Purpose

The United States and many states have a variety of whistleblower programs, but the False Claims Act is different in one very different way: it authorizes private persons to actually file a lawsuit on the government’s behalf, with its “qui tam” provisions. The False Claims Act requires the government to investigate claims filed in this manner, although the size of the investigation and the resources devoted to it can vary greatly.

The law was first instituted in 1863, and significantly revitalized in 1986. The premise of the law has not changed since its inception: if the government can offer a reward for information, it is far more likely to learn about fraud that may be difficult to detect. The United States often acts in a regulatory or law enforcement capacity in conjunction with a False Claims Act suit, but at its heart, the False Claims Act is meant to protect all taxpayers by protecting the government’s financial interests. In exchange for taking on this important role, whistleblowers can receive between 15% and 30% of False Claims Act recoveries.

How the False Claims Act Works

To initiate a False Claims Act case, a whistleblower (or, “relator”) first files a complaint under seal. Allegations must be made with particularity, covering all elements of the fraud claims. The relator also prepares a disclosure of all material evidence and information at their disposal, which is served on the United States along with the complaint. The case remains under seal while the United States investigates, often with the relator’s further assistance, for a period that is frequently over a year.

The United States then elects to either intervene, taking on primarily responsibility for pursuing the case in court, or not to intervene. If the United States elects not to intervene, the relator may still choose to pursue the case in a “declined” status. Once the United States makes its election, the case will generally be unsealed shortly thereafter, and served on the defendants in the case. You can read more on the litigation process here.

What the False Claims Act Can Address

The “claims” at the heart of most “false claims” cases are claims of payment submitted to the United States. Many False Claims Act cases involve false claims for payment for services or goods never provided, for services that were not necessary, or for false statements that caused the United States to pay money. The False Claims Act can also cover situations in which the United States has made another issue a condition of payment, such as compliance with the Anti-Kickback Statute, or Buy America requirements.

The False Claims Act also covers so-called “reverse” false claims, however: situations in which a person or company avoids an obligation to pay the United States in whole or in part. It is this type of violation that most frequently arises in the customs duty or tariff context. False statements material to “reverse” false claims are also violations of the False Claims Act.

Pitfalls in FCA Litigation

A long history of statutory amendment and case law have shaped FCA litigation, with competing goals of wanting to attract whistleblower cases while making sure that the government need not pay rewards for information it already has.

The so-called “first to file bar” is meant to incentivize whistleblowers to bring fraud to the government’s attention quickly, but sufficiently. It also protects the government from paying more than one award, if multiple persons file cases. Since FCA cases are filed under seal, it is not always clear whether a case has already been filed.

Similarly, the FCA’s “public disclosure bar” is intended to prevent “parasitic” suits based on thoroughly public information. Qualifying as an “original source” to sidestep this obstacle requires persons to meet very specific requirements.

These issues and a host of others, including issues of state sovereignty, requirement materiality, and knowledge can doom the prospects of an otherwise meritorious False Claims Act case. Because some of these obstacles can require quick action, expertise is especially helpful.

Protection from Retaliation

The rewards offered to False Claims Act whistleblowers are meant to incentivize persons who may be risking conflict with co-workers or even harm to their careers. To further protect people considering blowing the whistle, the False Claims Act also contains an anti-retaliation provision, which was made more robust in 2010.

The private right of action to sue for retaliation can’t actually prevent a defendant from retaliating against a whistleblower for trying to stop fraud on the U.S. or for pursuing an FCA case, but it does offer protection, providing for reinstatement and double back pay. Read more about the FCA’s anti-retaliation provision here.

Interpreting Options

Most of the time, an experienced False Claims Act attorney can determine fairly quickly if a False Claims Act case is a viable or promising option for a would-be whistleblower. In the customs context, even if the False Claims Act is not an option, it may be possible to make a moiety claim.