What are False Claims Act Cases?

The core of a false claims case is that the government was cheated in one form or another -- the "false claim."

The false claim may take many forms: overcharging for a product, failing to perform a service, delivering less than the promised amount of goods or services, underpaying money owed to the government, and charging for one thing but delivering another, to list just a few examples. The legal definitions of a false claim can be found in section § 3729 of the Act .

A company or individual that has made a false claim may be liable for triple damages, a civil fine of $5,500 to $11,000 per false claim, and the attorney's fees of the citizen whistle-blower (called the "relator"). Individuals or companies that cause someone else to submit a false claim can also be found liable under the False Claims Act.

The standard of proof in a False Claims Act case is "preponderance of the evidence", i.e., the claim is more likely true than not. This is the same burden of proof ordinarily applicable in most civil cases, and is easier to meet than the "beyond a reasonable doubt" standard used in criminal cases.

n Things to Consider

When deciding if a potential False Claims Act case is meritorious, a potential whistleblower needs to consider a number of things:

• The whistleblower should have actual knowledge of the fraud, not just a suspicion. Evidence in addition to the whistleblowers mere knowledge is also necessary in most cases. The evidence of the fraud has to be specific, identifying the "who, what, when and where" of the fraud. Assertions of false claims usually require some documentation.
  
  
• The fraud cannot be tax fraud. Tax fraud is specifically exempt from prosecution under the False Claims Act,
  
  
• The whistleblower's evidence of the fraud cannot come from a publicly disclosed source such as a newspaper, TV, magazine, radio, court record, administrative hearing, Congressional hearing, U.S. General Accounting Office report, or Freedom of Information Act request.
  
  
• Federal money must be involved, or, in a state with a state False Claims Acts, state money must be involved.
  
  
• The fraud cannot involve a state defrauding the Federal government, though it can involve a County or City defrauding the Federal government.
  
  
• The company or entity that submitted False Claims to the government must have done so knowingly. Deliberate indifference to the truth of a claim, or acting with reckless disregard of the truth counts as knowing.
  
  
• Generally, the case needs to be filed within six years of the violation (see §Section 3731 of the False Claims Act).
  
  
• Mere mismanagement by a government contractor is not covered by the False Claims Act. Likewise, wasteful contracts which the government enters into with its eyes open, are not covered.
  
  
• The government’s own waste and mismanagement is not subject to the False Claims Act; only those who have made false claims to the government are subject to prosecution under the False Claims Act.
  
  
• Government employees are not specifically barred from filing a qui tam lawsuits against their own agencies, but the Justice Department usually opposes FCA suits brought by this type of whistleblower, and such whistleblowers can expect to meet more resistance than would otherwise be the case.
  
  
  

n Beyond the Legal Requirements

If your potential false claim is deficient under one or more of the above considerations, there is a good chance you do not have a case. However, if the fraud you have uncovered appears to stand up under these considerations, you still have a few more hurdles to clear.

For a case to be worth pursuing, the fraud needs to rise to a sizeable level, and there has to be a reasonable expectation that the entity engaged in the fraud will be able to pay back the stolen money and the associated fines. In short, assessing the dollar value of a case is a very real part of determining whether to move forward on a case.

Another factor is the quality of the information in the possession of the whistleblower. It is simply not enough to broadly allege fraud; specific knowledge of the fraud and how it works is required. The more documentation available, the more likely that both a private attorney and the Federal government will be interested in the case.

FCA cases often involve frauds that aren't apparent to the untrained eye. Because such frauds are complex and technical, they remain undiscovered by the government. This is why participation by the whistleblower in the qui tam law suit is so important to the prosecution. Billing records, for example, may scream "fraud!" to someone with specialized knowledge, but look perfectly legitimate to others. A whistleblower should be prepared to show how the fraud works, and explain how the evidence reveals a pattern of fraud against the federal government (or any one of the 13 states with their own False Claims Act laws).

Do You Need a Lawyer?

As a legal matter, no. As a practical matter, yes.

For a False Claims Act case to succeed, a qui tam lawsuit needs to be filed with the federal government. While a person can file a qui tam case without a lawyer, such a case is unlikely to be as successful as it would be if legal counsel is involved. Due to the volume of qui tam cases filed with the U.S. Justice Department, and the limited number of of Justice Department lawyers working qui tam cases, only those cases with strong evidence, and that are well presented, are likely to be joined by the federal government. A key job of your attorney is to help you shape the case and present it to the Justice Department.

While the U.S. Justice Department only joins about 25% of qui tam cases, the cases the DoJ does participate in are settled or won over 85 percent of the time. If the Justice Department turns down a qui tam case, the odds of success drops to just 20 percent.

How Can You Afford a Lawyer?

Lawyers working on False Claims Act cases routinely work for a contingency fee; whistleblowers need put up no money at all to have a lawyer examine their case. If the lawyer thinks you have a case, he or she will work with you to determine the contingency fee (i.e. the portion of the relator's share) that they will receive should the case prevail in court. In addition to the contingency fee, the whistleblower's lawyers are entitled to certain court awarded attorney's fees, paid by the Defendant, separate and apart from the relator's share.

