Introduction to the False Claims Act

Often called Lincoln’s Law, the False Claims Act  provides for liability for triple damages and a penalty from $5,500 to $11,000 per claim for anyone who knowingly submits or causes the submission of a false or fraudulent claim to the United States.

The statute, first passed during the Civil War to fight war profiteering, includes an ancient legal device called a “Qui Tam” provision (a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself”).  This citizen suit provision allows a private person (referred to as the “Relator” under the False Claims Act), to file a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States for payment.

Complex Filing and Prosecution Process

The False Claims Act has a highly complex process for the filing and pursuit of these claims.   First, the Qui Tam Relator must be represented by an attorney. Second, the Qui Tam Complaint must, by statute, be filed under seal, which means that all records relating to the lawsuit are kept on a secret docket by the Clerk of the Court.

The Qui Tam Complaint, and all other court filings, remain under seal for a period of at least sixty days.  At the conclusion of the sixty days, the Department of Justice must, if it wants the case to remain under seal, file a motion with the District judge showing “good cause” why the case should remain under seal.  In most False Claims Act cases, the Department of Justice, with the consent of Relator’s counsel, files multiple motions to keep the case under seal, and these cases often remain under seal for several years while the investigation is conducted.  So, if you are a Qui Tam Relator, do not expect fast results and prepare yourself for a life lesson in patience. 

In addition to filing the Qui Tam Complaint under seal, the Qui Tam Relator, through counsel, must serve upon the Department of Justice a “Disclosure Statement” containing substantially all evidence in the Relator’s possession about the allegations in the Qui Tam Complaint.  This Disclosure Statement is not filed in any court, and is not available to the named defendant.

Relator’s Share in the Recovery

The False Claims Act provides that the Qui Tam Relator is entitled to a reward from 15% to 25% of the Government’s recovery, if the Department of Justice intervenes, and 25% to 30% of the recovery if the Government does not intervene and the Qui Tam Relator and his or her counsel prosecute the case alone.  

The False Claims Act Succeeds  Because of Whistleblowers

The False Claims Act is a highly successful program, in fiscal year 2011, federal and state False Claims Act cases returned over $4 billion back to U.S. taxpayer-funded programs.   However, for the False Claims Act to work, whistleblowers with inside information must come forward and report the fraud.  The single major obstacle to fighting fraud against the government is that these companies and individual attempt to do so in secret. Often times, however, the fraudulent conduct is detected by insiders who have the courage to report the fraud.  These whistleblowers are heros, and we need more of them.