Compensation & Justice for Whistleblowers in False Claims Act & Related Claims

The United States Government is the single largest purchaser of goods and services in the world. As a consequence, the motive and opportunity for companies doing business with the Government (federal and state) to commit fraud is substantial. Fraud in the context of Government spending occurs with regularity in the areas of health care (including Medicare and Medicaid), Education and Research Grants, Military procurement, Government funded construction, disaster relief, pharmaceutical fraud and every other kind of program similarly funded with taxpayer money.

No one really knows, or could know, just how much fraud is perpetrated against the taxpayer, nor how many billions of dollars are stolen from the treasury each year.

The good news is that federal law – through the False Claims Act (FCA) – provides a means for ordinary people who have evidence of fraud against the Government to bring lawsuits on behalf of the Government to recover for such frauds.

Persons who sue under the FCA are referred to as “Relators” or “Whistleblowers.” Lawsuits under the FCA can arise when companies submit claims for the payment of money from the Government (directly or indirectly) that are tainted by fraud – such as through false certifications of qualifications, false representations of quality, failure to meet contract specifications, delivery of defective or substandard goods, tainted and/or adulterated drugs, claims generated through the payment of kickbacks, and the like.

The False Claims Act, which contains “Qui Tam” provisions (which is an abbreviation for a common law latin phrase that means “He who sues on behalf of the King, as well as for himself”), dates back to the Civil War. President Lincoln prompted Congress to enact this law to bring justice against war profiteers who cheated the Government by supplying defective and worthless supplies to the Union Army and to recover the ill-gotten gains back to the Treasury, with a substantial reward to the whistleblower.

Under the modern version of this law, which dates back to 1986, the False Claims Act has proven highly successful in recovering money to the U.S. Treasury money that was stolen by fraud. The law does so by creating a partnership between whistleblowers, their attorneys, and the United States Government. The law “incentivizes integrity” to report fraud perpetrated against the Government by rewarding the whistleblower with a bounty of between 15% and 30% of the total amount recovered from the fraudster. The fraudster can be punished – if the fraud is proven – by being liable for up to three times the Government’s damages, plus civil penalties of between $5,500 and $11,000 per false claim. The False Claims Act also provides protections to the Relator against retaliation, such as would a whistleblower being fired as a result of his/her efforts to expose fraud.

The False Claims Act has been tremendously successful. It is the single most important tool in the Government’s arsenal to fight fraud. The U.S Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.2 billion, with around $40 billion recovered since 1986. The vast majority of these recoveries have come from Relator-initiated FCA lawsuits.

The FCA lawsuit process starts with the Relator’s attorney preparing and delivering a pre-filing “Disclosure Statement” to the local U.S. Attorney. The Disclosure Statement is a writing containing substantially all material evidence and information the person possesses as to the fraud. Thereafter, the FCA lawsuit (also called a “Qui Tam” lawsuit) is filed “under seal” – meaning that it is filed in secret and that the defendant does not know of its filing. The initial “seal” is for 60 days, but as a practical matter in the majority of cases it will be extended – usually in 6-month increments. During this time the Government investigates the facts and allegations of the complaint, and meets with the Relator and his or her attorney. Qui Tam cases remain under seal until the Government either formally intervenes in the case or elects to not intervene. Statistically, the Government intervenes in only about 20% of all cases filed. On average, FCA cases take about 38 months from filing through resolution, though some cases have taken a decade to reach resolution.

In addition to the False Claims Act, there are other federal laws that allow whistleblowers to expose fraud against the Government and receive a reward, such the IRS Whistleblower statute and the SEC Whistleblower statute. Also, a majority states, and several cities, have also enacted anti-fraud laws that can reward whistleblowers.

The False Claims Act is complex, and the law is full of “traps” for inexperienced counsel. This area of law is highly specialized and a potential Relator would be wise to work with seasoned counsel who are experienced and have a track record of success with FCA cases. Maggiano, DiGirolamo & Lizzi  is a highly experienced firm of trial lawyers, and we have teamed up with North Carolina-based attorney Chet Rabon, of the Rabon Law Firm, PLLC, as an “Of Counsel” attorney to our firm to handle False Claims Act cases. The Rabon Law Firm concentrates in False Claims Act and related litigation, and has successfully represented Relators in cases returning tens of millions of dollars to the Government. The Rabon Law Firm has represented Relators around the country and has numerous FCA cases at various stages of litigation in federal courts around the United States.

If you have a potential False Claims Act case, or related statutory fraud matter such as an IRS or SEC Whistleblower case, contact our firm for a free confidential consultation.