There are a lot of types of fraud that companies commit, but the only type that can lead to a False Claims Act case is fraud against the government or a government program. In sum, the fraud must include making a false claim to the government, making or using a false record or statement to get a claim paid by the government, making or using a false record or statement to decrease or conceal an obligation to pay money to the government, or conspiring with another party to do any of those things. There may be other remedies if you know of fraud against non-government individuals or entities, but only fraud involving government funds can be addressed by a False Claims Act case.
The Securities and Exchange Commission’s whistleblower program went into effect in August 2011 to encourage the reporting of any securities violation. If you are aware of a publicly traded company that is committing securities fraud such as insider trading, hiding negative information from the public or filing false statements, you may qualify for an award if you report information to the SEC that leads to a recovery of more than one million dollars from the offending company. For more information about filing an SEC whistleblower claim click here.
A False Claims Act case is filed by an individual in an effort to return funds to the government. Before the case is filed, the individual notifies the government about the fraud and discloses that a False Claims Act case is going to be filed. After that, the individual files a case in court and it is served (sent to) the United States or to any individual states that may be involved.
After a period of investigation, the government has a choice whether it wants to get involved and move forward with the case, which is called “intervening.” If the government intervenes, it will take the lead on settlement negotiations or taking the case to trial. The government may also decide that it does not want to intervene, and the individual who brought the case may choose to move forward on his or her own. If the case moves forward, the government always has the option to change its mind and intervene at a later date.
It is important to remember that in any False Claims Act case, the United States is the “real party in interest” which means that the case is really about the government’s interests, not the interests of the person who files the suit. The whole purpose of the case is to return money that was fraudulently obtained from the government.
False Claims Act cases are often referred to as qui tam cases. Qui tam is short for the Latin phrase, “qui tam pro domino rege quam pro se ipso in hac parte sequit” which is roughly translated as “he who brings an action for the king as well as for himself.” The phrase means that a qui tam case is brought by an individual on behalf of the government.
Usually the person who brings a lawsuit is called a Plaintiff. In a qui tam case, the Plaintiff is referred to as a Relator.
It is important to file a case as soon as possible after you have learned about a fraud. The False Claims Act statute says that a case must be filed within:
- Six years from the date of the violation; OR
- Three years from the date the Government knew or should have known about the fraud, but in no event more than ten years from the date of the violation;
whichever is latest.
For example, if a fraudulent action occurred four years ago, a suit can still be filed. Also, if the action occurred seven years ago, but the government does not and could not have known about it until now, then the statute of limitations has not expired and a suit can still be filed.
However, if the action occurred eleven years ago, the statute of limitation has expired and it is too late to file a suit. Also, if the action occurred eight years ago but the government knew or should have known about it five years ago, then the statute of limitations has run and a suit is prohibited.
Not right away, but eventually. All qui tam cases are filed “under seal,” which means that the defendant company does not get served (given a copy of the lawsuit) and the lawsuit is not made public. The case is required by law to stay under seal for at least sixty days while the government investigates, but often the government will make requests to the court for the seal to be extended for months or even years while the investigation continues.
The seal will only be lifted and the lawsuit made public once the investigation is complete and the government has decided whether or not to move forward, or the judge decides not to give the government any more extensions. With very limited exceptions, this is the time when a Relator can expect for his or her name to be revealed.
No, the seal applies to you too! Only the Relator, the Relator’s counsel, the court and the government may know about the case while the seal is in place. Violating this rule can actually cause a case to be dismissed, so it is very important to follow it closely. As a general rule, you should not discuss a False Claims Act lawsuit with anyone other than your lawyers.
Yes, the False Claims Act has special provisions to protect whistleblowers from being retaliated against. An employee may bring a lawsuit against an employer if the employee is discharged, demoted, suspended, threatened, harassed or discriminated against because of any lawful acts done by the employee in furtherance of a False Claims Act case. The employee may seek reinstatement, two times the amount of back pay plus interest, and special damages, which include attorney’s fees.
However, it is important to know that this is an after-the-fact provision and there is nothing in the law that can force an employer to hire the employee back while the case is pending. The employee only receives the protection of the law if, through the legal proceedings, he or she can show that the retaliation is directly attributed to the qui tam action.
The False Claims Act includes a provision that is commonly called the “first-to-file bar.” That means that only the first person to file a case alleging a certain type of fraud can maintain the case; all other claims are barred. There is an extensive body of law discussing how similar two cases must be for the second one to be barred, so it is important to talk to a lawyer about any other cases that might exist.
Because of this part of the statute, filing a qui tam case can literally be a race to the courthouse. For this reason, it is important to get a case on file as soon as possible.
