his or her identity confidential.
What Does A Decision On “Intervention” Mean?
If the United States “intervenes” in the case, the United States takes over the litigation and proceeds to prosecute the fraudster. The whistleblower remains a party in the case and can fully participate, but the United States conducts the litigation. When the United States intervenes, it generally means that a case will have a favorable resolution, as the government has validated the allegations raised by the whistleblower and is willing to spend resources fighting the defendant.
If intervention is “declined,” the whistleblower has a right to proceed with the lawsuit. Litigating a case after a declination is usually very difficult, as defendants will often aggressively fight the case. Also, a whistleblower may have to pay court costs if they lose the case. There is also the possibility of sanctions for misconduct or for filing a frivolous claim.
However, the qui tam provision that permits the whistleblower to pursue a case even if the United States declines prosecution is among the most critical provisions in the False Claims Act. It helps to keep the government honest.
Where Can I Find A Copy Of The False Claims Act?
The False Claims Act, linked here, is codified as 31 U.S.C. §§ 3729-33. Section 3729 sets forth anti-fraud requirements of the Act, and Section 3730 includes the provisions related to filing a qui tam lawsuit.
Do False Claims Act Cases Work?
Yes. The public record unquestionably demonstrates that the False Claims Act works and is essential for the detection and successful prosecution of fraud and corruption. The public record is consistent with the research findings published by the University of Chicago Booth School of Business [concerning the effectiveness of the False Claims Act:
“A strong monetary incentive to blow the whistle does motivate people with information to come forward. Monetary incentives seem to work well, without the negative side effects often attributed to them. Employees clearly have the best access to information.”
“[T]here is no evidence that having stronger monetary incentives to blow the whistle leads to more frivolous suits.”
“Honest behavior is not rewarded. . . Given [the] costs [of whistleblowing] the surprising part is not that most employees do not talk, it is that some talk at all.
See, Alexander Dyck et al., Working Paper No. 08-22: Who Blows the Whistle on Corporate Fraud?, U. of Chi. Booth Sch. of Bus. (2009).
The top leadership of the Department of Justice confirmed the effectiveness of the False Claims Act:
S. Attorney General in 2012: “[T]he False Claims Act has provided ordinary Americans with essential tools to combat fraud, to help recover damages, and to bring accountability to those who would take advantage of the United States government – and of American taxpayers.”
Assistant Attorney General in 2014: “[Whistleblower reward laws are] the most powerful tool the American people have to protect the government from fraud.”
Associate Attorney General (2016): “The False Claims Act and its [whistleblower] provisions remain the government’s most effective civil tool in protecting vital government programs from fraud schemes.”
Assistant Attorney General in 2018: “The taxpayers owe a debt of gratitude to those who often put much on the line to expose such [fraudulent] schemes.”
Assistant Attorney General in 2020: “Whistleblowers continue to play a critical role in identifying new and evolving fraud schemes that might otherwise remain undetected.”
These words are backed up by hard statistics. By the end of FY 2019, whistleblowers had triggered the recovery of $44.7 billion in from fraudsters, while the government was able to recover only $17.3 billion in cases for which there were no whistleblowers.
Will The United States Government Pay Whistleblowers The Money They Are Owed?
Yes. The United States is serious about enforcing the qui tam reward provisions in cases in which a whistleblower meets all of the requirements to obtain a reward. Between 1987-2019 the United States has paid whistleblowers $7.3 billion in qui tam rewards.
What Is The Philosophy Behind The False Claims Act’s Qui Tam Whistleblower Reward Provision?
The foundation of the False Claims Act is simple: Use monetary rewards to incentivize persons with inside information to report crimes. Whistleblowers are compensated based on the quality of the information provided and the ability of law enforcement to use that information to obtain successful prosecutions.
The better the information provided, the better the potential for a successful prosecution, and the higher the financial reward. All rewards are paid directly from the collected fines.
