THE FALSE CLAIMS ACT ...

Growing in use since an important statutory modification in 1986, is the qui tam provision of the federal False Claims Act. A qui tam suit is a suit brought by an individual on behalf of the United States government seeking to expose and thereby stop the wasting of federal funds. The qui tam relator, often referred to as a whistleblower, if successful in his or her suit, is entitled to a percentage of the funds recouped by the federal government, generally between 15 to 25 % of the recovery. The key point is that federal funding must be involved under this statute, and the fraud alleged must be substantial and non-frivolous in nature. Recently, a number of states, including New York State, have enacted state false claims acts with qui tam provisions, with the goal of protecting state and municipal funds from fraud.

There are several keys to a successful qui tam prosecution, but chief among them, are the facts, meaning the merits of a given claim. The quality and quantity of proof at the disposal of the whistleblower (also known as the relator) and the prosecutors will determine the shape and outcome of the case.

Common examples of such fraud are:

a) The submission of false claims to Medicare or Medicaid;

b) The submission of false claims for payment to any other Federal agency, or grantee of Federal funding;

c) The submission of claims for defective or substandard parts under a government contract;

d) The non-disclosure by a contractor of costs during the bidding process for a government contract.

e) "Reverse false claims"- This is where a false statement is made which has the effect of depriving the federal government of revenue which it is due. A common example is the intentional mis-classifying of bulk mail by a postal customer which shortchanges the U.S. Postal Service of revenue. Other recent examples include false claims which have deprived the U.S. Treasury of revenues due it from companies leasing federal land where oil and gas are extracted and sold for a profit. The False Claims Act has also been used by the government to recoup funds lost through fraudulent transactions involving federally-insured loans and mortgages, including those supervised by HUD (Housing and Urban Development).

Who is entitled to bring a qui tam action?

Anyone who comes upon credible information that a false or fraudulent claim for federal funds has been submitted or paid is eligible to file a qui tam action, provided that such person did not simply learn about the fraud in the newspapers, or another public forum. A private citizen or company can not file a qui tam action without an attorney. This is due to the fact that the relator brings his or her case on behalf of the government, and the U.S. government can not be represented in court by a non-attorney.

What should I do if I am privy to such information?

A qui tam relator must follow a specific procedure for filing the claim. Failure to do so can result in the dismissal by the court of an otherwise meritorious claim. It is wise to consult an experienced attorney as soon as you become aware of a serious fraud involving government funding, to protect your interest. If the government finds substance and merit to the qui tam complaint it will most likely intervene in the action.

Retaliation by your employer

If you become aware that real fraud is being committed involving the use of federal funds, it is advisable to speak with an experienced lawyer before taking any action yourself. Suffice it to say that your employer will not give you a medal or a raise for discovering fraud deep in its midst. This is because the company is civilly liable under the theory of respondeat superior for the fraudulent activity of its employees. Often and regrettably, employers attempt to demonize the messenger. What begins with a thank you, ends with termination.

The Footrace to the Courthouse

In order to encourage people to come forward as soon as is practical and stop the hemorrhaging of federal funds, the law creates a race to the courthouse. In other words, the first person with bona fide information about a specific fraud to file a qui tam action is the only qui tam relator allowed in that case. And it is also worth noting that if the government has begun a lawsuit to recover funds, there can be no qui tam suit. While no qui tam action should be brought without a thorough examination of the facts of a case by an experienced qui tam attorney, the law encourages early reporting of fraud.

The above information should not be construed as legal advice. In any specific matter, a lawyer should be consulted.