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The False Claims Act: A primer for whistleblowers

Here’s some general information about the federal law known as the False Claims Act and how it works. This comes from a DOJ white paper.

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The False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733 was enacted in 1863 by a Congress concerned that suppliers of goods to the Union Army during the Civil War were defrauding the Army. The FCA provided that any person who knowingly submitted false claims to the government was liable for double the government’s damages plus a penalty of $2,000 for each false claim.

Since then, the FCA has been amended several times. In 1986, there were significant changes to the FCA, including increasing damages from double damages to treble damages and raising the penalties from $2,000 to a range of $5,000 to $10,000. The FCA has been amended three times since 1986.

Over the life of the statute it has been interpreted on hundreds of occasions by federal courts (which sometimes issue conflicting interpretations of the statute). . . .

The statute begins,in § 3729(a), by explaining the conduct that creates FCA liability. In very general terms, §§3729(a)(1)(A) and (B) set forth FCA liability for any person who knowingly submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government.

Section 3729(a)(1)(G) is known as the reverse false claims section; it provides liability where one acts improperly — not to get money from the government, but to avoid having to pay money to the government. Section 3729(a)(1)(C) creates liability for those who conspire to violate the FCA.  . . .

The FCA allows private persons to file suit for violations of the FCA on behalf of the government. A suit filed by an individual on behalf of the government is known as a “qui tam” action, and the person bringing the action is referred to as a “relator.”

The qui tam provisions begin at § 3730(b) of the FCA; § 3730(b)(1) states that a person may file a qui tam action. Section 3730(b)(2) provides that a qui tam complaint must be filed with the court under seal. The complaint and a written disclosure of all the relevant information known to the relator must be served on the U.S. Attorney for the judicial district where the qui tam was filed and on the Attorney General of the United States.

The qui tam complaint is initially sealed for 60 days. The government is required to investigate the allegations in the complaint; if the government cannot complete its investigation in 60 days, it can seek extensions of the seal period while it continues its investigation. The government must then notify the court that it is proceeding with the action (generally referred to as “intervening” in the action) or declining to take over the action, in which case the relator can proceed with the action.

If the government intervenes in the qui tam action, the relator is entitled to receive between 15 and 25 percent of the amount recovered by the government through the qui tam action. If the government declines to intervene in the action, the relator’s share is increased to 25 to 30 percent. Under certain circumstances, the relator’s share may be reduced to no more than ten percent.

If the relator planned and initiated the fraud, the court may reduce the award without limitation. The relator’s share is paid to the relator by the government out of the payment received by the government from the defendant. If a qui tam action is successful, the relator also is entitled to legal fees and other expenses of
the action by the defendant. All of these provisions are in § 3730(d) of the FCA.

The FCA also provides that if the government chooses to obtain a recovery from the defendant in certain types of proceedings other than the relator’s FCA suit, this is known as an alternate remedy and the relator is entitled to the same share of the recovery as if the recovery was obtained through the relator’s FCA suit. §3730(c)(5).

The FCA provides several circumstances in which a relator cannot file or pursue a qui tam action:

1. The relator was convicted of criminal conduct arising from his or her role in the FCA violation. § 3730(d)(3).

2. Another qui tam concerning the same conduct already has been filed (this is known as the “first to file bar”). §3730(b)(5).

3. The government already is a party to a civil or administrative money proceeding concerning the same conduct. §3730(e)(3).

4. The qui tam action is based upon information that has been disclosed to the public through any of several means: criminal, civil, or administrative hearings in which the government is a party, government hearings, audits, reports, or investigations, or through the news media (this is known as the “public disclosure bar.”) §3730(e)(4)(A). There is an exception to the public disclosure bar where the relator was the original source of the information.

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Here’s the full text of the DOJ’s FCA primer (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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