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The False Claims Act  An online resource for whistleblowers about qui tam lawsuits and the False Claims Act. A service of Phillips & Cohen LLP, the nation's most successful and most experienced whistleblower law firm.

How it works | Common types of fraud | Qui tam statisticsThe statute
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How it works
The False Claims Act allows any person who knows that an individual or company has financially defrauded the federal government to file a "qui tam" lawsuit to recover damages on the government’s behalf.

Many people who file qui tam lawsuits (called the "relators") are employees or former employees of companies that commit fraud. But anyone who knows of an instance where the government has paid false claims can file a qui tam lawsuit. That could be, for example, a competitor, a subcontractor or even a patient.

The whistleblower does not need to have personal knowledge of the fraud to file a False Claims Act case. The lawsuit can be based on information the relator learned from a friend, a relative, a competitor, etc. As long as the information is not publicly disclosed and the government has not already sued the individual or company for the fraud, the relator may bring a qui tam lawsuit. (Tax fraud cannot be the basis of a False Claims Act case. However, the Internal Revenue Service has a reward program for whistleblowers who report tax fraud and other tax law violations. For more information, see www.irswhistleblowerlawyers.com.)

Sometimes there may be a False Claims Act case even if the government does not pay any money directly to the dishonest company. If Company A cheats Company B, for example, and Company B receives funds from the federal government, it is the same as cheating the government directly. All that is necessary is that some of the money wrongfully obtained is paid or reimbursed by the federal government. This can happen when the government does business with a general contractor who is cheated by a subcontractor, when a company defrauds a state highway authority that receives federal highway funds and in other similar circumstances.

Filing a False Claims Act lawsuit
A False Claims Act case is in many ways like any other civil lawsuit in federal court. But there are some major differences.

The relator files the lawsuit in federal court "under seal," meaning it is not available to the public and cannot be discussed with anyone except the government officials investigating the case. Even the defendants -- the individual or organization charged with committing fraud -- are not told about the lawsuit. This gives the government time to investigate the fraud allegations without alerting the defendant. The government has 60 days to review the case and decide whether it looks like one that is worthwhile to pursue. In reality, seals on qui tam cases are routinely extended for one or two years.

If the government decides to join the case, the lawsuit is unsealed, a copy is served on the defendant, and the government and the relator work together in the case as co-plaintiffs. If the government declines to intervene, the relator may go forward with the lawsuit. But the chances of a lawsuit succeeding are much greater with the government’s participation.

The timing of a lawsuit can be critical. The first person to file a case under the False Claims Act for a particular fraud preempts all other cases. So if you plan to bring a case, it is important to do so before another whistleblower beats you to the courthouse. Potential whistleblowers also should keep in mind that the False Claims Act has a statute of limitations that may be as short as six years.

Damages and fines
The law stipulates that a liable defendant pay three times the government’s losses plus a penalty (currently $5,500 to $11,000) for each false claim. When settling a case, the government often agrees to forego the civil penalties and accepts two to three times the amount of damages suffered by the government. The defendant also must pay the fees and the case-related expenses of the whistleblower’s attorney.

Whistleblower's reward
Under the False Claims Act, whistleblowers are entitled to 15 percent to 30 percent of whatever amount the government recovers as a result of their qui tam lawsuits. The amount varies, depending on whether the government intervened in the qui tam case and other factors.

Congress decided to give whistleblowers a share of the recoveries that result from qui tam lawsuits to give people a strong incentive to step forward and take the personal and professional risks involved in reporting fraud. It also wanted to encourage private law firms to risk their resources in litigating cases on the public’s behalf.