Supreme Court upholds qui tam provisions of False Claims Act

Re: Vermont Agency of Natural Resources v. U.S. ex. rel Stevens, No. 98-1828

May 22, 2000 -- The important aspect of today's Supreme Court decision on the False Claims Act is that it upholds the right of whistleblowers to sue companies and individuals defrauding the federal government, said attorney John R. Phillips, a Washington, D.C., partner of Phillips & Cohen LLP.

"The defense and health care industries have tried for 12 years to get the False Claims Act declared unconstitutional," said Phillips, who worked closely with Congress in strengthening the Civil War-era fraud statute in 1986 and whose law practice is devoted exclusively to representing whistleblowers in "qui tam" (False Claims Act) lawsuits. "The battle is over now."

"This law is of great benefit to the government as well as whistleblowers," Phillips said. "Because of the False Claims Act, whistleblowers are more willing to risk ruining their careers by reporting fraud."

The government has collected more than $4.3 billion as a result of qui tam lawsuits filed under the False Claims Act — including the tentative $745 million settlement of qui tam lawsuits against Columbia/HCA Healthcare Corp., the nation's largest healthcare provider, that was announced last week. Phillips & Cohen LLP represents whistleblowers in two of those cases.

The law has also deterred fraud totaling hundreds of billions of dollars, according to an economic analysis that was done in 1996.

The portion of the decision that overturns the right of whistleblowers to sue states will have a very limited effect, Phillips said.

"Most lawsuits against states focused on Medicare and research fraud by state and university hospitals," Phillips said. "It's unfortunate that state-owned hospitals will be held to a lower standard of accountability than their private competitors."