Blowing the Whistle: Fraud and the False Claims Act
A record-keeper for a major corporation sits in her cubicle, reviewing the company’s latest statements. To the untrained eye, the records seem to be in order, but the employee’s specialized knowledge and years of experience have allowed her to know better. The records point to a clear pattern of fraud perpetrated against the federal government. What is the employee to do?
The Latin phrase “qui tam” roughly translates to “who sues on behalf of the King as well as for himself.” The qui tam provision of the False Claims Act accordingly allows private citizens to sue on behalf of the government in situations where they have specific knowledge of fraud perpetrated against the federal government itself. In successful cases, the private citizen (also known as a “whistleblower” or “relator”) is entitled to a share of the fines, penalties and damages assessed against the fraudulent party.
Considering a Claim
Fraud against the government may take various forms. Examples include:
- Overpricing a good or service
- Underperforming a service
- Failing to provide promised compensation
- Neglecting to deliver goods as promised
A potential whistleblower should not simply suspect that fraud has taken place, but should have specific knowledge of the fraud and its operation. As fraud cases require hard evidence before they can be successfully prosecuted, the whistleblower should ideally be able to provide documentation of the activity.
Many other considerations must be contemplated before a whistleblower can move forward. Most qui tam claims require the representation of an attorney. Potential whistleblowers and their attorneys should consider that:
- The activity in question should be sizeable in nature
- The fraudulent party should generally be in a position to repay the government, plus any fines or penalties assigned
- Qui tam claims cannot be filed for issues related to tax fraud
- The evidence which supports the claim cannot be readily available to the general public
- Relevant fraud must involve federal money
- The fraud must have been committed knowingly or, in some cases, recklessly
- Claims must ordinarily be brought during the six or fewer years following the fraudulent activity
Qui Tam Process
Qui tam claims must be filed under seal. This means that the process begins in secret and must be kept a secret by both the whistleblower and the government. For 60 days after the claim is filed in District Court, only the Department of Justice (DOJ) and the assigned judge are granted access to the contents of the claim. The allegedly fraudulent party will have no knowledge of the claim, as long as it remains under seal. If it can demonstrate good cause, the DOJ may request extensions of the sealed period, six months at a time.
The whistleblower must initially file a disclosure statement with the claim. The statement should contain all the evidence relevant to the claim that the whistleblower has possession of. Like the claim itself, the disclosure statement is kept hidden from the allegedly fraudulent party.
Once a claim is filed, the DOJ is obligated to investigate the accusation of fraud. Once the investigation is complete, the DOJ may choose one of the following options:
- Intervene: the federal government becomes an official plaintiff in at least one aspect of the case and prosecutes it
- Decline to intervene: the whistleblower and his or her attorney may pursue the claim on behalf of the federal government, within a specified amount of time
- Move to dismiss the complaint: the government asserts either that no viable claim exists or a conflict of interest is present
- Settle: the whistleblower will still be entitled to recovery in the case of a settlement
Protection against Employment Retaliation
Whistleblowers employed by the fraudulent party are protected from employment-related retaliation under the False Claims Act. Should the employer dismiss, demote or discriminate against the whistleblower, the employee will be eligible for reinstatement, back pay and/or special damages, depending on the unique circumstances of the case.
To qualify for retaliation protection, the termination, discrimination or demotion must have occurred as a result of the qui tam claim in the following ways:
- The employee must have acted in furtherance of a protected qui tam activity;
- The employer must have been aware of the employee’s protected actions; and
- The employer must have discriminated against the whistleblower in retaliation for the protected activity
Qui tam claims often require that an attorney represent the whistleblower. It is important that anyone considering a qui tam case consult with an experienced attorney as soon as possible, as restrictions may bar claims that are filed after a certain amount of time.