Summary of the False Claims Act
Although each type of case is unique, they all have certain basic elements: A claim, falsity, and knowledge that the claim is false. 31 U.S.C. §3729(a) prohibits four distinct acts:
- Knowingly presenting a false claim to the United States;
- Knowingly using a false record or statement to get a claim paid;
- Conspiring with others to get a false claim paid; and
- Knowingly using a false record or statement to avoid having to pay money owed to the United States. This is known as a "reverse false claim".
Note: 1) Tax fraud is not covered by the False Claims Act.
Note: 2) The False Claims Act prohibits "causing" the presentation of a false claim, so a subcontractor, for example, whose fraudulent bills are passed on to the government by a general contractor is still liable under the Act.
Anatomy of a False Claims Case
- Whistleblower suspects illegal conduct.
- Whistleblower consults a private attorney to determine if illegal conduct has truly occurred.
- Whistleblower decides to bring a qui tam suit.
- Whistleblower and lawyer file a law suit in federal court. It is filed under seal and shown only to the United States Attorney and the Department of Justice.
At the same time, the whistleblower gives all of his or her evidence to the government.
- The government then investigates the case.
- If the government decides to take the case, it intervenes in the law suit. The whistleblower and the private attorney then help the government prosecute the suit, participating in all phases of the suit and the trial.
- If the government decides not to prosecute the suit, the whistleblower and his or her lawyer than decide if they want to prosecute the case themselves.
The Whistleblower’s Share
In a successful case, the whistleblower gets between 15% and 25% of the total recovery if the United States government joins in the case. If the government does not join the case, the whistleblower will receive between 25% and 30% of the total recovery. The defendant must also pay for the successful whistleblower’s legal fees and related expenses.
A Brief History of False Claims Litigation
During the Civil War, Union troops suffered horrible losses when war profiteers sold the government defective ammunition and rotten food. President Lincoln wanted to strike back at this massive fraud and in 1863 secured passage of the False Claims Act, then popularly known as the Lincoln Law. Interest in the law was renewed during World War II as war profiteers once again sold shoddy goods and equipment. As it was written at that time, the law permitted someone learning that a war profiteer had been criminally indicted to then race to the courthouse and file a civil suit. In 1943, Congressional disgust over these "parasitic claims" led to amendments which effectively eliminated any role for whistleblowers.
But the need for whistleblowers was never eliminated. By 1985, nine of the ten leading military contractors in the nation were under criminal indictment, and Congressional interest in the law was renewed. In 1986 a bipartisan effort breathed new life into the act by increasing its scope -- and by dramatically improving recovery for whistleblowers. In the ten years before the 1986 amendments, fewer than twenty false claims cases were filed. In the eleven years since, more than one thousand have been filed. Four key changes in the Act have made it the weapon of choice for striking back at corporate wrongdoing:
- Whistleblower rewards have been dramatically increased giving the whistleblower a 15-30% share of the recovery.
- Whistleblower protections have been strengthened -- giving employees a clear statutory right to a wrongful discharge suit with all tort remedies, including back pay, front pay, general damages, and punitive damages.
- The scope of the act has been broadened to include cases of fraud, even if the government has not actually been financially damaged by the fraud.
- The intent standard has been lowered from deliberate fraud to "deliberate ignorance," or "reckless disregard" for the truth, making it harder for corporations to evade liability for their misconduct.
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