False Claims Act (Qui Tam) Whistleblower FAQ

The False Claims Act (31 U.S.C. Sections 3729 through 3733) is the oldest qui tam law, originally enacted in 1863 but later amended in 1943 and 1986. It has been further strengthened by recent amendments in 2009 and 2010.

Since its modernization in 1986, it has proven to be the most effective antifraud law in the United States.

Qui tam literally means “in the name of the king.”

Under the False Claims Act, qui tam allows persons and entities with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the United States Government.

In qui tam actions, the government has the right to intervene and join the action. If the government declines, the private plaintiff may proceed on his or her own. Some states have passed similar laws concerning fraud in state government contracts.

Some actions that would be considered violations of the False Claims Act are as follows:

• Charging the government for more than was provided;
• Fraudulently seeking a government contract;
• Submitting a false application for a government loan;
• Submitting a fraudulent application for a grant of government funds;
• Demanding payment for goods or services that do not conform to contractual or regulatory requirements;
• Requesting payment for goods or services that are defective or of lesser quality than were contracted for;
• Submitting a claim that falsely certifies that the defendant has complied with a law, contract term, or regulation;
• Attempting to pay the government less than is owed.

When the False Claims Act was signed into law by President Abraham Lincoln during the Civil War, the term “whistleblower” was not in use.

The term “relator” is the term used in the statute to identify the original source of the frauds against the government. Consequently, in modern whistleblower reward laws, the term “relator” is often used by the Courts and parties to signify a whistleblower.

Any persons or entities with evidence of fraud against federal programs or contracts may file a qui tam lawsuit. This includes non-U.S. citizens — for a detailed breakdown of how the False Claims Act applies to international whistleblowers, see this False Claims Act FAQ for international whistleblowers. However, if the government or a private party has already filed a False Claims Act lawsuit based on the same evidence, you cannot bring a lawsuit.

A qui tam action must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the plaintiff’s possession, must be confidentially served on the US Attorney General and the US Attorney for the district in which the complaint is brought.

An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed.

Violators of the False Claims Act are liable for three times the dollar amount that the government is defrauded and civil penalties of $10,781 to $21,563 for each false claim.

A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement.

To be eligible to recover money under the Act, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough.

You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.

Under the False Claims Act, an action must be filed within the later of the following two time periods:
Six years from the date of the violation of the Act; or
Three years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act.
(One Circuit Court has interpreted the second provision as requiring that the action be filed no later than three years after the qui tam plaintiff rather than when the government knows, or should have known about the violation.)

Under Section 3730(h) of the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole. Such relief may include:

• • Reinstatement
  • Double back pay
  • Compensation for any special damages including litigation costs and reasonable attorneys’ fees.

You should be aware, however, that the scope of whistleblower protection under Section 3730(h) is an issue that currently divides the courts. Many states have wrongful discharge or other employment laws that may provide other remedies for such discrimination.

The Statute of Limitation for filing a FCA retaliation case is different then that for filing a qui tam recovery case. A FCA retaliation case must be filed under the statute of limitation applicable to the most closely analogous state statute.

Due to the success of the federal False Claims Act, 31 states have established similar state versions of the False Claims Act including New York, California, and Virginia. Many of these state False Claims Act laws permit whistleblowers to recover a “finders’ fee” for reporting fraud in state, local, and municipal contracting.

In 2006, Congress amended the Internal Revenue Code to permit whistleblowers to obtain a reward for reporting tax fraud.

The importance of using financial incentives to promote corporate fraud disclosures was underscored in a scholarly study of published in the Boston University Law Journal . This study analyzed several possible methods of incentivizing whistleblowing and concluded that a qui tam model provides the greatest incentive for the whistleblower while exposing information that the government would not be able to detect on its own. “ Qui tam cases bring out important inside information. Potential qui tam plaintiffs can offer information about inchoate or ongoing malfeasance of which law enforcement is unaware.” After examining the potential disincentives that qui tam whistleblowers may confront, the article notes that “the bounty a relator stands to gain does, in many cases, outweigh the disincentives to being a whistleblower.”

If you want to contact an attorney, please visit resources for locating an attorney.

Please read “25 False Claims Act Facts”, written by NWC Board Chairman Stephen Kohn.

For additional information on qui tam and the False Claims Act please read Rules 1, 3, 6, and 30 and review Checklists 1 and 4, published in The New Whistleblower’s Handbook: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself (Lyons Press, 2017).