False Claims Act FAQs
What is Qui Tam?
Qui tam is an abbreviation from the Latin phrase “qui tam pro domino rege quam pro sic ipso in hoc parte sequitur”, meaning “who as well for the [lord] king as for himself sues [proceeds] in this matter”. A qui tam action allows private citizens to file a lawsuit in the name of the federal or state governments charging fraud by contractors and others who receive or use government funds.
What is a Relator?
A Relator is the name that commonly refers to the whistleblower plaintiff in qui tam action brought under the False Claims Act.
Do I have to be represented by an attorney?
Yes, to bring a qui tam under the False Claims Act, the whistleblower (or Relator) must be represented by an attorney. Selecting an attorney that has experience with qui tam whistleblower lawsuits and the False Claims Act is vital to protecting your interest in this complicated area of the law.
What is a Disclosure Statement?
The Disclosure Statement is the document that must be filed and served upon the Department of Justice (“DOJ”), and contains substantially all the evidence the Relator has in her/his possession about the allegations set forth in the Complaint.
Does it matter if the DOJ intervenes?
Because the success rate of qui tam action where the DOJ decides to intervene is much higher than the success rate for qui tam cases that do not have government intervention. However, lack of government intervention does not necessarily mean the qui tam action will not succeed. Indeed, some of the qui tam cases with the largest settlements have lacked government intervention.
Will the government take my information seriously and investigate it?
Yes, by law under the False Claims Act, the Attorney General or a Department of Justice Attorney must investigate the allegations of violations of the False Claims Act. The investigation usually involves one or more law enforcement agencies, and state attorneys general with expertise and interest. They will participate in the investigation, and work closely with the federal agencies when state agencies are victims.
What happens at the conclusion of the investigation?
The DOJ will either (1) intervene in one or more counts; (2) the DOJ will decline to intervene in one or all counts; (3) the DOJ will move to dismiss the Relator’s Complaint; (4) the DOJ will settle the qui tam action with the defendant prior to intervention or in conjunction with the intervention; (5) the DOJ will advise the Relator of their intention to decline intervention.
How much money could I get?
If the DOJ intervenes and recovers money through a settlement or trial, the whistleblower is entitled to receive 15-25% of the recovery. If the government does not intervene and the case continues then the whistleblower reward is between 25-30% of the recovery.
Additional False Claim Act FAQs
What is considered a false claim?
A false claim is a fraudulent request submitted to the government for payment of goods or services that were provided to, or on behalf of, the government. A false claim can be made by one or more people, or most non-public entities or organizations, such as corporations, educational institutions, and health care providers. In many cases, a false claim involves charging the government full price for the delivery of a lesser quality or quantity of goods or services. In some cases, fraudsters brazenly submit false claims seeking payment when they failed to deliver any good or service.
The False Claims Act was enacted during the Civil War as a means for the government to sue unscrupulous merchants who sold defective and substandard goods, such as cardboard boots and gunpowder mixed with sawdust, to the Union Army. The False Claims Act is also referred to as Lincoln’s Law because the bill was signed into law by President Lincoln.
Who does the False Claims Act protect?
The False Claims Act protects the United States government. Since the treasury is directly funded by taxpayers, American taxpayers are ultimately the ones protected by the False Claims Act. Every dollar stolen by scammers is a dollar not available for important governmental expenditures, such as education, health care or infrastructure.
In a larger sense, the False Claims Act protects every American who relies on good and services for their welfare and protection. From life-saving drugs and medical devices to ammunition and fighter planes, countless lives depend on the honesty and integrity of the people and companies who produce, repair, and maintain critical goods and services.
How successful are False Claim Act cases?
For the fiscal year ending September 30, 2019, the U.S. Department of Justice recovered over $3 billion in settlements and judgments from civil cases brought under the False Claims Act. Since 1986, when the damages and penalties for False Claims Act violations were significantly increased, the government has recovered more than $62 billion.
Although the False Claim Act allows private individuals, known as relators, to file a case and prosecute an action even when the government declines to actively participate in the litigation, a relator cannot proceed without being represented by an attorney. In order to avoid the numerous pitfalls and have the best chance of success, it is important to choose a lawyer who not only has experience in this highly-specialized area of litigation, but also has an established track record of proven results in False Claims Act cases.
What are the three major categories of False Claim Act cases?
