What is a False Claims (“Qui Tam”) Whistleblower case?
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 TopIf 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 TopFor 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 TopRelators 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:
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: