The body of law that has developed around the False Claims Act is complex and ever-changing. False Claims Act cases require experienced, knowledgeable law firms like Morgan Verkamp to successfully navigate the ins-and-outs of the unique process. While it’s our job to do the heavy lifting, we want our clients to be comfortable with the process, to understand the words and phrases that are commonly used along the way, and to have a general working knowledge of the laws that may underlie their claims. To that end, we’ve collated these resources and prepared these FAQs. For any questions about a specific case or for more information about any of the topics addressed below, please contact a member of the Morgan Verkamp team.
Frequently Asked Questions
Getting to Know the False Claims Act
What is the False Claims Act?
The False Claims Act is a federal statute that allows a “person” (which, in this case, means an individual person or a business entity) to file a lawsuit alleging that a government contractor has submitted illegal claims for payment. The person bringing the case, called a “relator,” files a qui tam lawsuit on behalf of him- or herself and the United States against the company that committed the fraud. It’s one of the only laws that allows a person to “stand in the shoes” of the United States. The False Claims Act is written into U.S. law at 31 U.S.C. § 3729 – 3733. About 30 states also have false claims acts.
What does “qui tam” stand for?
Qui tam, pronounced “kwee tom” (or “key tam,” depending who you ask), is short for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur.” That translates to “he who brings an action for the king as well as for himself.” The short-hand term “qui tam” refers to False Claims Act cases brought by an individual on behalf of the government and the person who files the case. If the case is successful, the recovery is for the government, and the person who brought the case is entitled to a percentage of that recovery for herself (this is called a “relators’ share”).
What is the history of the False Claims Act?
Qui tam laws date back hundreds of years. When the United States of America was first formed, many of the original laws passed by the Continental Congress included qui tam provisions. But, there wasn’t a law specifically enabling people to report fraud and be awarded a portion of the recovery until 1863.
The modern False Claims Act, as explained by a court in Pennsylvania, was “enacted at the time of the Civil War at the urgent request of President Lincoln, who was disturbed at contractors robbing the country during its time of travail.” U.S. v. Westinghouse Elec. Corp., 363 F.Supp. 1038, 1041-42 (W.D. Penn. 1973). The scams that were so shocking to President Lincoln are markedly similar to what goes on today. A historian wrote of the reasons for the Act: “For sugar, [the Army] often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the refuse of shops and foreign armories.” F. Shannon, The Organization and Administration of the Union Army 1861-1865, at 54-56 (Peter Smith Press 1965).
Often called “Lincoln’s Law,” the 1863 version of the False Claims Act was similar, though not identical, to the modern version. Companies that committed fraud faced double damages plus up to $2,000 fine for each false claim submitted, and the individual who brought the case was entitled up to 50%. Sen. Jacob Howard of Michigan, one of the sponsors of the original legislation, argued that rewarding whistleblowers, even those who may have acted improperly themselves, was justified because “setting a rogue to catch a rogue…is the safest and most expeditious way I have ever discovered of bringing rogues to justice.”
Unfortunately, the False Claims Act was gutted just after World War II. With the huge influx of military spending came an influx of fraudulent contractors. Some unsavory attorneys capitalized on the Department of Justice’s efforts to deal with fraud by filing civil False Claims Act cases to piggyback on the government’s criminal cases. In 1943, in a case called Marcus v. Hess, the Supreme Court determined that the language of the Act permitted such cases and said Congress needed to amend the Act if it wanted to change that. Congress acted quickly and nearly abolished the False Claims Act altogether but at the last minute passed amendments that substantially reduced the relator’s share and, perhaps most critically, said that no one could bring a qui tam action if the government already knew about the conduct underlying the fraud allegation. By its strict language, a case was be prohibited if any government employee had any knowledge about the conduct, regardless of whether that employee identified the conduct as fraud or even had the capacity to act if they did recognize the fraud.
The broad-brush swept across practically all potential False Claims Act cases. As a result, the 1943 Amendments essentially took all the teeth out of the False Claims Act, and it fell into virtual disuse for the next forty years until the statute was amended in 1986.
