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HOW TO MAKE $1,000,000 AS A WHISTLEBLOWER -- (Under the United States False Claims Act)
by Attorney Carl E. Person
(July 1994 Revision)
Office and Telephone Consultations Are Free
Carl E. Person, Attorney at Law
325 W. 45th Street - Suite 201
New York, NY 10036-3803
Tel: (212) 307-4444
Fax: (212) 307-0247
- The Potential of Qui Tam for You
- How Much Could a Case Be Worth?
- Qui Tam Actions and Whistleblower Statutes: Background
- New York Whistleblower Statute
- Whistleblowing under U.S. Tax Code
- How You Become a Private Attorney General
- Federal False Claims Act - Range of Awards
- Examples of Actionable Fraudulent Conduct
- Requirements to Commence a Qui Tam Action
- Qui Tam Procedures
- Statute of Limitations
- Gathering All Needed Documents before Departure
- Whistleblowers' Protection under the False Claims Act
- Costs of Litigation
- Interrelationship with Other Government Actions
- Finding an Experienced or Suitable Lawyer
- Appendix A-The False Claims Act
Table of Contents
1. The Potential of Qui Tam for You
The phrase "Qui Tam" means nothing to more than 99% of the nation's population, but it has the potential of making you a millionaire, many times over. Let me explain.
First of all, the phrase "qui tam" is derived from a long Latin phrase "qui tam pro domino rege quam pro se ipso in hac parte sequiter", which means "a person who bring the action for the King as well as for himself".
The United States government is losing billions of dollars a year to fraudulent claims (not including claims for tax refunds or other fraudulent tax matters). Congress has stated in legislation known as the False Claims Act that the United States government is willing to give informers up to 30% of the claim plus expenses and attorneys' fees for commencing and possibly maintaining a lawsuit in the name of the United States against the wrongdoers. If you (or the government, if it takes over the lawsuit) wins the action by settlement or judgment, then you are entitled to a percentage of the recovery.
Thus, even if the recovery amounts to $10,000,000,000 ($10 billion), for example, you would receive a percentage ranging from 10% to 30% (or from 0 to 10% under certain circumstances where the government takes over the case and the case was not based primarily on information supplied by the plaintiff).
The key to making a million dollars or more through initiating a qui tam action is understanding what information you have which would enable you to commence a qui tam action. This booklet will try to help you with this type of analysis.
Obviously, there should be some type of dealing between a business or other entity and some agency of the U.S. government, and this is pretty broad to start off with. Secondly, there must have been some false information provided knowingly to the U.S. government agency as the basis for obtaining some money or valuable benefits from the government.
When an employee is terminated by a company dealing with the U.S. government, he or she may well have information which could be the basis for a successful qui tam lawsuit against the former employer.
If you have been fired (or are threatened with being fired), you might wish to consult a lawyer about any potential you may have for commencement of a successful qui tam action. This consultation would be separate and apart from any claims of unlawful discharge you may have (such as for illegal employment discrimination or breach of contract, or possibly as illegal retaliation for limited types of whistleblowing).
It would seem that fired executives of companies having contracts with one or more agencies of the U.S. government should look to a qui tam action as a possible "golden parachute" not found in the company's benefits program for executives [or other employees].
I should note that actions are not required to be brought by former employees. They can be brought by persons who were never employees of the defendant, or they could be brought by a current employee of the defendant, and they can be brought by corporations or even states and local governmental agencies.
2. How Much Could a Case Be Worth?
The range start from less than nothing (where you might wind up having to pay a substantial amount of money for the defendant's costs and attorneys' fees if you bring a frivolous case) to approximately $1 billion (i.e., $1,000,000,000.00), assuming 30% of a $3.3 billion recovery ($1.1 billion in damages trebled). The scope of the defendant's fraudulent dealings with the U.S. government determines how much is at stake. A supplier of airplanes or tanks to the U.S. government would probably have far more potential than a supplier of paper clips, but my belief is that any meritorious claim involving at least one million dollars in potential recovery (or at least $333,333 in damages) should be looked at seriously. This would involve a qui tam award as high as $300,000 plus costs and attorneys' fees.
