False Claims Act

The False Claims Act (FCA) is a whistleblower reward statute.  If you know of private parties (such as government contractors) defrauding the government, you as a whistleblower may bring a court action, called a qui tam suit, and be awarded a portion of the damages if the case is successful.

There are also other federal whistleblower reward statutes (See section 1), for tax, security and other types of fraud. 

In addition, 30 states have “Little FCAs” — these provisions can also be seen in the context of other state whistleblower laws.

Remedies against the Violator:

  • Civil penalties
  • Treble the amount of damages sustained by the government as a result of the fraud
  • Exclusion/debarment from government programs

Remedies for the Whistleblower:

  • 15 to 25% of the recovery if the government intervenes
  • 25 to 30% if whistleblower succeeds in a case which the government declines to pursue
    • However cases in which the government does not intervene are expensive and difficult to win
  • Attorneys’ fees

Role of the Whistleblower (“Relator” in FCA terminology):

  • Bring suit in the name of the United States
  • Assist by providing evidence, analysis, research

Anti-Retaliation Provision 31 USC 3730 (h) (See section 2) protects employees from retaliation for participating in false claims reporting (See section 3), investigations, or law suits.

Government Employees

Government employees are not specifically barred from filing a qui tam lawsuit against their own agencies but face resistance from the Justice Department and procedural hurdles to ensure they are not seeking to profit from doing their job (e.g., as a government auditor). Before considering a False Claims Act suit, government employees should first exhaust their agency’s fraud reporting requirements.

False Claims Act Proceedings

FCA suits have their own singular process, features and limitations (See section 4).

1. WHISTLEBLOWER REWARD STATUTES

Whistleblower Reward Statutes

  • Dodd-Frank Act Securities and Exchange Commission reward provision, 15 USC
    §78u-6
  • Dodd-Frank Act Commodity Futures Trading Commission reward provision, 7
    USC § 26
  • Financial Institutions Reform, Recovery and Enforcement Act of 1989
    (“FIRREA”), 12 U.S.C. §1833a et seq., and the Financial Institutions Anti-Fraud
    Enforcement Act of 1990 (“FIAFEA”), 12 U.S.C. §4201 et seq.
  • IRS reward provision, 26 USC § 7623
2. FEDERAL FALSE CLAIMS ACT RETALIATION PROVISION

Federal False Claims Act Retaliation Provision

31 U.S.C. 3730 (h) RELIEF FROM RETALIATORY ACTIONS.—

  • (1) In general. Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter [31 USCS §§ 3721 et seq.].
  • (2) Relief. Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. An action under this subsection may be brought in the appropriate district court of the United States for the relief provided in this subsection.
  • (3) Limitation on bringing civil action. A civil action under this subsection may not be brought more than 3 years after the date when the retaliation occurred.
3. FEDERAL FALSE CLAIMS ACT ANTI-RETALIATION PROVISION

Federal False Claims Act Anti-Retaliation Provision

31 USC 3730(h)

    • Applies if you are fired, demoted, or otherwise discriminated against for furthering an investigation into false claims against the government
    • Your actions need not be in connection with an actual or potential FCA suit; also protects steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to false claims.
    • Also protects individuals from employment retaliation when “associated others” made efforts to stop FCA violations, to address indirect retaliation by, for example, firing a spouse or child of the whistleblower
    • Protects contractors and agents as well as employees
    • 3 year statute of limitations for anti-retaliation claims
    • Remedies under anti-retaliation provision
      • Double back pay with interest
      • Loss of future earnings
      • Attorneys’ fees
      • General damages including emotional distress and harm to reputation
      • Reinstatement
4. FEDERAL FALSE CLAIMS PROCEEDINGS

Federal False Claims Proceedings

Persons subject to suit: Individuals, partnerships, corporations, and joint ventures but not federal or state agencies.

Knowledge requirement – violator must have actual knowledge of the falsity of the claim, deliberate ignorance, or reckless disregard for the truth

Examples of False Claims:

    • Services Not Rendered (the defendant claims they were rendered by submitting a bill for payment)
    • Upcoding (billing for a more expensive and extensive service than the one actually rendered)
    • Defective Pricing (lying about how much something will cost)
    • Claim Tainted By Kickbacks

Barriers to Whistleblower Recovery:

    • Another case alleging the same fraud was filed first
    • The claims are based on a public disclosure (but no bar if whistleblower’s disclosure predated the public disclosure or added something substantial to the public disclosure)
    • The whistleblower planned and initiated the fraud (but it is not necessarily a bar if the whistleblower played some role)
    • The whistleblower interfered with the investigation by violating the seal (secrecy) of the case

Process for Court Cases under the FCA:

    • Whistleblower files the case under seal in federal court
    • Remains under seal until government decides whether to intervene, which can take years
    • Defendant is not served with the complaint until government decides whether to intervene
    • Whistleblower must give the Department of Justice a disclosure with substantially all material information and evidence that supports the allegations
    • Government investigates
    • Government decides whether or not to intervene
    • Three out of four cases are declined, sometimes because of weakness of the case or likely recovery too small, but sometimes simply because government lawyers don’t have the time or resources to pursue
    • If Government declines, whistleblower decides whether to proceed without the government