The Process of False Claims Act Litigation
The core of a False Claims Act 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 whistleblower (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.
A qui tam suit initially remains under seal for at least 60 days during which time the Department of Justice can investigate and decide whether to join the action. Most seals are extended at least once, and it is not uncommon for a case to remain under seal for several years.
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. Physical evidence of fraud (emails, bills, invoices, training materials, audio tape, video tape, accounting ledgers, etc.) is necessary in most cases. To win a False Claims Act case, the evidence of fraud has to be specific, identifying the "who, what, when and where" of the fraud. Assertions of false claims usually require documentation to avoid declination.
The whistleblower's evidence of 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 a false claim 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) or three years after the government knows or should have known about the violation, and in no case longer than 10 years after the violation.
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 lawsuit 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. If you are a government employee, you should exhaust fraud reporting requirements within your own agency before availing yourself of a False Claims Act lawsuit..
Beyond the Legal Requirements
If your potential false claims case 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. False Claims Act cases tend to be evidence intense. The more documentation of fraud that you have in your possession, 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 explain how a fraud works and to document the fraud through evidence that reveals a pattern of fraud against the federal government or any one of the states that have their own False Claims Act laws.
Do You Need a Lawyer?
Though the False Claims Act does not specifically bar pro se litigation, a pro se relator cannot prosecute a qui tam action on their own after declination since they would effectively be acting as an attorney for the government.
That said, there are practical reasons not to proceed without a lawyer. A key job of your attorney is to help you shape your case and present it to the Justice Department and the court. Due to the volume of qui tam cases filed with the U.S. Department of Justice, and the limited number of Justice Department lawyers working qui tam cases, only those cases compellingly presented are likely to be joined by the federal government.
While the Justice Department joins only 20 to 25 percent of qui tam cases filed, the cases the DoJ does participate in are settled or won over 90 percent of the time. If the Justice Department turns down your qui tam case, however, the odds of success drops to around 20 percent.
How Can You Afford a Lawyer?
Lawyers working on False Claims Act cases routinely work for a contingency fee, where whistleblowers do not need to put up any money to have a lawyer examine their case. If a False Claims Act lawyer thinks you have a case, he or she will generally 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, a 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, cataloged 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 Lawyer?
Choose your attorney carefully and consider whether he or she has experience in qui tam lawsuits. Qui tam litigation is a specialized area of the law, and most attorneys do not have experience in this narrow field of law.
When choosing an attorney, don't base your decision on advertisements or web site appearances, and avoid attorneys who are quick to sign you up in order to collect a referral fee from a lawyer in another firm who will actually be doing the work on your case. You should meet and talk with the lawyer who will be doing most of the work on your case.
If an attorney says they have had success in bringing FCA cases, ask for specific examples of success. A lawyer who misrepresents the experience of others as their own is best avoided right from the start.
Many False Claims Act cases are national in scope. Geographic proximity to an attorney should not be your primary concern when your case is national in scope.
Ask about the attorney's record of working with government lawyers and investigators in prosecuting qui tam lawsuits, and whether they have the resources to pursue a case if it is declined by the government. What contingency plans do they have to retain additional lawyers if that becomes necessary?
Develop a basic understanding of the False Claims Act before you begin reaching out to contact an attorney. The more you know, the better prepared you will be in evaluating any possible legal representation offered.
Organize your thoughts and information before you begin reaching out to possible False Claims Act attorneys. One suggestion is to take two pieces of paper. On the first page tell a story that includes the "who, what, where, when, and how much" of the fraud. Detail what agency was defrauded, the basics of how the fraud works, the size of the fraud, and how you came to know about the fraud, but carefully omit the name of the company and any company-identifying information. On the second page, snap a line across the middle of the page, and above this line detail the evidence you have in hand to support the story on the first page: emails, spread sheets, contracts, billing records, training materials, PowerPoint presentations, copies of canceled checks, voice mails, audio or video tape, etc. Below this line, list the titles of the people inside the company and outside the company who should be contacted and questioned if an investigation is initiated. Now you have a simple organized story, an inventory of evidence in hand, and a list of potential interviewees for government investigators to talk to should they decide to further explore this case.
If you think you have a False Claims Act case, there are a series of procedural pitfalls you need to avoid:
Don't talk to the press, or to former or current coworkers or friends about the fraud, and 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. You want to be first to file!
The complaint must be filed under seal and must not be served on the company. False Claims Act cases remain "under seal" while the government investigates the case. This is done to allow the government to determine the strength of the charges, and it also 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 the 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 theoretically required to begin its investigation within 60 days, during which time the case is "under seal." At the end of this initial 60-day period, however, 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 several times. It is not unusual for a case to remain under seal for 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 whistleblower’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 whistleblower’s qui tam lawsuit 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 whistleblower, 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.
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 whistleblower and/or the types of questions being asked by the government. Harassment or ostracized 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.