The False Claims Act is a law that allows ordinary citizens to help expose fraud in government, and ALSO to share in the recovery of monies recouped as a result of exposing the fraud. False Claims Acts, both federal and state, are aimed at fraud committed which harms government, i.e. taxpayers.
False claims actions involve claims against businesses, corporations and individuals for submitting false and/or fraudulent claims for payment to federal, state or local governments, or to government contractors. These actions, also known as “qui tam” actions, often are triggered by a complaint filed under seal by a “whistleblower,” who often is a current or former employee of the potential defendant.
A wrongdoer found liable may be required to pay substantial damages which can be shared with the whistleblower, including penalties, treble damages and attorney’s fees.
What is the False Claims Act (Qui tam)?
The False Claims Act is 31 U.S.C. Sections 3729 through 3733. Qui tam, under the False Claims Act, allows persons and entities with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the United States Government. In Qui tam actions, the government has the right to intervene and join the action. If the government declines, the private plaintiff may proceed on his or her own. Some states have passed similar laws concerning fraud in state government contracts. (Top)
What Actions Are Considered Violations under the False Claims Act?
Who Can File a Qui Tam Action?
Any persons or entities with evidence of fraud against federal programs or contracts may file a qui tam lawsuit. However, if the government or a private party has already filed a False Claims Act lawsuit based on the same evidence as you, you cannot bring a lawsuit. (Top)
Where Should a Qui Tam Action Be Filed?
A qui tam action must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the plaintiff’s possession, must be confidentially served on the US Attorney General and the US Attorney for the district in which the complaint is brought.
An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed.
What Are the Civil Penalties Under the False Claims Act?
Violators of the False Claims Act are liable for three times the dollar amount that the government is defrauded and civil penalties of $5,000 to $10,000 for each false claim. A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the Act, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough. You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.
What Are the Statutes Of Limitations for Filing a Qui Tam Lawsuit?
Under the False Claims Act, an action must be filed within the later of the following two time periods:
Six years from the date of the violation of the Act; or
Three years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act.
(One Circuit Court has interpreted the second provision as requiring that the action be filed no later than three years after the qui tam plaintiff rather than when the government knows, or should have known about the violation.) (Top)
What Are the Whistleblower Protection Provisions in the False Claims Act?
Under Section 3730(h) of the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole. Such relief may include:
You should be aware, however, that the scope of whistleblower protection under Section 3730(h) is an issue that currently divides the courts.
Many states have wrongful discharge or other employment laws that may provide other remedies for such discrimination.
The Statute of Limitation for filing a FCA retaliation case is different then that for filing a qui tam recovery case. A FCA retaliation case must be filed under the statute of limitation applicable to the most closely analogous state statute.
What about State False Claims Acts?
Due to the success of the Federal False Claims Act, a growing number of states including California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico. New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Washington, and Wisconsin have enacted State versions of the False Claims Act. These laws permit whistleblowers to recover a “finders’ fee” for reporting fraud in state, local, and municipal contracting.
What about Tax Fraud?
In 2006, Congress amended the Internal Revenue Code to permit whistleblowers to obtain a reward for reporting tax fraud.
Why are awards offered under the False Claims Act?
The importance of using financial incentives to promote corporate fraud disclosures was underscored in a scholarly study of published in the Boston University Law Journal . This study analyzed several possible methods of incentivizing whistleblowing and concluded that a qui tam model provides the greatest incentive for the whistleblower while exposing information that the government would not be able to detect on its own. “Qui tam cases bring out important inside information. Potential qui tam plaintiffs can offer information about inchoate or ongoing malfeasance of which law enforcement is unaware.” After examining the potential disincentives that qui tam whistleblowers may confront, the article notes that “the bounty a relator stands to gain does, in many cases, outweigh the disincentives to being a whistleblower.”
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