Guiding Residents of the Capital District Through Complex Litigation
The federal False Claims Act provides a reward to private persons who act as whistleblowers and come forward with information concerning fraud committed against the federal government. Whistleblowers in False Claims Act cases are called “relators” and are entitled to sue on behalf of the federal government, even if they personally have not been damaged by the fraud. This provision is known as the “qui tam” provision and allows rewards to relators of up to 30 percent of the total amount recovered by the government.
Qui tam comes from the Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself.” Passed during President Lincoln’s era, the False Claims Act and its qui tam provisions have been in effect since 1863. Also known as “Lincoln’s Law” the False Claims Act was enacted by Congress in response to government contractors cheating the government during the Civil War. Qui tam actions have been largely successful in helping the federal government combat fraud such as Medicare- and Medicaid-related fraud and false claims submitted by government defense contractors.
- Overcharging for a product
- Duplicate billing
- Charging for services not rendered
- Material false statements on a claim
- Billing for services not rendered in accordance with Medicaid or Medicare guidelines
- Knowingly receiving improper payments or overpayments without reimbursing the government
- Failing to comply with program restrictions
- Many other possible variations
Entities or individuals who submit false claims to the federal government are subject to severe civil penalties including a fine of $5,500 to $11,000 per false claim and treble (triple) damages. The damages can be substantial, with recoveries by the government in excess of $33 billion between 1986 and 2006. In each qui tam action, relators may receive between 15 and 30 percent of the total recovery by the government, whether by settlement or verdict.
The motivation behind the creation of the qui tam provisions of the False Claims Act was the recognition that the government lacks the information to pursue all the false and fraudulent claims that are submitted. Although the government has committed significant resources to combating fraud, including the creation of the Medicare Task Force in 2007, it is estimated that Medicare fraud alone costs taxpayers more than $60 billion each year.
Qui Tam vs. Fraud
Qui tam actions differ greatly from other fraud actions and are extensive and extremely complex. They involve procedural requirements, such as filing the complaint under seal and providing a disclosure statement to the United States Attorney General and United States Attorney where the action is venued that are unique to the False Claims Act and must be followed closely. Furthermore, there are several limitations to filing a complaint as a relator that must be carefully considered prior to beginning an action. For these reasons, it is imperative to obtain an attorney who is experienced in litigating false claims actions and settlements.
The New York False Claims Act
New York State passed its own False Claims Act in 2007 and is set forth in the State Finance Law. Substantially similar to the federal False Claims Act, the New York False Claims Act permits private citizen whistleblowers to take legal action against entities and individuals who submit false and fraudulent claims to the New York State government.
New York’s provisions provide for civil penalties between $6,000 and $12,000 per false claim and triple damages sustained by the state or local government. New York State’s False Claims Act also has a qui tam provision that provides an award between 15 and 30 percent of the total proceeds of an action or settlement.
Although over two dozen other states have also enacted their own false claims acts, New York’s is the only one to expressly permit qui tam actions for tax fraud, a provision not included in the federal False Claims Act. New York’s tax fraud provision was created in 2010 to close a loophole, which would have otherwise prevented whistleblowers from bringing a tax qui tam case against a corporation for defrauding the government out of tax dollars. In this respect, the New York False Claims Act is tougher than even the federal False Claims Act.
Dodd-Frank Securities Whistleblowers
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) added Section 21F to the Exchange Act, providing for whistleblower incentives and protections, similar to the federal False Claims Act. Under the Dodd-Frank Act, whistleblowers may receive awards for reporting original information about securities law violations to the Securities Exchange Commission. These violations include insider trading, accounting fraud, broker-dealer violations, and corporate disclosure violations.
The Dodd-Frank Act also provides confidentiality for whistleblowers who report violations to the Securities Exchange Commission. Whistleblowers are permitted to remain anonymous until payment of the reward, which can range between 10 and 30 percent of the amounts collected by the SEC where its sanctions exceed $1 million. In determining the award percentage, the SEC generally considers the significance of the information, the degree of assistance provided by the whistleblower, and the extent to which the government wants to deter the violations in question.