The False Claims Act is intended to encourage people to come forward with information and assist the government in stopping Medicare fraud, defense contractor fraud and other kinds of fraud. Under the statute, individuals are awarded a percentage of the money the government recovers as a result of their successful whistleblower lawsuits.
The False Claims Act dates back to the Civil War when, in 1863, President Abraham Lincoln and the Congress enacted this law to combat defense procurement fraud in which unscrupulous defense contractors were billing the Union Army for dead mules, boots with soles that had been glued on, rather than stitched (and were coming apart in the rain and mud), and gunpowder that had been salted down with sawdust.
President Abraham Lincoln knew the federal government lacked the “insider knowledge” needed to uncover sophisticated schemes of fraud against the federal treasury. As a result, Lincoln wanted a law that would reward insiders who came forward with their private attorneys to disclose the fraud and prosecute it. This reward is called the “qui tam” provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery. “Qui tam” comes from the Latin phrase, “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means "he who comes for the king as well as for himself." So, in a “qui tam” lawsuit under the False Claims Act, private citizens sue for themselves and on behalf of the federal government.
The qui tam reward for the whistleblower ranges from 15% to 30%, depending on the extent to which the whistleblower (also known as the “relator”) and his counsel contribute to the prosecution of the case. In addition, the False Claims Act provides for the recovery of attorney fees and expenses. These two provisions combine to encourage whistleblowers to come forward, and private law firms to commit their resources, in fighting on the Government's behalf.
After the initial enactment of the False Claims Act, the statute was amended in 1943 and signed into law by President Franklin D. Roosevelt. Thereafter, the law was primarily actively used in times of war and the resulting huge defense contractor funding. However, the law was again amended in 1986. By that time, there was great concern that the national deficit had risen dangerously and President Ronald Reagan had declared that a vast amount of government spending was being misused through waste and fraud. “Defrauders” of the government were seen as posing a severe threat to national interests, and fraud was uncontrollable through normal law enforcement channels. As a result, the False Claims Act was again amended to add increased incentives for whistleblowers and their private attorneys, and to make it more feasible to prosecute the vast amounts of fraud. These amendments were signed into law by Ronald Reagan.
Since the passage of the 1986 Amendments to the False Claims Act, recoveries for the federal treasury have exceeded $17 billion. Today, roughly 80% of all qui tam cases involve healthcare fraud.