How did the False Claims Act change in 1986?
The False Claims Act was given new life in 1986. As Americans faced another military surge in light of the Cold War, the public began pressing the Government to address ways to reduce costs and combat fraud. U.S. Senator Charles Grassley (R-Iowa) and Congressman Howard Berman (D-Ca) sponsored legislation to dust off the False Claims Act and transform it into the powerhouse we know today. The False Claims Amendments Act applied a rational burden of proof, clarified which types of conduct are forbidden, imposed a strong anti-retaliation provision, and strengthened the qui tam portion of the Act.
The Senate Judiciary Committee wrote a report that accompanied the proposed legislation. We don’t think we can say it any better than they do, so we encourage you to read their words here: Senate Report No. 99-345.
In the years since its revival, the use of the False Claims Act has resulted in more than $62 billion dollars in settlements and judgments.
Does the False Claims Act work for state money or only federal money?
The federal False Claims Act can only be used to recover federal funds. However, as of 2020, thirty states, the District of Columbia, and several counties and cities have passed their own False Claims Acts which enable qui tam suits related to state or local funds. Most state-level False Claims Acts closely mirror the federal False Claims Act.
Many cases involve both state and federal funds, particularly in the healthcare field where fraud can span both Medicare (exclusively paid for by the federal Government) and Medicaid (jointly funded by the federal and state Governments). If a recovery includes both state and federal funds, the recovery will be split pro rata among the United States and the involved states based on the amount that each entity paid for the false claims.
What are the penalties for violating the False Claims Act?
A person or corporation who violates the False Claims Act is liable to the Government for three times the damage caused by the violations plus civil penalties. Although the text of the Act says that the penalties are between $5,000 and $10,000, the amount is adjusted periodically for inflation. As of June 2020, the per-claim penalties were set at no less than $11,665 and no more than $23,331.
Many False Claims Act cases end by settlement, and every settlement necessarily involves a negotiation, so many cases resolve for less than the maximum possible penalty. For example, in healthcare cases, the Government will sometimes settle for double damages and will leave off penalties – a substantial incentive to a defendant to settle because penalties are mandatory if the defendant loses at trial.
A defendant must also pay the relator’s reasonable expenses, costs and attorney’s fees incurred in bringing the qui tam action.
Is the False Claims Act important to the United States?
Unquestionably, yes. Since the passage of the 1986 Amendments, the False Claims Act has been responsible for returning more than $62 billion to the U.S. Treasury. Congress and the Department of Justice regularly recognize that the False Claims Act is “the Government’s primary litigative tool for combating fraud.”
If estimates are to be believed, ten cents of every dollar spent by the United States goes to fraud, waste or abuse. But, some studies show that the cost-benefit-ratio to False Claims Act enforcement exceeds 20:1 – meaning $20 are recovered for every one dollar spent on enforcement efforts. That number has steadily risen over the years. This sort of counter-balance is absolutely critical to maintaining the United States’ ability to protect and care for itself and for all of us as taxpayers.
These two charts illustrate the tremendous importance of enabling individuals to bring and litigate cases under the False Claims Act. The first shows just how dramatically the United States’ False Claims Act recoveries accelerated after the Act was amended in 1986:
The second one shows how important qui tam relators were to those recoveries.
To put the statistics into perspective, $62 billion since 1986 through the end of 2019 is $1.82 billion per year, or $4.99 million per day, or $208,031 per hour for every hour since the False Claims Act was amended. So yes, we think the False Claims Act is not just important, but is the most important fraud-preventing tool in the United States’ arsenal.
Getting a False Claims Act or Other Whistleblower Case Started
Who can be a False Claims Act relator?
Whistleblowers in False Claims Act cases are called “relators,” and just about anyone can be a relator. You do not have to be a citizen or a resident of the United States, an adult, or even an individual (corporations and partnerships count as a “person” for purposes of bringing a False Claims Act case). Our clients are all types of hard-working and courageous people, whose objections to fraudulent conduct are often ignored by their employers or who have been retaliated against for trying to do the right thing.