Although the False Claims Act is the oldest mandatory reward law, based on its success, Congress has passed other reward laws. These laws are often used jointly with the False Claims Act to hold fraudsters accountable. Other whistleblower reward laws modeled on the qui tam reward provisions of the False Claims Act are: the Foreign Corrupt Practices Act, the Securities Exchange Act, the Commodity Exchange Act, and the Internal Revenue Code (which can also cover money laundering).
What About Fraud In State And Local Spending?
Because of the success of the False Claims Act, a majority of states have enacted state and local versions of the False Claims Act.
What The Procedures To File A State False Claims Act Case?
Each state has its own rules and regulations regarding filing a state qui tam whistleblower reward case. But to facilitate filing state qui tam cases Congress, amended the federal False Claims Act to make it relatively easy to include state claims as part of a federal qui tam lawsuit.
What States Have False Claims Acts?
Taxpayers Against Fraud, a non-profit educational organization for which the partners of Kohn, Kohn and Colapinto are members, has published a list of states that have False Claims Act qui tam laws. These states are listed below. States with an “*” have a limited False Claims Act law that only covers fraud in Medicaid programs.
States with False Claims Acts:
District of Columbia
The following local jurisdictions have enacted False Claims Act qui tam laws:
Allegany County, Pennsylvania
New York City, New York
Does The False Claims Act Protect Whistleblowers?
Yes. 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 False Claims Act 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, including litigation costs and reasonable attorneys’ fees.
What Is A “Relator” Under The False Claims Act?
A “relator” is another term for a whistleblower. This name was in the original False Claims Act enacted in 1863, before the word “whistleblower” was common.
How Are Rewards Calculated Under The False Claims Act’s Qui Tam Reward Law?
Unlike retaliation laws, the False Claims Act is focused only on the losses suffered by the taxpayers by frauds and misrepresentations. If the whistleblower can prove a violation of the False Claims Act, the wrongdoer must pay the government three times the amount of any fraud or false billing (in addition to a fine for each violation). The whistleblower is entitled to between 15-30% of the total sum collected by the government. Because of the treble damage and liquidated damage provisions in the law, it is common for False Claims Act cases to result in huge settlements or judgments. Whistleblowers often obtain multi-million dollar rewards based on the quality of their information and the service they provide to the taxpayer.
Are False Claims Act Lawsuits Limited To Holding Government Contractors Accountable?
No. The 1986 amendments to the False Claims Act targeted defense contractors, but the law was not limited to contract fraud. It covers any scheme that can result in a loss of money to the federal government. These schemes include a wide variety of actions, many of which are counterintuitive. Successful cases include:
Overbilling the government for more than was provided;
Fraud in obtaining a government contract;
Mortgage frauds, when federal monies are involved;
Medicaid and Medicare Fraud committed by doctors or hospitals;
Unnecessary medical procedures billed to Medicaid or Medicare;
Illegal marketing of drugs by pharmaceutical companies;
Providing defective goods to the government;
False statements on customs forms;
False statements to obtain a government lease;
Failure to comply with government contracts or leases;
Failure to pay monies owed to the government;
Knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment;
Knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government;
Conspiring with others to get a false or fraudulent claim paid by the federal government;
Knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.
How To File A False Claims Act Case
A qui tam action must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the plaintiff’s possession, must be confidentially served on the US Attorney General and the US Attorney for the district in which the complaint is filed.
An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed.
What Is A False Claims Act “Disclosure Statement” That A Qui Tam Whistleblower Must Serve On The Attorney General And U.S. Attorney’s Office When Filing The Initial Complaint?
When filing the initial qui tam complaint, the whistleblower must submit to the government all of the relevant facts and documents that the whistleblower lawfully possesses. The information in the disclosure statement gives the factual basis of the qui tam complaint filed under seal with the district court.
How Long Does It Take For A False Claims Act To Be Resolved?
It is not unusual for qui tam cases to remain under seal for extended periods, even for multiple years. The government is typically required to file periodic reports with the district court explaining the reasons for extending the seal. The case is taken out of seal once the government makes its decision whether or not 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. Some cases resolve relatively quickly while other cases proceed to full litigation and may continue for several years before there is final decision or settlement.