Hare, Wynn logo

False Claims Act Lawyers Fighting
To Stop Fraud on the Government

Search

Qui Tam News

PDF Print

What is a False Claims (“Qui Tam”) Whistleblower case?

What are the liabilities under the False Claims Act?

How are damages calculated?

What is the whistleblower’s share?

How is the relator’s counsel paid?

Where do relator’s come from?

What are the challenges faced by the relator in obtaining the status as a proper relator?


What is a False Claims (“Qui Tam”) Whistleblower case?

In general terms the qui tam provisions of the False Claims Act (“FCA’) 31 U.S.C. § 3729 – 3730 allow a private citizen with knowledge of fraud being practiced upon the government to file a civil lawsuit, on behalf of himself and the government, to recover treble damages and civil penalties.  For his efforts, the private citizen (known as the whistleblower or “relator”) may receive a percentage of the recovery obtained by the government.

What are the liabilities under the False Claims Act?

Liability under the False Claims Act is statutory: that is it is based upon a violation of one of the seven subsections of the FCA found at 31 U.S.C. § 3729 (a) (1) through (a) (7).

The primary violations are:  A)  Knowingly presenting or causing to be presented, a false or fraudulent claim for payment or approval 31 U.S.C. § 3729 (a) (1);  1A)  Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim:  31 U.S.C. § 3729 (a) (1);  B) Conspires to commit a violation of these sub-paragraphs 31 U.S.C. § 3729 (a) (1) (G) knowingly makes uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money as property to the Government. (the reverse false claim) 31 U.S.C. § 3729 (a) (1) (G). The other three statutory sections, § 3729 (a) (1) (D), (E), and (F), are not heavily utilized.

How are damages calculated? Back to Top

If a defendant is found guilty of violating one of the seven false claim subsections, 31 U.S.C. § 3729 (a) provides that the court shall assess “three times the amount of damages which the government sustains because of the act of that person...”

The calculation of damages is simply stated - that is, damages are the difference between what the government actually paid minus what the government either received or should have paid had the claim or statement not been false.  For a reverse false claim, the calculation is the difference between what the government should have been paid minus what the defendant actually paid the government.

In addition to those damages, the court must also assess a civil penalty “of not less than $5,500 and not more than $11,000 for each false claim.”  For example, each over inflated invoice submitted for payment would be a separate false claim subject to penalty.  In situations where a defendant submits daily reports that contain false claims the penalties can add up quickly.  It each invoice is considered a false claim, the penalties can far outweigh the treble damages under the act.

What is the whistleblower’s share? Back to Top

For her efforts in bringing the fraud to the attention of the government and prosecuting the lawsuit, a qualifying relator is entitled to share in any recovery by way of verdict or settlement.  The percent of the total recovery received by the relator depends on a number of factors: 1) whether or not the government elects to intervene in the case; 2) whether the relator has substantially participated in the fraud and thus has “unclean hands” and, 3) the amount of support that relator and his counsel contribute to the prosecution of the case.

31 U.S.C. § 3730 (d) provides that if the government intervenes and elects to proceed with the action, the relator “shall ... receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending on the extent to which the person substantially contributed to the prosecution of the action.”

However, if the action is “based primarily” on certain types of information previously known to government agencies “the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation.”  In cases where the government intervenes the average award to relator is 16 percent.

However, intervention has its advantages.  When the government intervenes, 95 percent of cases result in a recovery.   Whereas only 5 percent of cases are successful when the government declines to intervene.   Further, the United States has recovered over $14 billion from qui tam actions since the 1986 amendments.  Of that amount, only $432 million had been recovered when the government declined to intervene.

If the government declines to intervene in the relator’s case, the relator may continue to pursue the case to trial or settlement.  In the event the relator is successful in achieving a recovery in the form of a verdict or settlement (which must be approved by the government), 31 U.S.C. § 3730 (d)(2) provides that the relator “shall receive an amount the court decides is reasonable for collecting the civil penalty and damages.  The amount shall not be less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of the proceeds.”

The False Claims Act also vests the court with the power to reduce the relator’s share by an amount the court deems appropriate “If the court finds the action was brought by a person who planned or initiated the [false claim(s)] upon which the action was brought.”

How is the relator’s counsel paid? Back to Top

Relators counsel is compensated in two ways:
i) Counsels contingency arrangement with the relator; and ii) Statutory Fees.

Given the complexity of qui tam cases, the specialization and time required, and the financial risk of prosecuting the action, counsel and relator should structure a contingency fee arrangement that takes all of these factors into account.  If the relator is successful in reaching a verdict or settlement, counsel would be entitled to his or her contingency fee from the realtors share only - not the entire recovery.

In addition, 31 U.S.C. § 3730(d) provides that the relator shall also be awarded reasonable attorneys fees and expenses.  It is necessary for relators counsel to document work hours and expenses in a qui tam case, because accurate and complete documentation will support an end of case award of attorneys fees and expenses by the court.

BUT NOTE, 31 U.S.C. 3730(f) provides that “the government is not liable for expenses which a person incurs in bringing an action under this section.”  Thus, even if the government intervenes and works hand and hand with the relator in prosecuting the case, if the relator loses, he loses his expenses that are likely to be significant.

