What is the False Claims Act?
During the Civil War, fraud against the federal government was rampant. Shoddy goods of all types—uniforms, rifles, rations—were hamstringing the Union Army. With few federal enforcement resources at his disposal, President Lincoln urged Congress to pass the 1863 False Claims Act (also known as “Lincoln’s Law”), which gave financial incentives to private citizens who took action against companies or individuals that were defrauding the government.
While the statute was effective for a time, it did not stop fraud. In 1986, Sen. Charles Grassley, a conservative Iowa Republican, teamed up with Rep. Howard Berman, a liberal California Democrat, to pass legislation that strengthened “Lincoln’s Law.”
The amended False Claims Act (FCA) allows whistleblowers—who are called “relators” —to get up to 30 percent of any money recovered by their lawsuit. It also protects whistleblowers by allowing for claims to be made under confidential seal and prohibiting retaliatory action by a whistleblower’s employer.
If a defendant is found liable under the FCA, it could be forced to pay as much as three times the amount of money it has been found to have defrauded the government. The defendant will also have to pay other penalties.
Since 1987, whistleblowers have helped the U.S. government recover over $42.5 billion in taxpayer funds. Whistleblowers have received over $7 billion as their share of the government’s recovery.
What does Qui Tam mean?
The FCA is based on an old legal principle that is abbreviated as “Qui Tam.” This principle permits ordinary citizens to step into the shoes of the government. Whistleblower cases under the FCA are often called Qui Tam cases. A whistleblower who brings a Qui Tam case is called a “relator.”
Who can file a Qui Tam case?
Qui Tam whistleblowers are individuals who possess non-public knowledge and evidence of fraud against the government—either at the federal or state level. Employees of a larger company may have been required by their employer to participate in a fraudulent scheme involving a government program or witnessed others doing so. As a small business owner, an individual may have been offered incentives by a larger company to serve as a pass-through for small business set-aside contracts with the government. A county or city contracts officer may have been asked to submit federal grant certifications they know to be fraudulent.
Government employees are not specifically barred from filing a Qui Tam lawsuit against their own agencies, but the Justice Department usually opposes suits brought by this type of whistleblower, unless the employees have first exhausted all of the internal fraud reporting channels within the agency before availing themselves of an FCA action.
How do I know if I have a good Qui Tam case?
Qui Tam cases with the highest likelihood of success are generally those where the fraud is currently ongoing and the potential whistleblower is still employed in the company, but you may still have a viable claim if your case meets all of the following criteria:
- Federal money must be involved, or, in a state with a False Claims statute, state money must be involved. Some state FCA statutes cover all state programs while others are more narrowly targeted.
- The amount of fraud should be sizeable (generally into the millions of dollars) in order for the government to consider applying some of its limited resources to the investigation. There must also be a reasonable expectation that the company or entity engaged in the fraud will be able to pay back the money and resulting fines.
- You must have actual evidence (emails, bills, invoices, training materials, audio or video recordings, etc.) that proves the “who, what, when, and where” of the fraud. Your evidence cannot come from any publicly disclosed source such as a media report, court record, administrative hearing, legislative hearing, government report, or Freedom of Information Act request.
- The fraud cannot involve a state defrauding the federal government, although it can involve fraud against the federal government by a county or city.
- The company or entity that submitted a false claim to the government must have done so knowingly. The FCA does not cover:
- Mere mismanagement by a government contractor
- Wasteful contracts which the government entered into knowingly
- The government’s own internal waste and mismanagement
- You must file your case within six years of the violation 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.
How do Qui Tam lawsuits work?
Cases brought under the federal FCA are filed in a U.S. District Court, while state Qui Tam cases are typically filed in a state court. Qui Tam lawsuits are filed under seal, which means they remain a secret to everyone except the judge and government prosecutors. This permits the government to investigate the matter. Government officials can ask the judge to extend the seal to provide additional time for their investigation. Federal Qui Tam cases typically remain under seal for an average of 18 months, but sometimes the government completes its investigation sooner—and sometimes cases remain under seal for several years.
Once its investigation is complete, the government determines whether it will join the whistleblower’s suit and “intervene” in the case. Once the government intervenes in a case, the government takes over the litigation of the case and attempts to hold the defendant liable. Occasionally, the government intervenes in more than one case related to the same fraud. Cases in which the government intervenes almost always settle out of court.
Once the government completes its investigation—regardless of whether it intervenes—the seal on the case is lifted and it is no longer secret. This means the defendant will see the Qui Tam complaint and know the exact allegations against it.
What if the government declines to intervene in my case?
When the government declines to intervene in a case, it may be because prosecutors feel the amount of money at issue is too small, the case lacks merit, the fraud would be too difficult to prove, or any number of other reasons. However, they may also decline to intervene because they believe the relator’s counsel can prove the case without their help or because they are dedicating government resources to criminal charges related to the civil case. The government may also choose to file a statement of “non-intervention,” which means that, while they are not currently intervening, they reserve the option to do so in the future.