Any effort to describe principles of law is difficult because of the general language which is used, and the specificity of the situation which the reader often has in mind. Bear in mind, accordingly, that the area of law attempted to be covered by this pamphlet is impossible to describe accurately in a few pages (such as this booklet). You are being warned with all seriousness that what follows in this booklet may not cover your own situation or be accurate for that matter. So, don't rely on this effort to summarize the law relating to qui tam actions (i.e., whistleblowing for a percentage of the recovery), either federal or state. You must obtain answers tailored to your own situation from an experienced lawyer. This booklet will help you to raise appropriate questions for which your lawyer can give you his opinion and advice on the correct answers.
The main thing you should do, accordingly, is to communicate with your lawyer if you believe you have a viable qui tam claim. You might want to do so quickly, to minimize the possibility of losing your qui tam action through the appropriate statute of limitations or by some other person beating you to the courthouse. So, with this warning in mind, please keep reading.
4. Qui Tam Actions and Whistleblower Statutes: Background
Remember the phrase "qui tam". The part of the whistleblower statutes you are interested in is any "qui tam" part, which provides the right of an individual such as yourself to sue a certain type of wrongdoer on behalf of the government, and receive a percentage of any recovery as your reward.
A 1903 New Jersey statute could have been the origin of the term "whistleblower statute", which various statutes are now called which relate to protection or incentives for those who report wrongdoing to the government.
The New Jersey statute, NJ Laws of 1903, Chap. 257, section 35, created a $20 penalty for every failure by a railroad in New Jersey to ring a bell or blow a whistle at a railroad crossing. The statute went on to provide that 50% of the penalty was to be paid to the informer who commenced the action for recovery of the penalty, and the other 50% was to be paid to the county in which the violation occurred. Subsequently, in various New York decisions, the term "whistleblowing" and "whistleblower statute" came into use, which could well be a reference to the 1903 New Jersey statute which rewarded persons who sued for a railroad's whistleblowing failure.
The phrase "qui tam" comes from English common law, and was a proceeding to enforce a state-imposed penalty brought by a private citizen, in exchange for a percentage of any recovery. Qui tam proceedings historically have been used as inducements for persons with knowledge of wrongdoing to come forth and tell the government what they know. Also, the phrase "action by a common informer" has been used by the New York courts as the equivalent of "qui tam". Adams v. Dick, 103 Misc. 259 (Sup. Ct., N.Y.Co. 1918).
5. New York Whistleblower Statute
New York does not have any statutory-sanctioned qui tam actions, although it is possible that a person could bring suit on behalf of the government (where the government had failed to act) and claim some type of common law (i.e., case-law) precedent such as qui tam or "common informer" status.
New York's main whistleblower statute is in the New York Labor Law, section 740(2)(c), which prohibits discrimination and retaliation against employees. Thus, where an employee in New York blows the whistle on his employer for employment discrimination (as to various protected categories, such as age, sex, sexual orientation, country of origin, disability, religion), the employee may have a variety of remedies against his/her employer, including back pay and reinstatement.
This type of whistleblower statute is not the subject matter of this booklet, because there is no qui tam component which permits an individual to sue the employer on behalf of the government. Also, it should be noted that there would probably be no monetary claim by government for any fraudulent claim made by the employer, so that a qui tam provision was not necessary. Furthermore, there are government agencies already established to deal with job discrimination claims, and obtain recovery for the employees who are injured. Finally, an injured employee could bring a "class action" on behalf of others similarly situated. For these reasons, there was no need for any qui tam actions to obtain compliance with federal and state laws prohibiting employment discrimination.
In summary, New York provides no statutory basis for any qui tam actions, but there could be an opportunity for qui tam (common informer) actions under common law to recover moneys owed to New York State or governmental subdivisions thereof as to fines and damages for fraudulent claims. On the other hand, there are some federal cases which say qui tam actions are a creature of statute, and not to be judicially created by the courts. Marra v. Burgdorf Realtors Inc., 726 F. Supp. 1000, 10012-10014 (E.D. Penn. 1989); also see cases cited in footnote 35 in 5/1/90 New York Law Journal article (starting at p. 3) entitled "Mutiny for the Bounty -- Qui Tam: Bonanza or Fair Reward?"
