Qui Tam / Whistleblower
The False Claims Act, 31 U.S.C. Section 3729 et. seq., allows private persons to bring a qui tam action against another who had defrauded the federal government by knowingly presenting a false claim for payment. A false claim may involve a false record, receipt, statement or other representations made to the government. In such actions, qui tam plaintiffs file suit on behalf of themselves and the United States, and, if successful, will be entitled to share in any recovery with the federal government.
Qui Tam History
Congress enacted the False Claims Act in response to contractor fraud during the Civil War. President Abraham Lincoln had pressed Congress to act because military contractors had supplied the Union Army with defective products and inferior materials, and had inflated bills through illegal price gouging. However, the Act, and its qui tam provision, presented many obstacles for whistleblowers to overcome before filing suit and limited the qui tam plaintiff's recovery if the government took over a case. Accordingly, the Act was little used until Congress amended it in 1986.
The 1986 amendments made it easier and more lucrative for private citizens who have independent and direct knowledge of fraud against the federal government to file suit on its behalf. These amendments also protect whistleblowers who are "demoted, suspended, threatened, harassed or in any other manner discriminated against in the terms and conditions of employment" for acts done in furtherance of filing a claim under the Act.
Who May File a Qui Tam Action
Qui tam actions may be brought by employees, former employees, competitors, subcontractors, state and local governments, current and former federal employees, public interest groups, corporations, and other private organizations. However, some courts have dismissed organizations as relators for not being able to meet specific provisions of the law, and there is a debate over whether federal employees are obligated by their jobs to disclose the fraud and filing a qui tam suit is a conflict of interest.
Who is Charged
Qui tam actions have continued to successfully identify fraud and recover federal funds from many defense contractors, and increasingly, more actions are being filed that involve government agencies such as the Departments of Health and Human Services, Environment, Energy, Education, NASA, Agriculture and Transportation. Generally, any organization or person who uses federal money can be charged as a defendant in a qui tam action. Government contractors and subcontractors are the most common defendants in qui tam actions. Medical providers, including doctors, hospitals and clinics, and health maintenance organizations (HMOs), are often defendants in qui tam claims concerning Medicare/Medicaid fraud.
Private universities, as a result of their management of federal grants and research and development funds, also have been charged as defendants in qui tam actions. State and local government officials and agencies, recipients of great amounts of federal money, have been charged under the Act, including state-run colleges and universities.
Prosecution of A Qui Tam Suit
A whistleblower must file a qui tam suit under seal with a U.S. District Court, and the Justice Department then conducts an investigation of the facts involved in the complaint. When its investigation is complete, the government has the option to take over the case, or intervene. In some cases, the U.S. Attorney will open a criminal investigation based on the qui tam allegations and the civil case will not proceed until the criminal investigation is complete. Whether or not the government takes over the case, the whistleblower is entitled to a share of any successful qui tam action recovery. If the government decides not to participate, the whistleblower may pursue the case on behalf of the government. The filing, investigation, and trial in a qui tam action may take many years to complete.
If a whistleblower plaintiff wins a qui tam suit alleging false claims, the whistleblower, known as a "relator," will be entitled to 15 to 30 percent of the government's total recovery, which includes damages for the false claims and civil penalties that range from $5,000 to $10,000 per false claim. Plaintiffs who win under the Act also are reimbursed for expenses incurred, including attorneys fees and costs.
The Act has specific requirements a relator must follow in order to recover, and limits who is eligible to file suit, how much he can recover, and under what circumstances. If a relator was involved in the false claims, the court has the discretion to limit his recovery and he will not recover at all if he is convicted of criminal conduct related to the suit.
Cases filed as qui tam actions generally involve false claims that are presented to the government for payment or approval. These false claims may be accomplished through the submission of false records, statements . Although a wide variety of fraudulent conduct falls under the Act's definition of a false claim, the 1986 amendments do not cover false claims relating to tax returns.