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A suit under the federal False Claims Act (FCA), also known as a “qui tam” action,
allows people who have insider information of fraud against the Government, known
as a “relator” or “whistleblower,” to file a suit to help stop the perpetrators
from defrauding the United States Government. The False Claims Act seeks to deter
fraud against the United States Government by providing for penalties of up to
three times the amount of the fraud in addition to fines of $5,000 to $11,000 per
violation. It is estimated that the United States has collected almost $8 billion
in fines and penalties in False Claims Act cases since 1986. The FCA is codified
as 31 United States Code Sections 3729 - 3732.
It is critical that the whistleblower come forward with his information as soon as
possible. The False Claims Act requires that the relator be an “original source”
of the information, which generally means that he has direct and independent
knowledge of the fraudulent conduct and he has voluntarily provided this
information to the Government before filing the qui tam suit. Information about
fraudulent conduct which is in the public domain prior to the time the
whistleblower reports the same to the Government generally precludes the
prosecution of a qui tam suit.
If the qui tam suit alleging false claims is successful, the whistleblower or
relator will also be entitled to 15-30% of the government's total recovery, which
includes damages for the false claims, treble damages, plus civil penalties of
from $5,000 to $10,000 per false claim. To recover this bounty, the relator must
have complied with the complex and unusual statutory requirements, however. Merely
providing information to a hotline will not entitle the relator to a recovery
under the False Claims Act.
Unlike most other lawsuits, a complaint under the False Claims Act must be served
upon the government but must not be served on the defendant until ordered by the
court, must be filed under seal, and must be supported by a detailed disclosure
memorandum, not filed in court, but served on the government, setting forth the
factual underpinnings of the complaint, together with copies of all relevant
documents. The attorney for the plaintiff/relator to discuss the case or to
disclose its existence to anyone, including the defendant and the media, as to do
so could impair the government's ability to investigate the allegations in secret.
A whistleblower or qui tam plaintiff's failure to follow these unique statutory
requirements of the False Claims Act (FCA) can result in dismissal of the action.
After the complaint is filed under seal, and a disclosure memorandum and related
documents are served on the government, the government has 60 days to intervene or
decline to intervene, move for an extension of time to determine whether to
intervene, seek dismissal of the action, or settle the case per §3730(b)(4). The
government will usually request numerous extensions of the 60-day initial
investigatory period, however, as 60 days typically is too short a time period for
the government to complete an investigation. Upon completion of its investigation,
the government has the option to take over, or intervene in, the case. Regardless
of whether the government intervenes, the relator or whistleblower who has
complied with the proper procedures and is not otherwise barred from recovery, is
still entitled to a share of the recovery, and may pursue the case on behalf of
the government.
Attorney Joseph Griffith is a former prosecutor for the U.S. Department of Justice
who focuses on qui tam/whistleblower law suits.