1. Health Care Providers & Pharmaceutical Manufacturers – Fraud in the health care sector unquestionably accounts for the largest share of recoveries in False Claims Act cases. Fiscal Year 2019 was the tenth consecutive year that recoveries from the health care industry exceeded $2 billion. In FY 2019, $2.6 billion of the more than $3 billion recovered by the Department of Justice involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. The pharmaceutical industry often ranks as the largest contributor to amounts recovered through False Claims Act settlements and judgements.
2. Department of Defense Contractors – Procurement fraud involving the Department of Defense is another of the largest types of False Claims Act cases. In Fiscal Year 2019, the federal government spent over $693 billion on defense-related acquisitions, approximately $685 billion of which was discretionary, and about $8 billion mandatory. Much of the defense budget is spent on weapons systems, facilities, vehicles, equipment, supplies and technical services. There are numerous opportunities for unscrupulous contractors to defraud the government in their quest for higher profits. Some of the most common violations include bribery and kickbacks, bid rigging, improper substitution of products or services, and billing for unallowable costs. In FY 2019, settlements and judgments of False Claims Act cases involving fraud against the Department of Defense totaled approximately $252 million.
3. GSA Contractors – Much like the Department of Defense, virtually every other federal agency is vulnerable to procurement fraud by corrupt contractors. The General Services Administration (“GSA”) provides a centralized program through which federal agencies can procure products and services from a wide array of commercial vendors. Procurement fraud occurs when a government contractor knowingly fails to deliver the quality or quantity of goods or services specified in its GSA contract.
In addition to the stratagems mentioned above, a contractor can face liability under the False Claims Act for violating a statute or trade agreement if it purchases components or materials from a prohibited source. For example, the Buy American Act requires contractors to use only domestically-produced products and materials, absent an exemption. If a contractor falsely certifies compliance with the Buy American Act in bidding on or performing under a GSA contract, those deliberate misrepresentations can constitute violations of the False Claims Act.
What are some examples of a violation of the False Claims Act?
In the health care industry , False Claims Act violations often include improper billing for medical services, such as:
• Upcoding – Submitting a claim for payment to the government using a billing code(s) for a more expensive service or procedure than what was actually performed on the patient.
• Unbundling – Billing for a separate medical procedure when the procedure is normally billed as a single charge.
• Not Medically Necessary/Not Delivered – Submitting a claim for health care services, diagnostic tests, medical devices or drugs that were either provided to a patient without any legitimate medical purpose or not provided at all.
• The Stark Law – Prohibits physicians from referring their patients to a medical service provider, such as a laboratory or diagnostic test facility, where the physician, or an immediate family member, has a financial relationship. It is also known as the Physician Self-Referral Law.
• The Anti-Kickback Statute – A criminal law that prohibits incentives or payments designed to induce or reward patient referrals for any medical service paid by federally-funded health care programs. Both the offeror of the incentive and the recipient can be held liable. A claim for payment submitted to the government based on a violation of the Anti-Kickback Statute can create liability under the False Claims Act.
False Claims Act violations involving drug manufacturers includes misconduct relating to price reporting, manufacturing, and sales, including:
• PBM Fraud – Employers and health plan sponsors contract with Pharmacy Benefit Managers (“PBMs”) to design and administer prescription drug plans for their employees and members. Some of the largest PBMs have been sued for unjust enrichment for undisclosed rebates and kickbacks; misrepresentations to patients, health care providers, and health care plans; and charging a copay higher than the full cost of a drug (known as a “clawback”).
• Price Reporting Fraud – To have their drugs covered under Medicaid, drug companies must agree to pay rebates to the states for each covered drug. A formula, based primarily on the prices reported by drug companies to the government, is used to determine the amount of the rebate. By knowingly providing false pricing information, a drug company can significantly reduce the amount it pays in the form of a rebate for a given drug.
• Compounding Drug Fraud – When a particular combination of active ingredients is not available for sale, pharmacists are permitted to create new mixtures of drugs, known as compounds. Compounding pharmacies have engaged in misconduct involving drug formulations designed to ensure the highest possible reimbursement; targeting patients without regard to their actual needs; and producing compounded drugs in excess of allowable quantities.
• cGMP Fraud – Current Good Manufacturing Practice (“cGMP”) regulations impose minimum standards for the methods, facilities, and controls used to manufacture, process and package prescription drugs. In order to cut costs, certain overseas, and some domestic, manufacturing facilities fail to meet cGMP requirements. Noncompliant facilities are much more likely to produce substandard, contaminated or ineffective drug products.
Procurement fraud against the Department of Defense and GSA can occur during all phases of contracting, from pre-award to final completion. Some examples include:
• Bid Rigging – Any conduct that interferes with the competitive bidding process. In its simplest form, bid rigging is a conspiracy among bidders to decide which company will submit the winning bid. Bid rigging schemes restrict competition and cause the government to unknowingly pay a higher price for goods and services.
