Federal Law
False Claims Act
The False Claims Act (FCA) allows the federal government to financially reward brave citizens who blow the whistle on companies that submit fraudulent claims. The FCA allows private parties to file qui tam actions that allege defendants have defrauded the federal government.
The term qui tam is a Latin expression, which means “he who brings a case on behalf of the King, as well as for himself.”
This means that the “relator,” or person who brings a qui tam lawsuit on behalf of the government, can receive up to 30% of the recovered award.
In the past three decades, the federal government has recovered billions of dollars in lost government money with the help of qui tam whistleblowers.
A qui tam whistleblower is any person who reveals misconduct – engaging in illegal activity, fraud or corruption – by an employer, business or entity that is receiving federal dollars. Specifically, a qui tam whistleblower is an individual who knows of a company that is getting paid by the government for work they did not do, work that was not performed to the government’s specifications or any other work for which the company was not entitled for compensation. For example, in the healthcare context, a qui tam whistleblower might know that a healthcare company is submitting claims for payment to Medicare or Medicaid for procedures or services that are not medically necessary.
The federal False Claims Act was created to help whistleblowers and provide them with an incentive to report fraudulent behavior to the government. When the FCA was enacted, Congress recognized that few people would expose fraud if they believed that disclosures would lead to harassment, demotion, loss of employment or any other form of retaliation. Therefore, under the qui tam provisions of the FCA, companies and individuals are prohibited from using the threat of economic retaliation to silence whistleblowers. The False Claims Act whistleblower protection assures those considering exposing fraud that they are legally protected from retaliatory acts against them.
Why was the False Claims Act created?
The False Claims Act, also known as “Lincoln’s Law”, was originally enacted to help combat fraud within the Civil War. The Act was specifically focused on fraud committed by military contractors who were billing the government for goods that were not actually delivered. It was also focused on protecting the army from companies selling rotten food, sick mules and defective weapons.
Although the FCA was initially implemented to protect the military from fraudulent activity, it was never limited to the military sphere. The Act also intended to eradicate fraud committed throughout all aspects of government. The two main goals for the enactment of the FCA were to involve private parties or relators in fraud enforcement and to combat all types of fraud that cause financial loss to the federal government.
Between the Civil War and World War II, the False Claims Act definition underwent many changes. Each set of amendments weakened the effectiveness of the FCA. As a result, whistleblowers rarely used the FCA as a weapon to combat fraud against government programs. The act greatly reduced the potential rewards for qui tam whistleblowers.
Consequently, few people were willing to bring a qui tam action and risk their jobs by accusing their employers of illegal behavior.
Also, qui tam actions provided recoveries to dishonest, undeserving relators. To impede the ability of relators to prosecute claims and reduce their share in the event of a successful suit, Congress amended the FCA in 1943. However, this did nothing to strengthen the FCA.
The False Claims Reform Act of 1986
Up until 1986, the False Claims Act was extremely ineffective in combating fraud. Increased federal expenditures led to an increase in fraud against the federal government throughout the 1970s and 1980s, which indicated that amendment to the FCA was necessary.
In 1986, Congress made extensive changes to the FCA by providing incentives for whistleblowing insiders and preventing opportunistic plaintiffs. Senator Charles “Chuck” Grassley and Representative Howard Berman recognized that the FCA was in desperate need of reform to adequately protect the government against growing and increasingly sophisticated fraud.
Below are some of the major changes made to the FCA in 1986:
- Created an explicit cause of action for retaliation against whistleblowers
- Increased sanctions from a maximum penalty of $2,000 and double damages to a minimum penalty of $5,000 (maximum $10,000) and triple damages
- Increased the maximum award for qui tam relators from 25% to 30%
- Expanded the statute of limitations
- Authorized the government to use civil investigative demands
- Required defendants to pay reasonable fees to the whistleblower’s attorneys in successful qui tam prosecutions
Why was the False Claims Act created?
These changes have made a significant difference in the effectiveness of the FCA. They have since made it easier for the government to investigate FCA cases and lowered the required burden of proof, which increased the overall success of FCA lawsuits.
