So You Want to Blow the Whistle (Part 5): What Is the False Claims Act and How Does It Work?
This is the fifth entry in a six-part series on the process and practical realities of being a whistleblower and exposing fraud against the government.
Part 5: What Is the False Claims Act and How Does It Work?
In prior entries in this series, we have referred several times to the federal False Claims Act—the most significant federal law addressing whistleblowers and claims of fraud against the government. It is worth taking a step back at this stage to provide a little more detail on that law and how it works.
As far back as the Civil War, Congress recognized that the U.S. Government is too big and too cumbersome to uncover and combat fraud on its own. The False Claims Act was passed to help fix this problem by establishing major financial rewards for whistleblowers who come forward with evidence of fraud against the United States.
Under the False Claims Act, an individual with knowledge of fraud against the government “blows the whistle” by filing a lawsuit in federal court, laying out all the details of the fraud being alleged. Although they are filed in court, these False Claims Act lawsuits differ from most federal cases in at least three important ways.
First, the lawsuit is filed under seal and remains completely confidential for at least 60 days—and generally much longer. The United States Department of Justice is served with a copy of the lawsuit, but defendants are not, in order to give the government time to conduct its own investigation.
Second, the whistleblower—known under the False Claims Act as the “Relator”—files the lawsuit on behalf of the United States, rather than just on his or her own behalf. You may, for example, have heard of whistleblower lawsuits referred to as “qui tam” cases. That term comes from an old Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, which translates to “he who sues in this matter for the king as well as himself.” In other words, when you file a qui tam case, you are alleging harm against the United States, not harm against you personally. Because the United States is the party who has been harmed, the claims in your lawsuit all belong to the federal government. That means the whistleblower cannot dismiss those claims without the government’s consent and cannot settle with the defendants without the government’s express approval.
After the government completes its investigation—which can take two to three years—the Justice Department will make a formal decision about whether to intervene in the case. If the Justice Department does intervene, then the rest of the case is handled by the government, with only limited involvement from the whistleblower or the whistleblower’s attorneys. If the Justice Department chooses not to intervene in the case, the whistleblower has the legal right to proceed with litigation and pursue the case without the government’s assistance. Either way, once the government makes its decision, the case will come out from under seal, and the defendants will have to be informed of the case’s existence.
If the government recovers any money from the lawsuit—either through a settlement or a court judgment—then the whistleblower is entitled to a significant piece of that recovery, as a reward for bringing the case to the government’s attention. In cases where the government intervenes, the whistleblower is entitled to at least 15% and potentially up to 25% of the government’s total recovery. In cases where the government does not intervene, but the whistleblower still recovers money on the government’s behalf, then the whistleblower is entitled to receive between 25% and 30% of that money. A successful whistleblower is also entitled to make the defendants pay the whistleblower’s attorneys’ fees. That means that in a case involving a $10,000,000 recovery to the government, the whistleblower will receive at least $1,500,000 of that amount, and, depending on the specific circumstances, perhaps as much as $3,000,000.
This summary provides an overview of how the False Claims Act operates. If you have more specific questions about how the Act applies to your own specific circumstances, you should raise those questions with your attorney.
Want to learn more? Check out our other posts on the “So You Want to Blow the Whistle” series:
