What Is A Qui Tam Lawsuit?

What is a Qui Tam lawsuit?

A Qui Tam lawsuit is a legal action filed by a private person against a defendant who defrauded the government out of money and violated the False Claims Act. A Qui Tam lawsuit has several unique features:

  1. it is filed on behalf of the government (not by the government directly);
  2. it remains a secret while the government investigates;
  3. the person who filed the qui tam suit is protected by statute from retaliation;
  4. the government can recover treble damages;
  5. the government shares a portion of the money recovered with the person who filed the lawsuit.

Qui Tam” is Latin for “who sues [on behalf of the Crown].”

Common types of Qui Tam lawsuits:

1. Healthcare Fraud

Healthcare fraud is one of the most common types of qui tam actions and involves fraudulent activities by healthcare providers and organizations.

Examples:

  • Medicare/Medicaid Fraud: A healthcare provider bills Medicare for services that were never provided or for more expensive services than those actually rendered.
  • Kickbacks: A pharmaceutical company offers kickbacks to doctors for prescribing certain medications that are then billed to Medicare or Medicaid.
2. Defense Contractor Fraud

This type involves fraud related to government defense contracts.

Examples:

  • Overbilling: A defense contractor overcharges the Department of Defense for equipment or services.
  • Substandard Products: A contractor supplies substandard or defective materials and equipment to the military, falsely certifying that they meet contract specifications.
3. Government Procurement Fraud

This involves fraud in the process of government contracting for goods and services.

Examples:

  • Bid Rigging: Companies collude to rig the bidding process on government contracts, ensuring that a specific company wins at an inflated price.
  • False Claims: A contractor submits false claims about the costs or progress of a project to receive payment from the government.
4. Grant Fraud

Fraud involving federal grants and research funds.

Examples:

  • Misuse of Grant Funds: An organization uses grant money for unauthorized purposes, such as personal expenses.
  • Falsified Research Data: A researcher submits false data in grant applications to secure funding.
5. Environmental Fraud

This type involves fraudulent activities related to environmental laws and regulations.

Examples:

  • Illegal Dumping: A company illegally disposes of hazardous waste and falsifies records to the Environmental Protection Agency (EPA).
  • Clean Energy Credits: A business falsely claims to produce renewable energy to qualify for government subsidies and tax credits.
6. Financial Fraud

Fraud involving financial institutions and activities regulated by the government.

Examples:

  • TARP Fraud: Misuse of funds from the Troubled Asset Relief Program (TARP) intended to stabilize the banking system during financial crises.
  • Mortgage Fraud: A lender submits false information to obtain government-backed mortgage guarantees.
7. Education Fraud

This involves fraud in educational institutions, particularly those receiving federal funds.

Examples:

  • Federal Student Aid Fraud: A for-profit college submits false information about student enrollments or outcomes to receive federal student aid funds.
  • Research Grant Fraud: Universities misuse federal research funds or falsify data in research grant applications.
8. Tax Fraud

Fraud related to tax filings and payments.

Examples:

  • False Tax Returns: Individuals or corporations submit false tax returns to underreport income or inflate deductions.
  • Offshore Tax Evasion: Entities hide income in offshore accounts to evade U.S. taxes.
9. Cybersecurity Fraud

Fraud involving misrepresentations about cybersecurity practices and compliance.

Examples:

  • Data Breach Concealment: A company conceals data breaches and misrepresents its cybersecurity measures to maintain government contracts.
  • Non-compliance with Standards: A contractor falsely certifies compliance with federal cybersecurity standards to secure contracts.

 

State Qui Tam Lawsuits

Several states have their own qui tam statutes, allowing whistleblowers to file lawsuits on behalf of the state to combat fraud against state government programs. Here is a list of states that have enacted their own False Claims Acts with qui tam provisions, with hyperlinks to the statutory texts:

  1. California
  2. Colorado
  3. Connecticut
  4. Delaware
  5. District of Columbia
  6. Florida
  7. Georgia
  8. Hawaii
  9. Illinois
  10. Indiana
  11. Iowa
  12. Louisiana
  13. Maryland
  14. Massachusetts
  15. Michigan
  16. Minnesota
  17. Montana
  18. Nevada
  19. New Hampshire
  20. New Jersey
  21. New Mexico
  22. New York
  23. North Carolina
  24. Oklahoma
  25. Rhode Island
  26. Tennessee
  27. Texas
  28. Vermont
  29. Virginia
  30. Washington
  31. Wisconsin

These statutes allow for whistleblowers to bring forward information about fraud against state governments, often resulting in significant recoveries of lost funds and penalties for fraudulent parties.

 

Four Employees Who Prosecuted A Qui Tam Case Against Their Employer

Four plaintiffs (called “relators”) brought a case against GlaxoSmithKline (GSK) that was settled in 2012. This case involved multiple whistleblowers who provided information about GSK’s illegal marketing practices and other fraudulent activities.

The Case

  • Defendant: GlaxoSmithKline (GSK)
  • Allegations: The company was accused of engaging in various illegal activities, including promoting drugs for off-label uses (uses not approved by the FDA), paying kickbacks to doctors to prescribe their drugs, and failing to report safety data.
  • Relators: The case was notable for having four whistleblowers who came forward with information:
    • Greg Thorpe – A former sales representative at GSK who filed the initial complaint.
    • Blair Hamrick – Another former sales representative who joined Thorpe in the lawsuit.
    • Thomas Geraty – A former senior marketing development manager at GSK.
    • Matthew Burke – A former regional vice president for GSK.

The Settlement

  • Settlement Amount: GSK agreed to pay $3 billion to settle the allegations. This settlement included $1 billion in criminal fines and $2 billion to resolve civil liabilities under the False Claims Act.
  • Relator Rewards: The whistleblowers received a substantial portion of the settlement as a reward for their role in exposing the fraud.

Impact

  • The settlement was one of the largest healthcare fraud settlements in U.S. history and highlighted the pervasive issues of off-label marketing and kickbacks in the pharmaceutical industry.
  • The GSK case remains one of the most significant examples of a qui tam lawsuit involving multiple relators, showcasing the power of collective whistleblowing in addressing large-scale corporate fraud.