What is the False Claims Act? How does a qui tam case work?
Qui tam lawsuits are a type of civil lawsuit whistleblowers bring under the False Claims Act, a law that rewards whistleblowers if their qui tam cases recover funds for the government. Qui tam cases are a powerful way for whistleblowers to help the government stop many kinds of fraud – Medicare and Medicaid fraud, defense contractor fraud and numerous other types of frauds that impact the government financially – and recover billions that have been stolen from the U.S. Treasury and taxpayers. (Tax frauds and securities law violations are handled differently.)
The False Claims Act rewards whistleblowers whose qui tam lawsuits recover government funds and provides job protection to whistleblowers because of the professional and personal risks they take to expose and stop fraud against the government – fraud that can endanger the lives of patients, U.S. soldiers and others. Phillips & Cohen has won their clients more than $1 billion in whistleblower rewards – more than any other law firm.
Once a person has evidence of fraud against the government and decides to blow the whistle, that person needs to find a lawyer to represent him/her. Thorough research should be done and careful consideration should be given to the hiring decision as the work by that lawyer will be key to the success of the qui tam case and will be a major factor in determining whether the whistleblower will receive a reward and the amount of the reward. (See Using the Internet to Find a Lawyer and Pitfalls to Avoid.)
Under the False Claims Act, a private citizen may sue an individual or a business that is defrauding the government and recover funds on the government’s behalf. The qui tam lawsuit is filed “under seal,” meaning that it is kept secret from everyone but the government to give the Justice Department time to investigate the allegations. Even the person or entity being accused of fraud is not told about the qui tam case. The qui tam lawsuit and supporting documents should provide the government with detailed information about the fraud.
The government investigates the allegations, often with the assistance of the whistleblower’s attorney, and decides whether it will join, or “intervene,” in the case. The government intervenes in only a small percentage of qui tam lawsuits. Although whistleblowers have the option under the False Claims Act to pursue qui tam cases on their own, the chances of success are much higher when the government joins.
The False Claims Act states that a qui tam case will be sealed for 60 days, but courts generally extend the seal multiple times to give the government enough time to investigate the allegations to decide whether to join the case. Government investigations can take years.
Oftentimes the government will ask the court to partially lift the seal on the qui tam lawsuit to discuss the allegations and a possible settlement with the individual or entity accused of fraud. Most successful qui tam cases are resolved through settlement negotiations rather than a court trial, although trials may occur.
Defendants found liable under the False Claims Act may have to pay as much as three times the government’s losses plus penalties for each false claim.
The amount of the whistleblower reward depends on many factors, including the quality of the case as presented to the Justice Department and the work of the whistleblower’s attorney to help the qui tam case succeed. If the government intervenes in the case and recovers funds through a settlement or a trial, the whistleblower, or “relator,” is entitled to 15 percent to 25 percent of the recovery. If the government doesn’t intervene in the case and it is pursued by the whistleblower team, the whistleblower reward is between 25 and 30 percent of the recovery.
More detailed information about the False Claims Act and qui tam lawsuits can be found in The False Claims Act: Fraud Against the Government, a leading treatise on the law written by Phillips & Cohen partner Claire M. Sylvia.