There is a provision in the False Claims Act called the “public disclosure bar” which prohibits suits based on information that is already in the public domain and available to the government. The purpose is to discourage “parasitic” whistleblowers who only know about information second-hand and do not have unique, personal knowledge to help the government in a recovery.
This part of the statute was recently amended and now bars any case wherein the “allegations or transactions” were disclosed in a federal criminal, civil or administrative hearing in which the government was a party; in a congressional, GAO or other federal report, hearing, audit or investigation; or in the news media.
The exception to this rule is if the Relator is an original source of the information. An “original source” is someone who voluntarily disclosed the information to the government prior to the public disclosure or who has “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.”
Like the first-to-file bar, this requires a very case-specific analysis, so it’s important to discuss this with a lawyer.
Typically, each case will be assigned an Assistant United States Attorney (AUSA) in the jurisdiction where the case is filed, and an attorney or agent from the United States Department of Justice in Washington, D.C. There may also be representatives from various governmental agencies involved, depending on the nature of the allegations. For example, the Department of Health and Human Services may be involved in Medicare or Medicaid fraud cases, while the Department of Defense may be involved in defense contracting fraud.
Once a case has been filed, the course of the investigation is up to the government agents, not the Relator. The government may ask the Relator for help as the case progresses, but all strategic decision-making is up to the government agents assigned to the case. The Relator’s role can vary greatly depending on whether the Relator is employed by the Defendant and on the depth of the investigation. For example, a Relator may be asked to provide a potential witness list, to analyze documents, or even to wear a wire to record conversations.
The False Claims Act provides for a civil penalty of three times the total amount of damages suffered by the government plus $5,500 to $11,000 per false claim. Every individual statement, bill or record sent to the government in violation of the False Claims Act counts as a separate false claim.
A company may also be liable for criminal penalties against the company or against individuals who orchestrated and directed the fraud. Criminal penalties can be in the form of fines, asset forfeiture, or even jail time.
In the most severe cases, a company may face prohibition from future government contracting. For example, a medical provider may be excluded from participation in the Medicare and Medicaid programs or a defense contractor may be disbarred as a qualified contractor. The duration, or permanency, of these sanctions depends on the nature and severity of the fraud.
If a Defendant reaches a settlement with the government, the penalties are often negotiated downwards in exchange for the company’s cooperation. Often, a settling company will also be required to enter into a Corporate Integrity Agreement to allow for government oversight to ensure compliance in the future.
If a case is settled or successfully litigated, the Relator who initiated the case is entitled to a “Relator’s share,” which is a portion of the government’s recovery. The amount of the Relator’s share depends on the involvement of the Relator, the involvement of the government, and the ultimate resolution of the case.
If the government intervenes in a case that is settled or successfully litigated, the Relator is entitled to receive between 15% and 25% of the proceeds. If the government does not intervene and the Relator independently settles or successfully litigates a claim, the Relator’s share is increased to 25% to 30% of the government’s recovery.
However, the Relator’s share may be significantly reduced or completely eliminated if the Relator was an architect of the fraud or significantly participated in it. If the Relator is ultimately convicted of criminal conduct related to the allegations, he or she must be dismissed from the case and cannot share in the proceeds at all.
Importantly, a Relator will not collect any portion of a Relator’s share until the case is finally resolved and the government has received its funds. There is no provision for payment to the Relator while the case is ongoing.
The length of a False Claims Act case can vary greatly. Although there is a recent push by the Department of Justice to move cases along more quickly, a Relator should expect his or her case to last for several years. Realistically, a case may last anywhere between one year and seven or eight years depending on the complexity of the allegations, the size and nature of the company, and the motivation of the government agents. There is simply no way to predict this at the outset.
The James Hoyer firm is committed to gathering extensive facts to ensure the accuracy and viability of a case before it is filed. That fact-centered focus is combined with the recognition of the need to get a case filed as quickly as possible, so you can expect things to move rather quickly at the beginning. You may meet with your attorneys and our investigators several times to review documents and evidence, to create an in-depth timeline of events and to make sure that there are no stones left unturned.
Once a case has been filed, you will begin to prepare for your first meeting with the government, which often takes place within the first few months after filing. At that meeting, the government will want to know everything you know about the case so it is important to be prepared. We will meet in advance to ensure you are ready for all questions that you may be asked.
After the Relator’s meeting, you may feel like the case is slowing down. In reality, the baton has been passed to the government and they will be conducting an investigation to determine the accuracy of your allegations and whether they want to proceed with the case. This period of time can be long or short, and can involve a lot of communication with the government or almost none at all. The most important thing you can do is to be patient. The James Hoyer firm will work to ensure the case moves as quickly as possible and will keep you notified each step of the way.