HOW THE FALSE CLAIMS ACT WORKS
The False Claims Act is a law that is designed to reward any person who knows that an individual or company has financially defrauded the federal government, by allowing that whistleblower to file a “qui tam” lawsuit to recover damages on the government’s behalf.
What is a False Claims Act lawsuit?
The False Claims Act provides a reward for any person who is aware of a company or individual that has financially defrauded the federal government, and successfully files a “qui tam” lawsuit to recover damages on the government’s behalf.
Many times honest people are made to work in an environment of fraud by their employer or see fraud by a competitor and desire to level the playing field. The False Claims Act’s purpose is to provide a financial incentive for these people to come forward and disclose the information to the government and join in prosecuting the fraud. You do not need to be a corporate insider/officer to file a qui tam suit. The False Claims Act provides that anyone who is aware of fraud on the government can file a qui tam case.
Cases have been successfully brought by employees, competitors, subcontractors, physicians, dentists, consultants, and even patients. Cases have ranged from corporate officers, to line workers in the defense contract industry; and from hospital executives and doctors, to nurses and clerks in the medical industry.
The lawsuit is filed under seal and remains sealed during the investigation.
Your False Claims Act case is filed under seal, so that it is not disclosed to the public and cannot be discussed with anyone except government officials. Because the case is filed under seal, not even the defendants are aware of the case. The purpose of “sealing” the lawsuit is to permit the government to conduct its investigation without interference from the defendants. Your False Claims Act lawsuit will typically remain sealed for up to 2 to 3 years, although we have seen cases sealed for as many as 9 years before the public has access to the case filing.
At the end of the seal period, the government decides whether to join the case. If the government joins the case, the lawsuit is unsealed, a copy is served on the defendant, and the government and the relator work together in the prosecution of the case. If the government declines to intervene, the relator may choose to prosecute the case on his own. However, because of the Government’s power over contracting and Medicare issues, the case has a much greater chance of success and a much greater value if the Government joins in the prosecution. For this reason, it is our firm's policy not to become involved in cases that come to us "after the fact" and when the Justice Department has already decided that the case is not worth prosecuting.
Timing is critical.
The False Claims Act provides that only the first person to file a qui tam suit alleging the fraud can proceed. No court can have jurisdiction over a case where there is already another pending case on file involving the same fraud allegations. Therefore, it is critical that you are the first to file the lawsuit with your allegations of fraud.
Damages and Fines
The False Claims Act provides that the government shall recover three times the amount of money it lost as a result of the defendant's fraud, plus a recovery of between $5,500 and $11,000 penalty for each false claim submitted by the defendant. When settling a case, the government often agrees to forego the civil penalties and accepts two to three times the amount of damages suffered by the government. The defendant also must pay the fees and the case-related expenses of the whistleblower’s attorney.
The whistleblower typically receives between 15% and 25% of the total government recovery. However, the whistleblower recovery may be up to 30% of the total in some instances. The amount varies, depending on whether the government intervened in the qui tam case and other factors. Congress decided to give whistleblowers a share of the recoveries that result from qui tam lawsuits to give people a strong incentive to step forward and take the personal and professional risks involved in reporting fraud. It also wanted to encourage private law firms to risk their resources in litigating cases on the public’s behalf.
Make sure your attorney chooses the best court for the particular issues in your qui tam case.
- Not all courts have interpreted provisions of the False Claims Act in the same way. Various Circuit Courts of Appeal and District Courts throughout the country might rule on important aspects of your case differently. Your counsel should be knowledgeable about these different court interpretations and know where to file the case to avoid negative court precedents and optimize your case results. Under the False Claims Act, the case may be filed in any locale where the defendant does business.
- In addition to being knowledgeable about the False Claims Act case law in the different federal districts throughout the nation, your counsel should also be familiar with the experience of the different U.S. Attorneys offices in prosecuting qui tam cases. Although all U.S. Attorney offices technically handle qui tam cases, only a few U.S. Attorney offices have substantial experience in prosecuting major cases under the False Claims Act . In addition, some of these offices have greater experience in defense fraud cases, and others have greater experience in Medicare fraud cases. It is important to know the strengths of the particular district where you case is to be filed. If you have a choice of location, choosing the right U.S. Attorney office is critical. If your case is declined by the U.S. Attorney, the value of your case is greatly decreased. You don't want the U.S. Attorney declination to be based on a lack of experience in the area.
Ask about your attorney’s experience and results.
- Choose a law firm with substantial experience in qui tam lawsuits, and the proven ability to work with the Justice Department in their investigation. When the Justice Department joins a qui tam case, the case has a much greater chance of being successful. While this point seems obvious, we have encountered many clients who come to our firm because of dissatisfaction with their previous qui tam attorneys. However, it is our firm's policy not to become involved in cases that come to us "after the fact" and when the Justice Department has already decided that the case is not worth prosecuting. So, be sure to ask whether the attoneys you hire have proven success in the area of False Claims Act cases. Ask questions. Has the attorney been published in any Federal Court case decisions? Has the attorney broken any new ground in leading edge appellate cases under the False Claims Act? What is the attorney’s trial experience? Is the attorney ethical, or has the law firm ever had a qui tam client accuse it of misconduct? These are critical questions to be asked of even the law firms which claim extensive experience in qui tam cases. The False Claims Act is very complex, with many traps that can catch the inexperienced attorney. Make sure you choose an experienced attorney, because your case will have little or no value if the Justice Department decides not to join your case.
- Qui Tam cases can be very expensive and lengthy. False Claims Act cases often incur a great amount of financial costs. Depending on the case, expenses can run from the thousands to the hundreds of thousands of dollars and can take more than a decade to prosecute. In addition, there can be multiple appeals to the appellate courts to protect your interests. Make sure that your attorney has the resources to pursue qui tam cases and help shoulder the burden with the Justice Department.
- Will the attorney maintain an active role in your case? While some potential clients think a major law firm is best for them, that is not likely the case. Most major law firms are based on a business profile of hourly paid work. In those firms, the contingency fee work is often viewed as a “step child” part of the firm’s practice and is neglected. You should choose an attorney who understands the importance of giving your case the attention it deserves.
- Be wary of unsubstantiated advertisements. Some firms claim expertise, but might not have the experience to back it up. Look for results, not flashy advertising.
If you become aware of fraud, time is of the essence for a Qui Tam lawsuit.
- The False Claims Act is a “first to file” law. That means a qui tam lawsuit can be dismissed if it is not the first one to make the allegations. It also can be dismissed if information about the fraud becomes public before the case is filed. The reason for these two requirements, is that the False Claims Act is designed to reward the person who “blows the whistle” rather than following a whistle that has already been blown.
- There are strict time limits within which a lawsuit can be filed. Generally, lawsuits must be filed within six years of the date of the fraud. The statute's section governing the time within which you must file your lawsuit is complex and the unwary different courts have interpreted these provisions in different ways.
Do not discuss your case with anyone.
Qui tam lawsuits are filed under seal. This means no one can access the court record of your case while it remains “sealed.” This also means you cannot discuss your case with anyone other than your lawyer and the prosecutors. However, the seal on these cases eventually is lifted by the Court after the Government completes its investigation, and your name and allegations will be open to the public.