• PRC Violations – Most GSA contracts contain a Price Reduction Clause (“PRC”) which is triggered whenever a government contractor revises its commercial price list or offers more favorable pricing, discounts, or terms to another commercial customer. Whenever that happens, the contractor must offer the same reduced price, discount, or terms to the government. A contractor that intentionally fails to disclose a PRC disturbance to the government can create liability under the False Claims Act.
• Bribery & Kickbacks – Anything of value offered to a public official to influence that official’s actions is considered a bribe. A kickback is very similar to a bribe, except that federal regulations apply a specific meaning as it relates to government contracts. The Federal Acquisition Regulation defines a kickback as an “any item of value, or compensation of any kind that is provided, directly or indirectly, to any prime contractor, subcontractor or employee of either for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contractor in connection with a subcontract relating to a prime contract.”
What are the penalties for violating the False Claims Act?
The civil penalties and damages for False Claims Act violations can be quite onerous. Each violation can result in a penalty of between $11,665 and $23,331, as adjusted for inflation in 2020. In addition to the civil penalties, the government is entitled to recover treble damages, or triple the amount it might have lost as a result of a false claim. The False Claims Act also permits a successful whistleblower to “receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.”
Does the False Claims Act protect whistleblowers?
Yes, the False Claims Act contains a provision that specifically protects whistleblowers from retaliation by their employers. Retaliation is broadly defined to include any employee, contractor, or agent that has been “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment . . . because of lawful acts done . . . to stop 1 or more violations of [the False Claims Act].”
A retaliation claim brought under the False Claims Act must be filed within 3 years of the date when the retaliation occurred. An employee who prevails in a retaliation action can receive: (a) reinstatement with the same seniority status; (b) two times the amount of back pay, with interest; and (c) compensation for special damages, including litigation costs, reasonable attorneys’ fees, emotional distress and other non-economic damages caused by the retaliation.
What is a false claim under the False Claims Act?
A false claim is, in essence, any attempt to receive payment from the federal government through fraudulent or deceptive means. The False Claims Act lists the specific types of conduct that are considered false claims. Section 3729 of the False Claims Act imposes liability for any person who:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;
(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or
(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government[.]
31 U.S.C. § 3729 (a)(1)(A)-(G).
What happens if a person files a false claim?
If a potential whistleblower chooses to look the other way, and the government fails to detect the fraud, then nothing will happen to a person who files a false claim. The False Claims Act was specifically designed to provide a monetary incentive for those in the best position to observe misconduct and collect evidence documenting the fraud – typically employees, contractors, consultants and business competitors.
The civil penalties and damages authorized by the False Claims Act can be substantial. A penalty of between $11,665 and $23,331 can be imposed for each violation of the False Claims Act. In addition to the civil penalties, a violator can be liable for treble damages, or triple the amount the government lost, or might have lost, as a result of a false claim. A person who violates the False Claims Act can also be ordered to pay expenses, fees and costs, including attorneys’ fees, which a court determines were necessarily incurred in bringing the action.
Does a violation of the False Claims Act require intent?
Intent is a critical consideration when analyzing liability under the False Claims Act. A person must act “knowingly” in order to be liable under the False Claims Act. “Knowingly” means that a person had actual knowledge of specific information, but acted either (a) in deliberate ignorance of whether the information was true or false or (b) in reckless disregard of whether the information was true or false. Importantly, the False Claims Act does not require proof to demonstrate that the person acted with specific intent to defraud the government.
Why is the False Claims Act important?
The federal government spent $4.45 trillion in Fiscal Year 2019. The largest expenditures were on Social Security, Medicare, and Medicaid ($2.09 trillion combined); Department of Defense – Military ($654 billion); and Interest on the Public Debt ($423 billion). The federal government simply doesn’t have the resources or capacity to audit every contract or review every transaction. The government therefore relies on whistleblowers to report evidence of misconduct involving fraud against the government.
The qui tam provisions of the False Claim Act allow a private individual or entity, known as a relator, to file a lawsuit on behalf of the federal government. Since the False Claims Act was amended in 1986 to significantly increase the damages and penalties for violations, the government has recovered more than $62 billion in judgments and settlements. More than half of that $62 billion has come from False Claims Act lawsuits filed by whistleblowers. Since 1986, the federal government has paid over $7 billion in statutory rewards to whistleblowers who filed lawsuits under the False Claims Act on behalf of the government.