The year before 1986, FCA claims recovered about $40 million. Since 1986, the government has recovered more than $50 billion in False Claims Act settlements and judgments, with whistleblowers initiating 80% of these cases.
The new version of the FCA has substantially increased the government’s power to combat fraud, as evidenced by the increase in qui tam cases filed and government dollars recovered. The number of qui tam cases increased from 31 cases in 1987 to 356 cases in 2007.
The Fraud Enforcement and Recovery Act of 2009
As a result of the economic crisis of the past several years and new judicial decisions that restricted the effectiveness of qui tam actions, Congress began to reevaluate the federal FCA. Congress reviewed the history of the False Claims Act and recognized the key role it played in deterring and uncovering fraud and thus, strengthened it in early 2009 under the Fraud Enforcement and Recovery Act (FERA).
Improvements to the FCA under FERA include, but not limited to:
- Broadening the scope of fraud covered by the FCA
- Granting the government the ability to recover its costs expended in investigating and prosecuting FCA cases
- Improving the government’s ability to investigate fraud and false claims
- Reducing defendants’ ability to escape liability through technicalities
- Expanding whistleblowers’ protection from employer retaliation
What actions violate the False Claims Act?
To gain a better understanding of what constitutes a violation of the FCA, please note a few examples below:
- Submitting or causing someone else to submit a false claim to the government
- Making a false record or statement to get a claim paid by the government
- Underpaying money owed to the federal government
- Inflating the price or overcharging for a product
- Charging for one product and delivering another
- Failing to provide or perform a service
Violating the FCA also involves filing false claims and fraud against federal government programs such as:
- Healthcare (Medicare, Medicaid, and TRICARE)
- Housing and mortgage
- Student financial aid
- Small business loans
Whistleblower provisions of the False Claims Act
Under the False Claims Act, relators are protected against retaliation in the form of demotion, suspension, threats, harassment or any other form of retaliation for their disclosure to the government. Other forms of prohibited retaliation include:
- Oral or written reprimands
- Reassignment of duties
- Constructive discharge
- Retaliatory lawsuits against whistleblowers
The whistleblower protection provision of the FCA protects “lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under [the FCA] or other efforts to stop one or more violations of [the FCA].”
In addition to protections granted to whistleblowers of fraudulent acts, they can also receive compensation for their disclosure. The reward system for the FCA awards whistleblowers whose cases lead to successful prosecution with 15% to 30% of the money recovered by the federal government. The defendant is required to pay for any attorney’s fees and costs the whistleblower has accumulated during the lawsuit. In total, whistleblowers have been paid more than $7 billion as compensation for submitting FCA cases to the federal government. Defendants found in violation of the False Claims Act must pay up to three times the defrauded dollar amount and a civil penalty between $5,500 to $11,000 for each false claim.
A whistleblower who prevails in a retaliation action may also recover reinstatement, double back pay (plus interest), and emotional distress (as well as other non-economic harm resulting from the retaliation).
The importance of hiring a False Claims Act Attorney
If you suspect that your employer or a competitor has fraudulently obtained money from the federal government, be sure to contact a False Claims Act attorney right away. The likelihood of an FCA case being successful increases tremendously with the right lawyer – whoever you want to report for fraud is likely going to have some powerful attorneys on their side.
The False Claims Act is an extremely specialized, ever-changing and complex area of law. Only a lawyer experienced and skilled in FCA cases can effectively represent and protect a relator taking an important stand against fraudulent and illegal activity. A qui tam lawyer knows how to gather information about a relator’s industry, explain to the client that their position to the government is a big role and present the best possible case to the government.
Why was the False Claims Act created?
The overwhelming majority of FCA cases result in monetary settlements, awards or restrictions for companies. At Price Armstrong, we are the firm that can help you achieve the same success in your qui tam suit. If you want to move forward with filing an FCA claim, don’t hesitate to contact us today and speak to a False Claims Act lawyer during your free initial consultation.
