The False Claims Act (“FCA”), is America’s first real whistleblower law. It was originally signed by President Abraham Lincoln in 1863. Under these provisions, whistleblowers can be rewarded for confidentially disclosing fraud that results in financial loss to the federal government. They can be awarded between 15% to 30% of the awarded amounts under some circumstances in successful cases. The criminal actor can be held criminally liable and subject to a civil penalty and treble damages. Changes to the law enlarged the definitions of “claim” and “obligation”. This resulted in an increase in the reach of the law regarding conspiracy provisions, insuring that subcontractors and government-sponsored corporations or programs were covered under the act. Congress closed several loopholes, explicitly providing that the law be interpreted to “protect all Federal Funds.”
“Liability attaches whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the Government without regard to whether the wrongdoer deals directly with the Federal Government; with an agent acting on the Government’s behalf; or with a third-party contractor… The FCA reaches all false claims submitted to State-administered programs.”
Government contractors or medical facilities charging health care costs to Medicare or Medicaid can be liable even if their noncompliance was “not expressly designated as a condition of payment.” A condition of payment can be implied if it was “material” to the services provided: “what matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.” (e.g. Unlicensed, uncertified psychologist (nurse) illegally prescribed improper medications to treat psychiatric patient (teenager) who later died as a result of reaction to the drug; the contract between the provider and the government did not require certifications nor legalities. US Supreme Court upheld the theory of “implied certification.”)
The whistleblower can obtain an award for this public service. The FCA permits whistleblowers to go to court and show that the government was financially taken advantage of by a third party. If the whistleblower’s claims are proven to be correct, the whistleblower is entitled to a percentage of the moneys recovered for the United States, plus all attorney’s fees and costs.
Since 1987 taxpayers have recovered over $15.14 billion from government investigations, but whistleblower recoveries under the FCA during the same period of time totaled over $33.23 billion in civil penalties and fines.
12 steps to following a successful false claims act case
Step 1: don’t go public.
Almost any person can file a claim and qualify as a “relator,” as that term is used under the FCA. Relator does not have to be traditional whistleblower; they only have to be persons who have knowledge of the underlying fraud and report the fraud to the United States pursuant to the procedure set forth in the FCA.
If there has been a public disclosure, the class of persons who can qualify for obtaining a reward under the FCA is limited. The goal is to motivate people who provide the government with information that is not publicly available. Second, even if some or all of the allegations are publicly available, the government still wants to encourage true “insiders” to step forward and provide the United States with first-hand knowledge about the frauds.
Step 2: Tried to Qualify as “Original Source”
“Original source” means an individual who either (1) prior to a public disclosure… Has voluntarily disclosed to the government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.”
Step 3: Confidentially File Allegations with the Government
File your FCA claim before there is a “public disclosure” and you should be covered. If after a public disclosure, you must demonstrate that you are a “true whistleblower.” The period that you were able to obtain knowledge of the underlying wrongdoing independent of any information that may have been published in the press or reported in a government report is important, and that your information “materially adds” to the information that is in the public domain.
You must provide this information to the United States prior to filing your FCA case.
Every major government agency has an Office of Inspector Gen. That office has jurisdiction to accept and investigate allegations of contract or fraud and/or any former procurement abuse.
Step 4: File First
Another unique provision in the law is that “first to file” rule. Only the person who files the claim first has the right to pursue the case and collect the reward. An informal disclosure to the government does not count.
Step 5: Choose the Venue
FCA claims have very liberal venue rules. A party can file a lawsuit in any jurisdiction in which any of the named defendants “can be found, resides, transact business, or in which any false claim occurred.”
A claim should be filed in the venue that is most favorable for pursuing the case, not necessarily the judicial district where the company and/or the whistleblower resides. Factors to consider are: (a) where you or your lawyers reside (this can reduce litigation costs on the road); (b) the reputation of the local district court judges and the US Attorney’s Office; and (c) the FCA case law developed by the Appeals Court in the judicial circuit for which the claim is filed.
Step 6: Prepare a Detailed “Disclosure Statement”
The FCA requires that the whistleblower/relator file a detailed complaint. The complaint is not served on any party, except United States. Until the court issues an order lifting the “seal” no one else is provided with a copy of the complaint. When a case is initially filed, secrecy is key. When a case is initially filed, secrecy must be followed. If you tell the news media, and the defendants or anyone else for that matter that you filed the claim, you may lose your case and be subject to sanctions for violating a court-ordered confidentiality requirement.