Where do relator’s come from? Back to Top

The most common qui tam relators are current or former employees who have tried to report the fraud or correct the fraud only to be rebuffed or even terminated.  Often a potential whistleblower comes to a lawyer with no knowledge that the False Claims Act even exists.  The potential relator visits a lawyer because he or she feels wrongfully terminated as a result of their efforts to stop, correct or report fraud within the company.  Under many state employment laws the employee may not have a wrongful termination suit, but he or she may be a great relator.  Further, if the employee was fired for reporting fraudulent conduct (to the employer or the government) or for attempting to stop the submission of false claims, he or she has a personal claim under 31 U.S.C. § 3730(h)(which protects whistleblowers from retaliation and provides for damages if the employee is fired or terminated as a result of the efforts to expose or stop fraud).  Good relators come from all different positions:

  • quality control employees for defense contractors
  • contract administrators for defense contractors
  • Nurses
  • Doctors
  • Hospital pharmacy employees
  • laboratory technicians
  • billing personnel for any company dealing with the government or health care provider receiving payments from Medicare, Medicaid or TRICARE CHAMPUS.
  • Salespersons for durable medical equipment companies and pharmaceutical companies.
  • Salespersons for laboratory testing companies.
  • Laborers for defense contractors that know of quality problems or tests not being performed.
  • Industry competitors: often a competitor of a wrongdoer has knowledge of what the wrongdoer is doing and wants to stop it.
  • Government employees or former government employees


One type of person that does not make a successful relator is a planner or initiator of the fraud.  Often these people are fired by new management or when the company begins to feel they are being scrutinized by the government.  Planners and initiators of the fraud may have any award reduced all the way to zero, if the court finds appropriate.  31 U.S.C. § 3730(d)(3).  In such a case the relators efforts will benefit the government but not the relator himself.

What are the challenges faced by the relator in obtaining the status as a proper relator? Back to Top

To be successful, the relator shall possess direct and independent knowledge of the false claims submitted by the potential defendant.  As stated by several Circuit Courts of Appeal, proving that the qui tam relator is a proper relator, not barred by the Act, is a matter of subject matter jurisdiction.  The FCA, through jurisdictional bars, defines a proper relator by a process of elimination. 31 U.S.C. § 3730 contains the following jurisdictional bars:

e) CERTAIN ACTIONS BARRED.--
(1) No court shall have jurisdiction over an action brought by a former or present member of the armed forces under subsection (b) of this section against a member of the armed forces arising out of such person’s service In the armed forces.
(2)(A) No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of the judiciary, or senior executive branch official if the action is based on evidence or information known to the government when the action was brought.
(B) For purposes of this paragraph. “senior executive branch “Official” means any officer or employee listed in paragraphs (1) through (8) of section 101(f) of the Ethics in Government Act of 1978(5 U.S.C. App.)
(3) In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the subject of a civil suit or administrative proceeding in which the Government Is already a party.
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, “original source” means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.

If the potential relator has useful information about false claims being submitted to the government, the relator is not an employee of the armed forces, the government is not currently pursuing the claims in another arena, and the information has not been “publicly disclosed” as defined in 31 U.S.C. § 3730 (e), then the relator is technically proper.  However, relator’s substantial direct and independent knowledge of the false claims is important for two reasons:

  1. Section 3730 (e)(4)(A) contains a broad definition of public disclosure. If suit is brought, the defendant is likely to uncover some public disclosure within the meaning of paragraph 3730 (e)(4)(A); and
  2. The relator’s recovery percentage is directly tied to the amount of assistance he provides to the government.  Thus, the more knowledge the relator has, the more assistance he will be able to provide to the government and the higher his recovery may be.


If the false claims have been “publicly disclosed,” the potential relator may still qualify if he is an “original source” of the information on which the allegations ore based.  “An ‘original source’ is defined as ‘an individual who has direct and independent knowledge of the information upon which the allegations ore based and has voluntarily provided it to the government before filing [the action].’  A putative relator’s knowledge is “direct” if he acquired it through his own efforts, without an intervening agency, and it is “independent” if the knowledge is not dependent upon public disclosure.”

Although a relator may be otherwise proper, he may still be barred from bringing suit by two additional FCA requirements. First, 31 U.S.C. § 3730 (b)(5) provides that "[w]hen a person brings an action under this subsection, no person other than the Government may bring a related action based on the facts underlying the pending action." Thus, an additional eligibility requirement is, in effect, a "race to the courthouse" rule among relators.   Once a qui tam case is filed, no person other than the government may intervene in the care or bring a related case based on the facts underlying the pending action.  In fact, section 3730 (b)(5) of the False Claims Act was adopted to prevent multiple separate suits based on identical facts and circumstances.  Moreover, the first-to-file rule is the longstanding rule in qui tam cases.  As stated in 1941 by the Southern District of New York, in a qui tam action, "[t]he first plaintiff has sole control of the action, except that he cannot dismiss it without consent of the judge and District Attorney." Any actions filed on behalf of the United States, filed after the first action, must be stayed.  "Thus, if a qui tam case based on a particular set of facts is already pending, a second relator cannot file a related case based on the same set of facts."

The second potential bar is the "voluntary disclosure" requirement.  31 U.S.C. § 3730 (e)(4)(B) requires a potential relator to voluntarily provide the government with the information upon which the action is based before filing suit.  The potential relator may have already done so before coming to counsel to file a lawsuit.  However, to be certain this requirement is met, prudent counsel should schedule a meeting with a government official in charge of policing the activity involved, or the local U.S. Attorney, to allow the potential relator to disclose all of the information he has regarding the alleged false claims before suit is filed.

Back to Top

Glossary of Terms