The False Claims Act and Qui Tam Background

Would you think a Civil War era law has little relevance today? Think again.

The False Claims Act, initially known as the “Lincoln Law,” dates back to the Civil War. But its provisions still apply today, and lawsuits brought under the False Claims Act by whistleblowers have resulted in over $15 billion recovered on behalf of the federal government.

The False Claims Act came into being in response to fraudulent war suppliers who sold defective or nonexistent goods to the Union Army. Initially, it offered a 50 percent reward to “relators,” private citizens who filed lawsuits on the government’s behalf and acted as whistleblowers against the fraud. Since then the law has evolved and changed, and the “qui tam” litigation process has become clearer.

To Whom Does the False Claims Act Apply?

The False Claims Act applies to any person who:

• knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

• knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

• conspires to commit certain violations;

• has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

• is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

• knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

• 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 or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.

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False Claims Act FAQs

What types of evidence strengthen a False Claims Act case?

Strong FCA cases typically include internal emails, invoices, financial records, whistleblower testimony, or documents proving fraudulent billing, overcharging, or falsified certifications. Firsthand knowledge is important for a successful claim, but overall our goal is to help the government see that the case is worthy of resources for investigation.

Can multiple whistleblowers file a False Claims Act case on the same fraud?

In theory, only the first whistleblower to file a qui tam lawsuit is eligible for a reward. This is known as the “first-to-file” rule, meaning acting quickly is essential to secure a claim.  Often this is viewed on a per claim basis, however, not a per defendant basis.  If the second to file brings a different type of claim and the government settles that claim, instead of the initial one, the second to file whistleblower still has hope for recovery of a reward or bounty.

What happens if the government decides not to intervene in my qui tam case?

If the DOJ declines intervention, the whistleblower and their attorney can often still proceed with the lawsuit. Many successful FCA cases are pursued without government involvement after the initial investigation.

How long do I have to file a False Claims Act lawsuit?

The statute of limitations for FCA claims is either six years from the violation or three years from when the government knew or should have known about the fraud, with an absolute deadline of 10 years.

Can I remain anonymous if I report fraud under the False Claims Act?

Whistleblowers’ identities remain confidential during the early stages of a qui tam lawsuit. However, if the case moves forward, the whistleblower’s name may eventually be disclosed.  There are steps we can take to obscure or delay disclosure of the name to the public (but not to the government), but these are not guaranteed to work.

Does the False Claims Act cover tax fraud?

No. Tax fraud cases fall under the IRS Whistleblower Program, not the False Claims Act. However, Medicare, Medicaid, defense contracting, Customs (tariffs and duties), government mortgage backing, breaches of cybersecurity in government contracting, grant fraud, and many other types of fraud are covered under FCA claims.  The IRS Whistleblower Program is slow but often effective if the tax fraud is large enough.

Can government employees file False Claims Act lawsuits?

Yes, but only if they aren’t acting within their official duties to uncover the fraud. A government employee must have non-public, insider knowledge not obtained through routine investigations.

Can I be held liable for reporting fraud if I was involved?

Possibly. If a whistleblower actively participated in the fraud, they may still be eligible for a reward, but their award percentage could be reduced, and they could face legal consequences.  Leadership of the fraud scheme is disqualifying.  A separate consultation with a criminal defense lawyer can be arranged, and should be if the whistleblower is concerned their involvement might be prosecuted.

What industries are most commonly involved in False Claims Act cases?

• Healthcare (Medicare, Medicaid fraud, pharmaceutical kickbacks)
• Defense contracting (overcharging, defective equipment, bid-rigging)
• Government-funded research (misuse of grants, false reporting)
• Education (fraudulent student aid claims, for-profit school misconduct)
• Customs Fraud (underpaying tariffs by misclassification or undervaluation, country of origin issues)

Can a business or corporation be a whistleblower in a False Claims Act case?

Yes. While most qui tam whistleblowers are individuals, corporations can report competitors or industry fraud under the False Claims Act.  If multiple competitors are defrauding the government, multiple qui tam cases can be filed.

What percentage of the recovered funds does a whistleblower receive?

Whistleblowers typically receive 15% to 30% of the recovered amount. The precise percentage depends on whether the government intervenes and the whistleblower’s level of contribution.  The DOJ produced a memo which outlines relevant factors.

What if my employer retaliates against me for filing a False Claims Act case?

The FCA prohibits retaliation against whistleblowers. If you are fired, demoted, harassed, or face workplace retaliation, you may be entitled to reinstatement, double back pay, and damages under a “section h” claim.  These claims can be filed separately or together with the sealed qui tam action, but separate filing creates some important issues because of the seal and the consequences of settling employment claims before the qui tam.

Can a whistleblower file an FCA case against a state or local government?

No. States and Indian tribes are among the entities which cannot be sued under the False Claims Act.

Can a whistleblower file an FCA or qui tam case for fraud against state or local governments?

The federal False Claims Act only applies to fraud against the federal government. However, many states have state-level False Claims Acts covering fraud against state-funded programs, in particular, many states have Medicaid False Claims Acts.

How long does a False Claims Act lawsuit take?

FCA lawsuits can take several years to resolve. Cases that involve DOJ intervention or large-scale fraud tend to take longer, but successful claims result in significant financial rewards.