First, the complaint is filed with the court. Second, the complaint and the disclosure statement are formally served on the United States. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.
Step 7: File the Complaint and Disclosure Statement under seal
The complaint is filed under seal. The clerk must be informed of the complaint which must be filed confidentially and never served on the defendant until the court officially lifts the seal and orders service. As for the United States, a copy of the complaint and the written disclosure statement must be served on the government pursuant to Rule 4 (d) (4) of the Rules of Civil procedure. The complaint and disclosure statement must be served both upon the Atty. Gen. of the United States in Washington DC and upon the United States attorney for the judicial district in which the complaint is filed.
Filing under seal is based on the theory that the United States needs time to review the complaint and the material filed by the whistleblower and to determine whether or not the government wants to “intervene” and take over the lawsuit. Filing under seal permits the Government to investigate the whistleblower allegations before the company knows it is the target of a False Claims Act Lawsuit.
Step 8: The Complaint Filed in Court Must Be Detailed
The complaint should contain detailed factual statements setting forth the basis for the complaint. Similar to other fraud cases, the rule of Civil Procedure 9 (B), fraud cases are subjected to a “heightened pleading” standard. The rule is designed to protect those accused of committing fraud. It requires plaintiff to “place the defendants on notice of the precise misconduct with which they are charged” in order to “safeguard defendants against spurious charges of immoral or fraudulent behavior.”
You want to be specific for various reasons including make sure you are the “first to file. Second, under the Supreme Court’s ruling in the Rockwell Int’l Case, whistleblowers are only entitled to a reward for those frauds properly included within the scope of their complaint. If allegations are vaguely worded, and if the complaint lacks specificity on key issues, the qui tam relator risk having the claim denied.
Step 9: Keep Investigating the Claim after the Complaint is filed
Keep track of everything you do after the complaint is filed.
Step 10: Determine Whether State Funds are Involved
Step 11: Prepare for a Retaliation case
The FCA prohibits retaliation against employees who engage in protected activities designed to further an FCA lawsuit or who engage in other efforts to stop one or more violations of the procurement/contracting violations outlined by the FCA. The law provides for double back pay, reinstatement, special damages, and attorney’s fees and costs. Statute of limitations retaliation claim is generally 3 years.
Step 12: Decide Whether to Proceed with a Civil Case
After the government completes its investigation into the confidential complaint, the United States will inform the court whether or not it will “intervene” in some or all of the claims filed by the relator. This can be the most important decision in an FCA case. If United States intervenes in a case the chances of prevailing can be extremely high. But if United States declines to intervene, the vast majority of cases are dismissed.
If the United States intervenes in the case, as a matter of law, the Government takes over primary control of the litigation. Once this happens, the relator plays a secondary role to the government, and courts often defer to the judgment of the United States. “If the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action, shall not be bound by an act of the person bringing the action”; however the relator “shall have the right to continue as a party to the action.”
The whistleblower has a right to fully participate in a civil proceeding, conduct discovery, file briefs and motions, question witnesses at trial, and otherwise be fully included in every aspect of the case. The relator also must be informed of any settlement agreement and has an opportunity to oppose court approval of a settlement. By actively participating in an intervened case, the whistleblower can help the government prevail on the merits and at the same time protect his or her interest as the relator. Relator is also entitled to a payment of attorney’s fees and costs from the defendant. Thus, even in cases in which the final recovery may be modest, the relator’s counsel can still be paid by the defendant pursuant to the statutory attorney fee provision contained in the FCA.
If the United States declines to intervene in the case, the whistleblower can still go forward and prove the merits of the case. If he or she prevails, United States still collects the lion share of the award, but the whistleblower is may be entitled to a minimum 25% and maximum 30% “relator’s share” of any money recovered by the United States and the whistleblower may also collect the statutory attorney fee.
The FCA contains a section that permits a defendant to seek “reverse attorney fees” from the whistleblower if the United States declines to intervene and the employee-relator continues with the claim. The reverse fees can be awarded only under narrow circumstances: “if the government does not proceed… and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorney’s fees and expenses if the defendant prevails in the action the court finds that the claim… was clearly frivolous, clearly vexatious, or brought primarily for the purposes of harassment.”
If you have or suspect you have a whistleblower claim contact the attorneys at the Law Offices of Matt & Allen as soon as possible.