False Claims Act

Elements of a False Claims Act Claim

A claim under the False Claims Act (FCA) must satisfy several key elements to be successful. These elements ensure that the claim meets the legal standards set by the statute. The primary elements are:

A False or Fraudulent Claim: The core of an FCA claim is the submission of a false or fraudulent claim to the government for payment or approval. This could involve overbilling, billing for services not rendered, providing substandard products, or any other form of deceitful billing.

Materiality: The falsehood must be material, meaning it has a natural tendency to influence, or is capable of influencing, the payment or receipt of money or property. The misrepresentation must be significant enough to affect the government's decision to disburse funds.

Knowledge: The person or entity submitting the claim must have acted knowingly. Under the FCA, "knowingly" means that a person:

• Has actual knowledge of the information,

• Acts in deliberate ignorance of the truth or falsity of the information, or

• Acts in reckless disregard of the truth or falsity of the information. No specific intent to defraud is required; reckless or negligent behavior can suffice.

Presentation to the Government: The false claim must be presented to the federal government, either directly or indirectly. This can include claims submitted to government contractors, grantees, or other recipients if the money or property is provided or reimbursed by the federal government.

Causing the Government to Pay Money or Forfeit Property: The false claim must result in the government paying out money or forfeiting property. This establishes the financial harm necessary to bring an FCA action.

Scienter: There must be intent or knowledge of wrongdoing. The claimant must show that the defendant knew the claim was false or acted with reckless disregard or deliberate ignorance of the truth.

Damages: Although not always explicitly required, showing that the government suffered damages as a result of the false claim strengthens the case and impacts the recovery amount. The FCA allows for treble damages (three times the amount of damages sustained by the government) and penalties for each false claim submitted.

Wherever federal government money is involved, there may be a claim under the False Claims Act.  Fraud that violates the False Claims Act can happen in numerous industries and involve a wide range of government programs:

• Healthcare Fraud

• PPP and COVID-19 Fraud

• Technology Fraud

• Environmental Fraud

• Crypto Fraud

• Insurance Fraud

• Public Markets Fraud

• Government Contracting Fraud

Key Features of the False Claims Act

Based on Non-Public Information: The claim must be based on information that is not publicly disclosed unless the whistleblower is the original source of the information that has been made public, or the government objects to dismissal of the whistleblower’s case.

First to File: The whistleblower who first files the claim has the right to proceed with the action, barring others from filing related claims.

Statute of Limitations: Claims must be filed within six years of the violation or within three years of when the government knew or should have known about the violation, but no more than ten years after the violation.

No Tax Claims: Claims related to tax fraud are excluded from the False Claims Act. But the IRS Whistleblower Program may be available to whistleblowers who know about tax fraud.

Any Person or Entity Can Be a Whistleblower: Both individuals and entities can act as whistleblowers. Whistleblowers do not need to be company insiders, and they do not need to be U.S. citizens.  FCA whistleblower rewards have been paid to employees of defendants, former employees, customers, competitors, and industry experts, among others.

Whistleblowers Who Have Participated in the Fraud Can Make a Claim Unless They've Been Criminally Convicted: Participants in the fraud can still file a claim if they have not been criminally convicted for their involvement.

No Retaliation: Whistleblowers are protected from retaliation by their employers for reporting fraud under the False Claims Act.

The False Claims Act Process

A case under the False Claims Act is filed in federal district court "under seal." This means that the complaint and supporting evidence are initially provided only to the United States Department of Justice (DOJ), including the local United States Attorney, and the assigned district court judge. During this sealed period—which is often extended multiple times—the DOJ will investigate the allegations. The DOJ, sometimes in collaboration with other law enforcement agencies, typically interviews the relator (whistleblower), subpoenas documents, interviews other witnesses, and consults with agency personnel and experts.

The government must then decide whether to intervene in the action. If the government chooses to intervene, it takes over the litigation. If the government decides not to intervene, the relator has the option to continue the case on behalf of the government.

Whistleblower Rewards under the False Claims Act

If money is recovered for the government in a qui tam case, the whistleblower is typically entitled to a portion of that recovery. If the government intervenes in the case, the False Claims Act stipulates that the relator’s share ranges from 15 to 25% of the amount recovered. If the government does not intervene, the relator’s share is higher, ranging from 25 to 30% of the amount recovered. The actual share awarded to the whistleblower depends on various factors, including the quality of information provided and the assistance rendered by the whistleblower and their counsel.

Whistleblower Protections under the False Claims Act

Whistleblowers are protected under several provisions of the False Claims Act (FCA) and other laws. These protections aim to safeguard whistleblowers from retaliation and encourage them to report fraud and misconduct. Key protections include:

Anti-Retaliation Provision: The FCA includes strong anti-retaliation measures that protect whistleblowers from being fired, demoted, harassed, or otherwise discriminated against for their role in reporting fraud. If an employer retaliates, the whistleblower may be entitled to reinstatement, double back pay, compensation for any special damages, and coverage of litigation costs and attorney's fees.

Confidentiality: When a whistleblower files a claim under the FCA, the complaint is initially filed "under seal," meaning it is kept confidential while the Department of Justice investigates the allegations. This confidentiality can protect the whistleblower's identity during the initial stages of the investigation.

Right to Sue for Retaliation: Whistleblowers who experience retaliation can file a lawsuit against their employer in federal court. This right allows whistleblowers to seek legal remedies for any retaliatory actions taken against them.

Protection Under Other Laws: In addition to the FCA, various other federal and state laws provide whistleblower protections. These include laws related to specific industries, such as healthcare, finance, and environmental protection, which offer additional safeguards and remedies for whistleblowers.

Support and Resources: Whistleblowers often have access to resources and support from advocacy groups, legal counsel specializing in whistleblower cases, and government agencies that can provide guidance and assistance throughout the process.

Financial Incentives: By offering a share of the recovered funds, the FCA provides a financial incentive for whistleblowers to come forward. This can offset some of the personal and professional risks associated with blowing the whistle.

These protections collectively create an environment where whistleblowers can report fraud and misconduct with a degree of security and assurance that their rights and well-being will be safeguarded.