There are some things that may not outright disqualify a person from being a relator, but may significantly reduce or eliminate the ability to collect a relator’s share award at the end of a successful case. Government employees who were supposed to report the fraud as part of their work, individuals who planned or initiated the fraud, and individuals with criminal culpability for the reported fraud may face unique hurdles trying to collect for their cases.
The better question is what makes a good relator. From our experience, the best relator is someone who has information about a serious abuse by a government contractor (that is, any person or entity receiving federal funds, including any healthcare provider who takes Medicare or Medicaid reimbursements) that is not already under investigation, and someone who has a strong commitment to seeing the right thing done by working within the system. Having a strong moral compass, a strong stomach, and a lot of patience are also very helpful.
What kinds of fraud are addressed by the False Claims Act?
The False Claims Act can be used to remedy any situation where a contractor submitted a false claim for payment to the government or caused someone else to submit a false claim. The most common cases involve healthcare (through Medicare, Medicaid, or Tricare) and defense contracting (suppliers of weapons, food, supplies, contractors, and technical services to support troops overseas). But the options really are limitless – the False Claims Act has been employed to remedy banking fraud related to government “bail out” money, fraud by for-profit higher education institutions, fraud by companies representing themselves as woman-owned, minority-owned, service-disabled-veteran-owned or small businesses to obtain set-aside contracts, and countless more fraudulent schemes.
Can I be a whistleblower if the False Claims Act isn’t right for me?
Yes, there are several agency-specific programs intended to remedy fraud that impacts the government but may not be directly based on a false claim. For example, the Internal Revenue Service, the Securities and Exchange Commission, and the Commodity Futures Trading Commission all have whistleblower programs that enable individuals with knowledge of various forms of financial fraud to report to the government and receive a portion of an ensuing recovery. The programs operate differently than the False Claims Act in that the whistleblower does not file a lawsuit on behalf of the government but rather makes a complaint directly to the appropriate agency, which will then conduct an investigation into the allegations. Read more about the economic fraud programs here: Economic Fraud.
If you are unsure what program would be the most appropriate for your case, please contact us for an evaluation of your concerns.
What are the benefits to bringing a qui tam case?
The False Claims Act is the Government’s most effective weapon against fraud. By taking the bold step to become a whistleblower, you are exposing fraud that depletes critical resources needed to run federally-funded programs. Thus, a major benefit is doing the right thing for yourself, your country, and your fellow taxpayers.
Of course, successful whistleblowers are also financially rewarded for their hard work and efforts in bringing the lawsuit. Under the qui tam provisions of the False Claims Act, a successful relator may receive 15-30% of the recovery, depending on the role of the relator and the Government throughout the case. Under the economic whistleblower programs, the whistleblower is entitled to 10-30% based on various factors. Although some of the economic whistleblower programs cap the award, there is no cap on the amount a relator can recover in a False Claims Act case. More than a billion dollars have been awarded to relators under the modern version of the Act.
In addition, if an individual was demoted, harassed or fired from their employment as a result of their efforts in investigating or reporting false claims, there are benefits to using the False Claims Act to bring a retaliation claim. The employee may be entitled to reinstatement, double back pay plus interest, and compensation for special damages.
Do I need to have documents showing fraud in order to file a case?
Realistically, documents are a big help. Good documentation makes it easier for us to thoroughly evaluate your case and for the Government’s lawyers and investigators to understand the allegations once a case is filed. Documents specifically showing the false claims submitted to the Government are ideal, as are documents showing that the defendant company knew their conduct was improper or was willfully ignoring signs of the same. But, we understand that there are times when documents simply are not available – either because the relator is not an insider, has already been fired from a company, or the information is being hidden by the defendants. We’ve worked through those situations many times, so lack of documentation is not necessarily an insurmountable obstacle to bringing your case.
Generally speaking, it is safe for an employee to make copies of documents that are accessed in the ordinary course of business. But, improperly obtaining evidence (like accessing attorney-client privileged documents, raiding your boss’ emails, or secretly recording conversations in certain states) can compromise your entire qui tam case or can even subject you to civil or criminal liability.
