The False Claims Act empowers whistleblowers who have firsthand knowledge of false or fraudulent claims to report them to the appropriate government officials, and to incentivize the whistleblowers to work directly with government investigators.

The False Claims Act 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.

A “relator” is another term for a False Claims Act whistleblower. This name was in the original False Claims Act enacted in 1863, before the word “whistleblower” was common.

Key Takeaways

  • The False Claims Act was signed by Abraham Lincoln in 1863 to prevent contracting fraud during the civil war. It allows ordinary citizens to file lawsuits on behalf of the US government.
  • Under the False Claims Act, whistleblowers with information leading to sanctions against a fraudster are entitled to a reward between 15 and 30 percent collected by the government.
  • Some states also have enacted State False Claims Act laws, which have additional whistleblower rewards and protections.

History of 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.

In 1863, Senator Jacob Howard explained why he was introducing a 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.”

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).

“[T]he False Claims Act has provided ordinary Americans with essential tools to combat fraud…their impact has been nothing short of profound.”

Former Attorney General Eric Holder, U.S. Department of Justice, remarks at the 25th anniversary of the False Claims Act (January 31, 2012)

“The False Claims Act whistleblower law is the most powerful tool the American people have to protect the government from fraud.”

Former Assistant Attorney General Stuart Delery , Remarks at American Bar Association’s 10th National Institute on the Civil False Claims Act and Qui Tam Enforcement (2014)

False Claims Act Whistleblower Protections and Rewards

Under the False Claim Act’s 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.

Make sure you obtain an official acknowledgement from the SEC, IRS, CFTC, FinCEN, and/or the SOT confirming receipt of your complaint or claim application. Thereafter, fully cooperate with the investigations conducted by these law enforcement agencies.

The IRS, SEC and CFTC have detailed rules governing their programs. Make sure you follow these published rules. It is anticipated that the SOT will publish procedures shortly.

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.

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.

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.

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. Attorney’s 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 and the Department of Justice 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 public 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 government “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.

States False Claims Acts

Because of the False Claims Act’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 False Claims Acts:

The following local jurisdictions have enacted False Claims Act laws:

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

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.

How To File A False Claims Act Case

A False Claims Act case 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.

The complaint initially remains under seal for 60 days while the government investigates the allegations. Many times, the seal is extended for months or years.

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.

When filing the initial FCA 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.

What is the Average Length of a False Claims Act Lawsuit?

It is not unusual for False Claims Act 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 a final decision or settlement.

How to File a Qui Tam Lawsuit

Qui tam is the whistleblower provision of the federal False Claims Act, which allows for citizens to file lawsuits, or qui tam actions, and earn financial rewards for reporting corruption and fraud.

The False Claims Act is codified as 31 U.S.C. §§ 3729-33. Section 3729 sets forth anti-fraud requirements of the Act, and 31 U.S.C. 3731 includes the provisions related to filing a qui tam lawsuit.

To learn how to file a qui tam lawsuit, use this guide: Filing a Qui Tam Lawsuit: Updated 2021