Overview
The False Claims Act is the most effective tool in combating fraud against the federal government. The False Claims Act provides for the potential for substantial awards to whistleblowers as well as robust protections against retaliation.
Congress enacted the False Claims Act during the Civil War to combat fraud against the federal government by suppliers to the Union Army. The False Claims Act, often referred to as “Lincoln’s Law,” was, however, broadly underutilized until Congress overhauled the statute in 1986.
The 1986 amendments to the False Claims Act were motivated largely by highly publicized accounts of abuses in the defense industry, with the government being charged tens of thousands of dollars for everyday items like hammers and toilet seats. The amendments significantly expanded the role of whistleblowers, increased financial incentives, provided redress for whistleblower subjected to retaliation, and reduced critical barriers to successful legal actions.
Since the 1986 amendments were passed, the False Claims Act has become the federal government’s most effective and successful tool in combating waste, fraud, and abuse in federal spending. From 1986 to 2023, the federal government has recovered over $75 billion through the False Claims Act. Over $50 billion of those recoveries have been in healthcare-related lawsuits – reflecting the massive sums of money that the federal government (e.g., via Medicare, Medicaid, and TRICARE) pays for healthcare services. The False Claims Act also has been highly effective in combating fraud and abuse in government contracts for defense, energy, construction, housing, natural disaster recovery, and other forms of government procurement. The essence of a False Claims Act lawsuit is fraud upon the federal government. Similar state false claims acts are aimed at injury to the state fisc. However, fraud upon purely private parties (e.g., those without any connection to government funds) will not do.
The Critical Role of Whistleblowers Under the False Claims Act
The success of the False Claims Act is largely a result of lawsuits brought by whistleblowers (known as “Relators”), under the qui tam provisions of the False Claims Act. The qui tam provisions of the False Claims Act allow a whistleblower to file a sealed lawsuit on behalf of the federal government. This unique structure recognizes that the government often lacks the information and resources to pursue a fraud case. Corporate insiders and others with valuable knowledge of governmental fraud are often in better positions to discover fraud than the government itself.
Private citizen-whistleblowers have been a vital resource for the government by bringing to light evidence of fraud that would have otherwise gone undetected. 69% of the $75 billion recovered since 1986 has come from qui tam lawsuits filed by whistleblowers under the False Claims Act. Relators have been awarded over $8.6 billion in so-called relator’s share awards under the False Claims Act.
The success of whistleblower-initiated False Claims Act actions is largely driven by three key components of the law.
WHISTLEBLOWER AWARDS (AKA “the Relator’s Share”): A successful False Claim Act relator may receive between 15% and 30% of the total recovery (e.g., the amount that the government or, in a non-intervened case, the relator obtains from the defendant for the defendant’s fraudulent conduct). This is called the “relator’s share”, and the award percentage depends on various factors (e.g., whether the government intervenes in the case). The relator’s share award is a massive financial incentive given that FCA recoveries often stand in the tens or hundreds of millions of dollars. Even a relatively modest “slice” of a large recovery is enough to motivate whistleblowers to come forward. Each year hundreds of millions of dollars are awarded to whistleblowers under the False Claims Act.
WHISTLEBLOWERS CAN PURSUE NON-INTERVENED CASES AND HAVE DONE SO WITH GREAT SUCCESS: If the government decides not to intervene in a False Claims Act case (i.e., the government effectively foregoes its right to pursue the whistleblower’s claims), a relator and their counsel can generally choose to litigate the case on behalf of the government. That provides an additional avenue for recovery – and an additional avenue for a relator to receive an award if the non-intervened case bears fruit. In such cases, a successful relator can receive 25% to 30% of the recovery as his or her relator’s share award (as opposed to 15% to 25% of the recovery in intervened cases). Particularly in recent years, relators have obtained large recoveries pursuing non-intervened cases on their own.
ANTI-RETALIATION PROTECTIONS: Qui tam cases are filed under seal. That means only the court and government are put on notice of the lawsuit at the time it is filed. After a qui tam case is filed, the government investigates the allegations. During the pendency of the investigation, the case generally remains under seal (often for many years). So, defendants are usually not aware of the identity of the whistleblower or provided a copy of the lawsuit for many years. Even so, whistleblowers can be retaliated against at any time. Given that whistleblowers are often insiders (e.g., employees of a defendant), that means that whistleblowers can face retaliation. Luckily, the False Claims Act included robust anti-retaliation protections. A whistleblower that faces retaliation for opposing fraudulent conduct may file a retaliation claim to obtain “all relief necessary” to compensate them for being “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms or conditions of their employment” for their efforts to either stop violations of the False Claims Act or in support of a case under the False Claims Act. Whistleblowers can recover both economic and non-economic damages.
What Types of Fraud are Covered by the False Claims Act?
The False Claims Act covers virtually all manner of fraud upon the federal government – with the one pertinent exception of tax fraud. Federal tax fraud, however, is reportable under the Internal Revenue Service’s own whistleblower program. Given that the False Claims Act targets fraud, the defendant’s acts must be made “knowingly.” That means merely negligent conduct is not covered, but intentional and reckless conduct can fall within the statute’s ambit.
Examples of classic false claims include upcoding, charging for unnecessary services, regulatory violations, violations of the Anti-Kickback Statute, violations of the Stark Law, providing subpar goods or services, and avoiding rebates or other payment obligations to the government.
In a successful False Claims Act lawsuit, the government can recover three times its losses (A/K/A “treble damages”) and pursue civil monetary penalties. This creates the potential for significant liability and reflects the deterrent goals of the False Claims Act.
The Role of Counsel
Filing and litigating a case under the False Claims Act is highly complex. Experienced whistleblower attorneys can help to navigate the procedural hurdles of the False Claims Act, increase the odds that the government intervenes in the case (and obtains a settlement or judgment in its favor), actively litigate the case if the government declines to intervene, advocate on your behalf for a larger relator’s share award, and help to protect whistleblowers against retaliation (and obtain just compensation if retaliation occurs).
The whistleblower attorneys of Pietragallo Gordon Alfano Bosick & Raspanti, LLP have decades of experience under the False Claims Act. Our attorneys have represented relators in some of the most high-profile cases under the False Claims Act and been involved in the recovery of over $2 billion for federal and state taxpayers.
If you would like to speak to us about a potential whistleblower case, please contact us for a confidential consultation.