If you are in the process of gathering documents and aren’t sure whether you are or aren’t allowed to obtain something, it is very important to talk to your lawyer before you collect the documents. You must be honest with your lawyers about how you obtained any documents already in your possession, so your attorney can be prepared for any potential issues before they arise.
What do I do if I participated in the creation or submission of false claims?
It depends on what you mean by “participation.” When an employee follows orders, that is probably not “participation” which would impact your rights under the Act. On the other hand, someone who is a “planner and initiator” of a scheme to submit false claims will face hurdles in recovering a share of the Government’s recovery.
Participation in the fraudulent conduct does not preclude you from filing a qui tam suit. Many whistleblowers are not initially aware that their superiors are committing fraud or that they are participating in it. Others are “forced” to participate in fraudulent conduct despite their protestations. In fact, this is what leads many whistleblowers to come forward and file a False Claims Act case – being forced to choose between engaging in conduct that they believe is improper or losing their jobs.
What is the statute of limitations on a False Claims Act case?
A False Claims Act case must be filed within the later of the following: (1) six years from the date of the False Claims Act violation; or (2) three years after the Government knew or should have known about the material facts concerning the violation, but in no event longer than ten years from when the violation occurred.
Like most things about the False Claims Act, there is frequent litigation about how the statute of limitations is properly applied. While the law continues to develop, it is critical to pursue your case as soon as possible so as to avoid running into any statutory deadlines.
Why is it so important that I act quickly if I want to bring a case?
Other than the importance of stopping illegal conduct as soon as possible, there are two major reasons to pursue your case quickly: (1) the statute of limitations, and (2) the first-to-file bar. As described above, the statute of limitations varies based on different factors of your case and is a subject of frequent litigation in the courts, so it’s best to move quickly to avoid any issues there.
The “first-to-file bar” is unique to the False Claims Act. In effect, one part of the statute has been interpreted to mean that only the first person to file a case about a specific set of facts can bring a case and share in the recovery related to that fraud scheme. Often, because cases are filed under seal, one relator may not know for months or even years about another case that makes same or substantially similar allegations.
In practice, multiple cases are often filed involving the same fraudulent scheme – particular with larger defendant corporations. Relators and their lawyers commonly try to work things out and reach an agreement that allows everybody to participate. If the parties can’t agree, a judge will decide which relators are entitled to a portion of the recovery. Typically, the earlier-filed relators fare better than later-filed relators if the court has to decide, so being first-filed can be the difference between getting a relator’s share award or getting cut out completely.
My co-worker and I were talking about bringing a case together. Can we do that?
Yes, two or more relators can bring a case together. Cases can be filed in both individuals’ names or sometimes two or more people elect to form a corporation that will then act as the relator. There can be advantages to having two people with knowledge of the fraud working together, but there are also significant issues that should be addressed at the outset of the case. Two or more relators seeking to bring a case together should have a written agreement which establishes parameters for issues like: who makes the ultimate litigation decisions, what happens if one person can’t proceed in the case for any reason, how will any share be split between the parties? Addressing as many potential issues as possible at the outset avoids conflict down the road, especially at critical times like settlement negotiations or trial preparation.
Does it really matter if I have a lawyer who specializes in False Claims Act cases?
Yes. Just like a person who is getting divorced should consult with a divorce lawyer, and a person who was arrested should call a criminal lawyer, a person with a qui tam case is best served by calling a qui tam lawyer.
Qui tam cases are not easy. The False Claims Act is unique among statutes and presents issues that do not exist in other types of litigation. False Claims Act experts like the team at Morgan Verkamp have spent decades learning the nuances of the statute, preparing persuasive complaints and briefs to initiate and aid the government’s investigation, tracking case law, forming relationships with government lawyers who work our cases and with other qui tam attorneys who may have parallel cases, and, most importantly, developing our cases from the outset to be trial-ready when it’s time.