A whistleblower has the right to continue to pursue the case even if the government chooses not to participate. Some non-intervened cases have been successful—either settled out of court or successfully tried—but they are inherently riskier for both the relator and his attorney. An experienced Qui Tam attorney will advise you of these risks and help you determine whether to pursue a case in which the government has not intervened.
What are the potential rewards of a Qui Tam lawsuit?
A Qui Tam whistleblower is entitled to a share of the amount the government recovers from the defendant. The amount awarded to the whistlebloweris based on several factors, including how valuable the whistleblower’s information is to the government and how much the government recovers from the defendant. If the federal government intervenes in the case, the whistleblower will receive 15-25 percent of the recovery amount. If the government does not intervene, the relator could receive 25-30 percent of the recovery amount. Relator recoveries in state fraud cases vary from state to state. Other funds, such as attorneys’ fees, investigative and expert expenses, and other court costs, may also be awarded.
What are the potential risks of being a whistleblower? What protection does the FCA afford whistleblowers?
Many people who witness fraud may be hesitant to file a Qui Tam lawsuit because they fear retaliation from the defendant. They may have tried unsuccessfully to raise an alarm inside their company and feel they will be risking their jobs if they bring the matter to the government’s attention. However, the FCA provides protection against this type of retaliation. An employer cannot fire, demote, or deny an employee benefits to which the employee is normally entitled in retaliation for having blown the whistle about fraud against the government. If the employer retaliates against an employee for blowing the whistle about fraud against the government, then the employee can add a claim of unlawful retaliation to his or her Qui Tam lawsuit. The employee may be able to obtain damages for not only back pay, but future wages as well.
What should I look for when hiring a Qui Tam lawyer?
Attorneys who file Qui Tam race against the clock, seeking to be the first to bring fraudulent conduct to the government’s attention—filing a case a few days or even a few minutes too late can exclude a relator from receiving a portion of the recovery. At the same time, Qui Tam lawyers must make their filings as complete and compelling as possible. These constraints make it important to choose an attorney with a successful track record in FCA cases, credibility with state and federal prosecutors, and sufficient financial resources to investigate and, if necessary, litigate your case. Baron & Budd shares all of these qualities—which is why many of Baron & Budd’s Qui Tam cases have been referred to us by another law firm which is familiar with our reputation.
Specialized Qui Tam law practices are typically national in scope, since federal FCA suits can be filed in any federal court. Our attorneys know which federal prosecutors have the experience and resources available to investigate cases such as yours, as well as which courts will typically grant prosecutors the time necessary for a full investigation and will typically grant whistleblowers a fair opportunity to litigate their cases.
Even when the case involves fraud against a single state government, it may be better to hire an experienced Qui Tam lawyer from out of state who will establish a relationship with a local attorney in your state. The attorneys in Baron & Budd’s whistleblower team are licensed to practice in dozens of federal and state jurisdictions, and their decades of experience have allowed them to foster connections with local attorneys throughout the country. These connections permit our attorneys to file cases where they have the greatest chance of succeeding.
How will my case be put together?
Our whistleblower team will evaluate the information you provide through our intake form or over the phone. If we believe that you have a potential Qui Tam case, we will typically arrange for a longer interview. Information that you provide during these initial discussions is protected under attorney-client privilege, which means we are not allowed to share what you tell us unless you give your permission. If we feel that your case has a significant chance of substantial recovery, we will ask you to sign a retainer agreement to authorize our firm to act on your behalf in the case.
Once a retainer is in place, clients provide us with all of the evidence they have obtained. This can be done electronically, through Baron & Budd’s secure client portal, or in hard copy documents, thumb drives, CDs, etc. Our team will review the evidence provided and will work with you to:
- Formulate a viable legal theory for your case.
- Research the likelihood that other cases involving the same fraud may already be on file.
- Determine a realistic estimate of your case’s value.
- Develop a plan for documenting the potential scope of the fraud.
- Investigate the allegations and potentially find witnesses to corroborate the fraud.
- Determine the defendant’s ability to pay a recovery.
- Vet the case with potential prosecutors.
- Evaluate the potential risk/reward of the case.
- Determine the best jurisdiction in which to file the case.
- Draft a complaint and present the case to the government.
- If necessary, litigate the case and pursue a recovery against the defendant.
Once you decide to proceed, we will represent you in investigations, court filings, hearings, settlement negotiations, and litigation. We are also here to answer any questions you or your family may have about your case, as well as to handle any media inquiries when the case is unsealed or settled.
Get a Confidential Evaluation of Your Case
The attorneys at Baron & Budd will help you in the fight to combat fraud and win. If you feel you have evidence of fraud against the government, please call or complete the online form. We can answer your questions and explain what to expect as we help you navigate this process.
Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.