What does the lawyer bring to the table that justifies a portion of the relator's share? The short answer is legal expertise, experience, and contacts with a range of people who can assist the relator during the development and prosecution of his or her case. Prosecution of a False Claims Act case often takes several years, during which time scores of depositions may need to be taken across the country, and many thousands of documents copied, catalogued and analyzed. Expert witnesses need to be developed, new evidence uncovered, and exhibits created. This work represents risk for the law firm. If a case does not prevail, for whatever reason, the law firm will be out of pocket for all the up-front costs it put into the case, as well as all of the time and energy it put into filing and pursuing the case.

How Can You Find a Good Lawyer?

If you think you have a potential qui tam case, Taxpayers Against Fraud can help you find an attorney with the experience to evaluate your case and file a qui tam lawsuit. Qui tam litigation is a specialized area of the law, and most attorneys do not have experience with this particular kind of lawsuit which has its own set of issues and pitfalls. Taxpayers Against Fraud is not associated with any one law firm. However, through our Qui Tam Attorney Network, we monitor False Claims Act cases around the country and keep in contract with attorneys working in this area. In addition, the Taxpayers Against Fraud Education Fund publishes a Qui Tam Attorney Directory which lists experienced qui tam lawyers across the country.

Procedural Pitfalls

If you think you have a False Claims Act case, there are a series of procedural pitfalls you need to avoid:

1. Do not make a public issue of the fraud. Only talk to people you can trust to keep things confidential. Don't wait too long to talk to a lawyer. In general, only the relator who is the first to file a qui tam action can share in the recovery.
   
   
2. You must file a qui tam lawsuit. It is not enough to simply tell the government about the fraud. If you tell the government about the fraud, but don't file a case under the False Claims Act, you will not be eligible for a relator's share (i.e. a whistleblower's reward).
   
   
3. The complaint must NOT be served on the defendant and must be filed under seal, which means it is not available to the public. A case remains "under seal" while the government investigates the case. This is done to allow the government to determine the strength of the charges, which serves both to protect the whistleblower and the company while the case is being investigated. While a case is under seal, the government may conduct interviews and even issue search warrants, but it will not divulge the name of the whistleblower or the exact nature of its inquiry.

How Long Will It Take?

It will take longer than you imagine.

Investigation and prosecution of a qui tam case is not a rapid affair. After a case is first filed, the Justice Department is required to begin its investigation within 60 days, during which time the case is "under seal." At the end of the initial 60-day period, the government routinely asks for a six-month extension of the seal in order to continue the investigation. The government’s decision to intervene or to decline intervention in the suit may be made at the end of the first 60-day period, or at the end of this first six-month extension period, or the seal may be renewed once again. It is not unusual for a case to remain under seal for as long as two years or longer, during which time agents from the FBI, or any of a number of other federal agencies may execute subpoenas, issue search warrants, interview witnesses, and review documents in order get a better understanding of the relator’s fraud allegations.

If the government declines to intervene in the case, the whistleblower and his or her attorney can pursue the case on their own, which entails both higher risk and higher rewards, or they may decide to drop the case at that time.

If the government believes the relator's qui tam suit has merit, the government may seek to settle the case with the defendant while the case is still under seal. If these settlement negotiations are successful, the case will be resolved prior to being unsealed. If the negotiations are not successful, the case will be unsealed and the government and the qui tam relator, and his or her counsel, will pursue the suit.

If the whistleblower's suit is successful, he or she may receive from between 15 to 30 percent of the government's total recovery, depending on whether the government intervened in the case and the importance of the whistleblower's role in prosecuting the case. Since the Act was amended in late 1986, whistleblowers have been awarded over $1 billion.

Protection from Retaliation on the Job

If you are still employed by the company you file a qui tam case against, your identity will remain secret so long as your case is under seal with the U.S. Justice Department.

In some cases an employer may guess which employee blew the whistle based on the past actions of the relator and/or the types of questions being asked by the government. Harassment or ostricization by management and fellow employees is common in such situations, and the whistleblower may even be fired, demoted, or suspended.

The False Claims Act provides a remedy for whistleblowers who are discharged, demoted, suspended, “or in any other manner discriminated against in the terms and conditions of employment by his or her employer” in retaliation for filing a False Claims Act case.

To receive the benefits of the employment protections of the False Claims Act courts generally require that an employee demonstrate that he or she was: (1) engaged in an activity protected by the statute in furtherance of a qui tam suit; (2) that the employer knew of the employee's qui tam actions, and; (3) that the employer retaliated against the employee because of those actions.

If the court finds a whistleblower was terminated or otherwise mistreated for filing a qui tam lawsuit, the employee is entitled to reinstatement at the same seniority level as if he or she had never left the company, two times the amount of back pay owed plus interest, and compensation for any “special damages” sustained as a result of the discrimination, such as attorneys’ fees (see Section 3729 of the False Claims Act).