We are often contacted by general civil litigators who filed a False Claims Act case thinking the government would make the case, and then the government declined and the lawyer is faced with litigating their client’s qui tam case without any experience in the area. Sometimes, such cases suffer from not having been pled properly or investigated fully, but we welcome those calls and can sometimes help turn the ship around.
There are no guarantees of a positive outcome in any lawsuit, but choosing a team like Morgan Verkamp that exclusively works on whistleblower cases helps set your case up for success from the beginning.
Do I need to find a lawyer close to home?
No. Because federal courts govern themselves by uniform procedural rules, federal court practitioners can work around the country. Morgan Verkamp handles cases nationwide, and we have lawyers in Ohio, Massachusetts, and Florida. Wherever our clients are located, we stay in close contact through phone and/or video conferencing, and we’re always available to travel to you if needed. If you’re not near our office, our lawyers or investigator will typically come to meet you in person during the initial investigation of your case, or we’ll bring you to our office to meet with the whole team.
How much does it cost for you to review my case?
Morgan Verkamp does not charge you for our evaluation of your case. Contact us if you’d like to speak with us about a potential case.
What to Expect During the Case
What’s the next step after I file my case?
Your qui tam complaint will be filed in federal court and served on the U.S. Attorney’s Office where the case is filed and also on the U.S. Attorney General in Washington, D.C. If the case involves state funds, it will also be served on the Attorney General for each involved state. Every False Claims Act case is filed “under seal,” meaning it is not served on the defendant or even put on the court’s public website until it is unsealed by the judge. A written disclosure statement describing all material evidence and information in your possession will also be provided to the government, but not filed with the court.
The case will remain under seal while the government investigates the allegations in your complaint. One of the first parts of their investigation will be a relator’s interview, where you will meet with the government attorneys and investigators who are handling your case. The interview is a chance for you to share your story and experiences directly with the government, for the government to ask additional questions prompted by the complaint, and for the Government to evaluate your credibility as a potential witness if the case goes to trial.
The case will remain under seal for at least 60 days, but the seal period is often much longer. In our experience, many cases remain under seal for at least one to two years before the government makes an intervention decision and the case moves on to the next phase (but we’ve seen cases stay under seal for as long as eight years).
What can I say or do when the case is under seal?
“Under seal” is a term used in federal court to essentially mean “in secret.” A case that is filed “under seal” is not available to the general public or, in False Claims Act cases, even to the defendant that is the subject of the case. The main purpose of the seal is to allow the government time to conduct its investigation without giving the defendant the opportunity to circle the wagons and pressure witnesses, destroy documents, or otherwise influence the outcome of the investigation.
During the seal period, no one – including the relator or her counsel – may disclose the existence of the case to anyone other than the government agents assigned to the case. This includes extended family members, co-workers, the media, and even your best friend who promises not to tell anyone else. It also means no blogging, tweeting, or any online posting about the case – even if you do it from an anonymous account. The seal is an order of a federal court, and courts take the seal seriously. Although not every single seal breach will be handled the same, dismissal of the case is possible if the breach is serious enough.
While the case is under seal, relators should err on the side of extreme caution in discussing their case with anyone other than their lawyers. If you are unsure about whether something is allowed, you should reach out to your lawyer before saying or doing anything that may compromise your case.
What does it mean for the government to intervene in or decline my case?
By the end of the seal period, the government must decide whether it wants to take over primary responsibility for all or a part of your case. If it decides to take over any part of a case, that is called “intervening.” If it decides to turn the case back over to the relator, that is called “declining.” The government may intervene in an entire case, it may decline the entire case, or it may intervene in certain claims and decline others.
If the government intervenes, it has primary responsibility for prosecution of the case. The relator has the right to continue as a party in the action and to participate in the litigation.
If the government declines to intervene, the relator generally has the right to prosecute the case. The government typically continues to stay abreast of proceedings in the case and can elect to intervene at a later time upon a showing of good cause.
