CHAPTER II: WHISTLEBLOWER LAWS & WHO THEY PROTECT
PART I – FRAUD AGAINST THE GOVERNMENT & THE FALSE CLAIMS ACT (“FCA”)
Who the FCA Protects
If the information you seek to disclose relates to fraud against the federal government, you’ll find you’re not alone. Fraud against the government costs billions of taxpayer dollars each year and it’s one of the most prevalent forms of fraud anywhere.
Fortunately, there is a federal law that’s designed to protect and reward whistleblowers, who reveal fraud against the government and help its agencies recover lost funds. It’s called the False Claims Act, or FCA, and it’s critical to highlighting fraudulent activities against the government and its taxpayers.
In 2017 alone, the Justice Department recovered over $3.7 billion in settlements and judgments filed under the FCA. Approximately 70% of claims filed under the FCA are initiated by whistleblowers and nearly $392 million was paid to whistleblowers as reward for their courage and help!
How the FCA Works
The FCA passed in 1863. Initially, the law only covered a very narrow scope of fraudulent activities, leaving countless whistleblowers without protection and billions of dollars of fraud unreported. In both 1986 and 2009, the FCA went through sweeping reform, broadening the scope of the law, increasing award amounts, and bolstering personal protection for whistleblowers.
Now, it’s one of the most productive laws in existence for combating fraud and protecting whistleblowers.
Claims filed under the FCA are known as qui tam lawsuits. It’s short for a Latin phrase that roughly translates to, ‘He who brings an action for the king and for himself.’ In most litigations the person bringing the action is referred to as the plaintiff. In whistleblower actions although the term plaintiff is still used, the whistleblower is referred to as the relator, since he or she is relating the case against the defendants on behalf of the government. Sometimes the whistleblowers form corporate entities to commence the action, although that carries with it its own risks, but could potentially add a layer of protection to the whistleblower. There’s certain downsides to using a corporate entity and lately courts have become skeptical about the use of corporations in lieu of individuals and from this author’s perspective, this should be avoided for the most part.
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The False Claims Act can be a win-win statute if effectively navigated. In other words, a qui tam case helps the government AND you. The point is that fraud is so prevalent that the government can’t pursue every possible case, so they rely on private citizens to pursue cases on their behalf when you have information they don’t. But, because filing a qui tam lawsuit can be risky, the FCA will provide a successful filer with job protection and financial rewards.
A successful case means the government agency that was defrauded recovers funds based on the information you provide and the case you file. The amount of your reward will depend on the amount of money the government recovers. Even if the government does not recover money, if there is a good faith basis for filing the whistleblower action, and the action is colorable, the whistleblower protections may still protect you, even if the underlying case for the government loses.
Any private citizen can file a qui tam case against another private citizen or business for fraudulent actions against the government or one of its agencies. Once filed, the case will be ‘sealed’ for at least 60-days, but often it’s much, much longer. Courts have public records and dockets meaning generally anyone can see what was filed, but filing something under seal, means it’s filed secretively and the public can’t immediately access the docket until it becomes unsealed.
Anything productive is worth waiting for and the government is constantly triaging what must be dealt with immediately and what can wait. So things take time. In fact, false claims act cases are sometimes sealed for years. During this time, even the person or entity you’re suing will be unaware that a suit has been filed against them. This temporary ‘seal’ gives the Justice Department time to review the case, along with all your evidence, and determine if they want to intervene and take their own action. An intervention is when the government takes control of the complaint. If the government doesn’t intervene then you may be able to still proceed, but there’s a body of law that has developed that the government may move to dismiss your case even if you want to proceed.
The Justice Department is highly selective in which cases to intervene. There are many factors they use to decide whether to handle the case, such as the amount of damages the case potentially has, the proofs, how well you and your counsel conduct themselves and the risk of harm to the public to name a few. Generally, they will not intervene if there’s less than a few million dollars worth of fraud, unless it is a hot button issue like combatting opioid addiction or a slam dunk case but never say never. Cases in which the government intervenes on average resolve for more, but the whistleblower share percentage that goes to the relator is much less. In successful non-intervened cases the whistleblower stands to recoup a greater percentage, but on average there’s less monies recovered, so it’s a trade-off.
Even if, and once they decide not to intervene, and you decide to move forward with your case you will still receive all the protection and benefits afforded under the FCA if the underlying case has a good faith basis and is cognizable under the law.