The nuances of False Claims Act Cases (Qui Tam Cases) can be confusing. McKnight & Kennedy, LLC law firm has assembled a list of frequently asked questions about the industry for your benefit.
- Q: What does Qui Tam mean?
A: An abbreviated version of the Latin phrase "Qui Tam pro domino rege quam pro si ipso in hac parte sequitur," means "Who sues on behalf of the King, as well as for Himself." In Qui Tam litigation, a private citizen (the whistleblower) who knows of fraud committed against the government may, through his own privately retained lawyers, file a law suit to recover the losses caused by the government fraud. The False Claims Act provides huge financial incentives to citizen whistleblowers to retain attorneys and come forward, prosecute these lawsuits, and fight government fraud. - Q: How did Qui Tam laws evolve?
A: Qui Tam laws have existed for hundreds of years, with roots in England in the middle ages. In qui tam provisions, the government gives private citizens the right and the financial incentive to retain a private lawyer to file a lawsuit to act in the place of law enforcement. Abraham Lincoln, himself a lawyer in private practice before ascending to the Presidency, was responsible for enactment of the 1863 False Claims Act, which was necessary to protect the government from the fraudulent suppliers of faulty war equipment during the Civil War. Although a significant narrowing of the provisions of the False Claims Act took place in 1943, the law was revitalized by Congress in 1986, with a significant expansion of the scope of the law and renewed attention to the federal whistleblower and his or her attorney as a key to enforcement. - Q: What is covered by the False Claims Act?
A: Broadly speaking, anyone who makes a false or fraudulent claim upon federal dollars, or who causes another to do so, has engaged in conduct covered by the False Claim Act. In addition, anyone who falsely appropriates government property or, delivers to the government a service or product that is substandard or defective, may have made a false claim for payment for such a service. Congress drafted the statute to cover most conduct that may adversely affect the federal treasury. - Q: What are the penalties for making a False Claim or Fraudulent Claim (for breaking this law)?
A: A person who makes a false or fraudulent claim is liable to the United States Government for a civil penalty “of not less than $5,000.00 and not more than $11,000.00" for each false claim submitted. 31 USC § 3729 (1999). Moreover, the act requires the court to impose a penalty equal to three times the amount of damage sustained by the government. This amount may be reduced to two times the damage sustained by the government if the wrongdoer quickly and fully cooperates with the government officials investigating the claim. - Q: How do False Claims cases work?
A: Because McKnight & Kennedy's extensive experience in False Claims Act cases, we understand that this law—designed to encourage private citizens to help fight government fraud by acting as a whistleblower—can be confusing. Before filing, your claim must be properly investigated and presented, which demands that you obtain competent attorneys experienced in handling Qui Tam fraud cases. Here’s how the Qui Tam experience works:- If a person knows of fraud against the government, this person may retain a lawyer and file a court case (lawsuit) under seal (meaning that it is kept secret during this initial phase) in a United States District Court against the company or person committing the fraud. At the same time the relator (person filing) is required to file a written disclosure with the United States disclosing substantially all of the evidence and witnesses who support the complaint.
- After the case is filed, the U.S. Attorney investigates the lawsuit and allegations of fraud for sixty days. If he/she believes the fraud lawsuit is meritorious, the United States Government takes over the case and either enters into a settlement or pursues the lawsuit against the wrongdoer. In most cases, the government investigates the case for two or more years. During this time period, the case remains under seal in the court. When a case is under seal, no one knows about it except the government and the company under investigation. Usually, the identity of the whistleblower is unknown to the company during much of the time the case is under seal. The court records in a case under seal are not available to the public or the press.
- The whistleblower still retains his/her right to a portion of the proceeds in the Qui Tam fraud lawsuit resulting in a successful settlement or recovery, even though the government has taken over the legal case. (The government intervenes in approximately 25% to 33% of the cases.) If the government prosecutes the claim, then the relator is entitled to receive “at least 15% but not more than 25%” of the proceeds. 31 USC § 3730 (d)(1) (1999)
- If the government does not intervene, the federal whistleblower, through the lawyers he or she has retained, may settle or pursue the lawsuit on his/her own. If the lawyers are successful in proving fraud against the government, the law requires the wrongdoer to pay substantial penalties, which can be assessed up to three times the amount that the wrongdoer fraudulently stole from the government and, in reality, from the taxpayers. In addition, a mandatory civil penalty of between $5,000.00 and $11,000.00 per false claim will be imposed. The private citizen whistleblower can receive between 10% and 30% of the lawsuit recovery.
- Q: What if the fraud or false claim has been publicly disclosed?
A: Then you can’t file. Congress was concerned that citizens may try to take advantage of this law by canvassing the newspapers or the Congressional record for information that will lead them to the next big fraud case. To prohibit what have been termed as “parasitic” law suits, Congress does not permit actions to be pursued once the fraud has been “publicly disclosed,” unless the relator qualifies as an “original source". - Q: Are you an original source?
A: An original source is one who has “direct and independent knowledge of the information on which the allegations are based and has voluntarily disclosed the information to the government before filing an action under this section.” 31USC § 3730 (4)(B) (1999). The meaning of this provision has been frequently litigated. You will note that public disclosure deprives the court of jurisdiction unless the case has been brought by the government or by an original source. Accordingly, if you assume that the government has declined to intervene and that a relator is proceeding on his own, then proving that the relator does not qualify as an original source is an absolute defense for the company charged with fraud. Also, an original source has an obligation to disclose to the government before filing. - Q: Are you the first to file about this situation?
A: There is a time pressure associated with False Claims Act cases. That is, the first viable claim to be filed is the only claim recognized. The court has the authority to dismiss the second filed case arising out of the same facts and allegations. The first one to file wins. Remember that. - Q: Can your (or the whistleblower’s) story be corroborated?
A: This question is one asked by every lawyer who interviews a client about a prospective Qui Tam case. However, in False Claims Act cases, this is a critical inquiry because many relators have an axe to grind. That is, usually, a bad experience motivates them to come forward. A client reports possible fraud to his boss and the boss takes away his responsibilities and banishes him to a life of boredom in the basement office. Fed up, the client comes to a lawyer. Most of the clients that Mr. McKnight and Ms. Kennedy interview have had a bad experience of some kind with the company that allegedly committed the fraud. It is this experience that motivates the relator to come forward. This fact carries a number of implications with it. Primarily, this means that most clients are “tainted” and much of the lawyer’s job focuses on corroborating their client’s story. As a client, it is important to assess whether your claim can be corroborated. Do you have documents or proof of the claim? - Q: What are some examples of situations which would be covered under the False Claims Act and for which lawsuits could be brought?
A:- preparing a false record or statement or bill in order to get a false or fraudulent claim paid by the government
- conspiring with anyone else to have a false or fraudulent claim paid by the government
- holding property of the government intending to defraud the government or intending to conceal it from the government
- creating or delivering a false or fraudulent receipt to the government for its property
- fraudulently buying property of the government from someone who is not authorized to sell that property for the government
- making a false statement to fraudulently avoid paying a debt to the government or to avoid delivering property to the government
- causing someone else to submit a false or fraudulent claim