In either event, as soon as the government has made an intervention decision and the seal period has ended, the case will be unsealed. The relator must then decide whether to pursue the case and serve the complaint on the defendant. The lawsuit would then proceed in the same manner as most other federal litigation.
If your case involves a retaliation claim, the government will not intervene in that claim. That is always the relator’s claim to pursue.
What happens if the government intervenes in my case?
If the government intervenes in your case, the lawyers from the Department of Justice, the local U.S. Attorneys’ Offices, and/or the state Attorney Generals’ Offices that were responsible for the investigation will begin prosecuting the case and preparing for an eventual trial.
The government will serve a complaint on the defendant – they will either adopt the complaint that you filed or they will prepare and serve a separate Complaint in Intervention. They will then be responsible for responding if the defendants file a motion to dismiss, for engaging in the discovery process, for filing and/or defending against a motion for summary judgment, and ultimately for trying the case. The Morgan Verkamp team continues to work closely with the Government through this process, including helping evaluate and prioritize documents produced by the defendants, providing information to any retained experts, and, if requested, preparing legal memorandum for any issues that arise during the case.
What happens if the government declines my case?
If the government doesn’t intervene in your case, primary responsibility for the case transfers back to the relator who can choose to continue the case on their own. Many lawyers file False Claims Act cases with no intention to litigate if the government does not intervene. That is not how Morgan Verkamp practices. The government only intervenes in about 15% of False Claims Act cases, so we believe they decline a lot of very good cases that deserve to go forward. While we do like to have the government on our side, a number of our clients have succeeded in cases where the government declined intervention.
We do more declined litigation that most False Claims Act law firms, and we are often asked by other lawyers to partner with them on their declined cases. We also sometimes reach out to other lawyers to form litigation teams to take on a contractor together. We’ll work with you to take a hard look at the case and decide whether to go forward. If that’s the right thing to do, we’ll assemble a team that will be ready to take your case from a declination decision to trial.
Federal litigation is a long and complex process. Almost all defendants file a motion to dismiss shortly after receiving a complaint, so we will respond to that while we begin the discovery process. Discovery can involve receiving and reviewing many thousands of documents to find evidence in support of our allegations, taking and defending depositions of key players, asking and answering questions to establish a clear picture of the defendants’ conduct, and hiring experts to help analyze the information and present it to the judge and jury. Towards the end of the process, we may file a motion for summary judgment if there are issues which are so clear that we think they do not need to be taken to a jury, and the defendants may do the same. Every case presents unique challenges during litigation, but the benefit of experienced litigators is that we are prepared to tackle any issue that arises on the way to trial.
Even though the relator will have primary responsibility for the case, the government typically remains in close contact with the lawyers throughout the whole process. The government may weigh in with the court if it has an opinion on the law or outcome of a certain motion. It may even seek to intervene at a later date if it has good cause to do so. If the relator and the defendants reach an agreement on the settlement amount, the government will approve the terms and amount before the case can be finalized and dismissed.
This is not a process for the faint of heart, which is why Morgan Verkamp’s experience and fortitude sets our firm apart from most other False Claims Act firms. We are ready to stand side-by-side with you from the beginning to the end regardless of the government’s intervention decision.
Will the defendants know it was me who filed the case?
At some point, and in almost all cases, yes.
While the case is under seal, the defendants will not know about the case and so they will not know your name. Sometimes, though, the government serves a Civil Investigative Demand or asks the court for permission to talk to the defendants about the suit even while it remains under seal. If you have a very unique set of knowledge, it is possible the defendants could put two-and-two together to guess who filed the case, even if your name is not directly provided to them.
After the government’s intervention decision and the case is unsealed, the defendants will be served with a copy of the complaint and your identity will be revealed. If the government decides not to intervene and you decide not to move forward with the case, it is possible to dismiss the case while still under seal. Sometimes courts leave these cases under seal for good and the defendants never find out; sometimes the case is placed on the public court website, and a defendant may come across the complaint even if it was never served on them.
There are some options for concealing a relator’s identity for a time, such as creating a business to serve as the relator instead of the individual. Morgan Verkamp is experienced in helping their clients set up these entities in the right circumstances. That approach also does not guarantee that your name will never come out, but it may provide a level of security for a time that is desirable to some relators. There have also been a few cases where courts allowed the name of an individual to remain under seal long-term where there were realistic concerns for the individual’s personal safety, but that is not common. If you have fears of your identity being disclosed, speak with a member of the Morgan Verkamp team about the best way to address your specific circumstances.
What if my employer fires me during the case?
If you are still employed at the defendant company when the case is unsealed and your name is disclosed, there is an unfortunate reality that you are likely to lose your job or to be demoted or harassed in your position. There is nothing in the False Claims Act that can affirmatively stop an employer from terminating you, but there is an anti-retaliation provision that is intended to deter such conduct and to provide help if it does occur.
A person who is fired, demoted, harassed, or otherwise discriminated against because of lawful acts “in furtherance of” a qui tam action is entitled to all relief necessary to make the employee whole. This may include reinstatement, twice the amount of back pay, and payment of litigation costs and attorneys’ fees.
In addition to the part of the False Claims Act relating to retaliation, many states have laws that may protect a qui tam relator from employment retaliation for reporting or refusing to participate in fraud. The statutes of limitations for retaliation claims (under the False Claims Act and various state laws) make it VERY important that you move quickly: If you have been retaliated against because of your efforts to stop or correct your employer’s fraudulent conduct, contact Morgan Verkamp immediately.
How long does a False Claims Act case normally take?
False Claims Act cases can take a long time. Most cases are resolved in two to five years, but we’ve had cases go as fast as 18 months or take as long as 17 years. (Really!) Three to four years is a reliable guideline.
Because of the length of the cases, many relators become frustrated with the seemingly-slow pace. Some even try to go on the offensive with the Justice Department about the length of the investigation period, though that is not usually the best course of action. We do our best to stay informed and, in turn, to keep our clients informed regarding the Government’s investigation. Several of Morgan Verkamp’s lawyers and our investigator have extensive experience working for the Government, so they are often able to add insight as to what is going on behind-the-scenes during a case. Sometimes we can offer assistance to the government to move an investigation along, sometimes we just have to let the process happen. In the words of one investigator, the Government’s wheels may turn slowly, but “they grind fine.”
Resolving a False Claims Act or Whistleblower Case
How does a False Claims Act case end?
The vast majority of False Claims Act cases end in settlement. If the government has intervened in the case, then it will lead the negotiations with the defendants. Although the government is permitted to conduct the negotiations without the relator’s participation, experienced qui tam counsel are often given a spot at the table during the talks. If the government and the defendants reach an agreement, the relator will need to agree that the settlement is fair and reasonable, or he can request a hearing from the court on the issue. A fairness hearing is fraught for all parties involved, so most of the time, the government endeavors to work with the defendants and the relator to reach a settlement agreeable to everyone.
If the government has not intervened, the relator and the defendants conduct settlement negotiations. The government may choose to participate in the negotiations, even if simply to be present at a mediation to give its opinion on proposed terms. The government will need to approve any settlement reached by the relator and defendants, so it is most expeditious to all work through the process together.
Once everyone agrees to a settlement, a final document will be drafted that lays out all the various terms – who it includes, what specific conduct is being resolved, the amounts that will be paid to whom and when, and any other terms that have been negotiated. All parties will sign the agreement and, typically after the payments are made, the relator and/or the government will dismiss the case, formally ending the lawsuit.
If a settlement cannot be reached, the parties will prepare for trial just like any other civil litigation. Most cases are tried before a jury (as opposed to a judge), and the jury will decide if the defendants submitted false claims to the governments, and if so, the amount of harm caused by the false claims. A jury’s verdict may be the final end to the case, or the losing party may appeal the decision, and the appellate court will direct whether the verdict should stand or if the case needs to be retried.
How do the other whistleblower programs end?
In the economic whistleblower programs, the whistleblower has not filed a lawsuit on behalf of the government so there is nothing for the relator to settle or try. Rather, the agency will have investigated the whistleblower’s tip and initiated its administrative or judicial proceedings to recover funds. Typically, the government will post a notice on a designated website letting the public know that a recovery has been obtained. Whistleblowers or their counsel must regularly check the website and submit a request for an award once a recovery is posted that relates to the whistleblower’s tip.
Because of the confidential investigations and proceedings, the whistleblower will likely have no role in the settlement negotiations and is not required to agree that the recovery is fair, adequate and reasonable for the particular circumstances.
What is a relator’s share award?
The relator’s share award is an incentive payment made by the government to a person who discloses fraud where such disclosure led to the government recovering funds for the United States’ or individual states’ treasury. Although there are a lot of moral and personal reasons to bring False Claims Act cases, the relator’s share is the most tangible benefit.
Who will determine my share of the recovery?
In False Claims Act cases, the relator’s share award is set by the statute at 15-25% for intervened cases and 25-30% for non-intervened cases (with some exceptions for cases that were brought by someone who initiated the fraud or cases which were publicly disclosed). Within those brackets, the specific percentage is most often determined by a negotiation between the government and the relator’s lawyers. If the two sides cannot agree on a percentage, the court that had jurisdiction over the False Claims Act case will determine the award.
In the economic whistleblower programs, each program has a unique way of awarding the whistleblower. In FIRREA cases, the whistleblower receives a discretionary share amount up to 30% of the first $1 million recovered, 20% of the next $4 million and 10% of the next $5 million, which effectively caps the award at $1.6 million. In IRS cases, the whistleblower is entitled to 15-30% of the amount collected. Although the specific percent is largely discretionary by the IRS, the whistleblower may appeal to the U.S. Tax Court if he believes the IRS improperly underpaid the award. The SEC has a similar 10-30% bracket which is determined at the SEC’s discretion. The whistleblower can appeal to the SEC Office of the Whistleblower if a payment is denied completely, but if an award is granted and the procedural rules were followed, then the percentage itself is not appealable.
How do the lawyers get paid at the end of a case?
False Claims Act cases are risky, long, hard-fought cases against big, well-funded defendants. Unlike the defense firms that are paid throughout the case, we get nothing unless our client wins. That’s the risk we take, and our firm works hard to make sure that’s not the outcome. If we are successful and our clients obtain a recovery for the government, we receive a percentage of our client’s relator’s share award. Separate from that award, our hourly fees and expenses are paid by the defendant who settles the case or loses the trial. We often negotiate the amount of our fees and costs with the defense counsel. If we cannot reach an agreement, we can file a fee petition, which asks the court to determine the appropriate amount for the defendants to pay us.
Will I have to pay the defendant’s attorneys’ fees and costs if my case isn’t successful?
It is exceedingly rare for a False Claims Act relator to have to pay fees or costs to the defendants, even if the case does not result in a recovery, but it is possible if the relator brought or pursued the case for malicious reasons. Such a circumstance typically only arises if the relator’s case is “frivolous, clearly vexatious, or brought primarily for the purposes of harassment.” 31 U.S.C. 3730(d)(4). In other words, if you make something up just to force a company to defend against a False Claims Act case or if you continue to pursue a case even after it is clear that it lacks merit, you may have exposure to paying the defendant’s fees and costs incurred in defending a meritless suit. Experienced False Claims Act counsel like Morgan Verkamp carefully vet potential clients and conduct a thorough analysis before litigating a declined case to avoid these sorts of issues. But the responsibility lies primarily with you – the relator – to be completely honest and transparent with your lawyers at all times to avoid these sorts of situations.
Is this all really worth it?
Many relators become very wealthy from qui tam cases. Most do not.
We believe that reporting fraud against the United States is one of the most important roles that individuals can play in protecting each other and our country. Being a whistleblower can be a long, arduous, and emotional process, and it should not be undertaken without serious consideration. But bringing a case under the False Claims Act or one of the other whistleblower provisions allows you to know that you did your very best to right a wrong. And we think that is absolutely worth the costs.