6. Whistleblowing under U.S. Tax Code
Although it is clear that there can be no qui tam action under the federal False Claims Act for unpaid taxes, the Internal Revenue Code does provide for the payment of an amount (to be determined by the IRS in its discretion) to a person who reports tax fraud to the I.R.S. This provision is section 7623 of the Code, and it has not been of much value to informers. For example, a recent informer who caused the I.R.S. to recover $10,000,000 on an allegedly fraudulent tax-shelter deal was only paid $31,000 for his information. There is no action which can be brought for payment against the I.R.S. unless the I.R.S. has agreed to an amount of money. In such case, the informer could sue for non-payment.
7. How You Become a Private Attorney General
The federal government has "privatized" the activity of enforcing laws prohibiting fraudulent claims against the United States government, by permitting private persons (and even state and local governments) to sue on behalf of the United States (actually, in the name of the United States, as the "relator" of the information upon which the action is based).
Thus, the person who brings the qui tam action as the plaintiff is serving as a "private attorney general", with a possibility of recovering a huge amount of money for himself/herself. The plaintiff doesn't have to be an attorney, and in fact cases create some doubt as to whether an attorney obtaining information in the court of the professional activities would qualify as an "original source" for information which is publicly known.
Nevertheless, an attorney working on a contingent-fee basis for the qui tam plaintiff would have an appropriate interest in the amount awarded by the court to the plaintiff. Some persons (probably having contacts with defense contractors) argue that the qui tam plaintiff has too much power and can earn too much money, and that the statute should be changed once again.
This has happened several times since the Civil War, when the statute was first enacted. Experience shows that a substantial percentage of the recovery creates more suits and more recoveries for the United States, and Congress wants it that way, in spite of the "windfalls" which some persons receive for telling what they know about the fraud and commencing qui tam actions thereon.
8. Federal False Claims Act - Range of Awards
The amount of money which has been awarded under the False Claims Act ranges from less than zero to many millions of dollars.
Most importantly, it should be noted that the government, through a qui tam action, is entitled to an award of three times the proven damages (often called "treble damages"). Because the qui tam plaintiff who continues with the case (without the government taking it over) is entitled to 25% to 30% of the recovery, plus costs and reasonable attorneys' fees, the effect is that a qui tam plaintiff can easily be entitled to an award (including attorneys' fees) amounting to 100% of the damages which are proven. In other words, the qui tam plaintiff can get $1 of award for every $1 of damages proven. In a case for $100,000,000 in damages, for example, the qui tam plaintiff could be entitled to an award of $100,000,000, or 30% of the $300,000,000 ($100,000,000 trebled) plus reasonable attorneys' fees.
Are there any cases of this magnitude?
The guidelines for sentencing corporations for violations of various statutes can reach $290,000,000, and if the qui tam plaintiff has been responsible for providing the information used to convict, the qui tam plaintiff could participate (to an extent ranging up to 30%) in such criminal fines, it appears.
In 1992, a private attorney testified that his firm was involved in settlement negotiations in just two of the qui tam actions his firm. In these two action, the qui tam plaintiff had received offers to settle the two cases amounting to alawmallost $100,000,000, but that the government had rejected these offers to settle as inadequate.
If settlement occurred at $100,000,000, the qui tam plaintiff would receive from $25,000,000 to $30,000,000 (assuming the government had not taken over the two cases) or from $15,000,000 to $25,000,000 (if the government had taken over the two cases) plus reasonable attorneys' fees. The government has reported that there is a major increase in qui tam litigation, increasing by 300% between 1990 and 1991.
In 1990, the Justice Department complained to Congress that the time its lawyers have been spending in the review of and working on qui tam actions has increased 1100% since 1986. Prior to the 1986 amendments to the False Claims Act, the Justice Department use to get about 6 qui tam actions per year, but during the first 10 months of 1989 the Justice Department received 100 qui tam actions. Six months prior to enactment of the amendment, the Justice Department spent about 1,100 hours on qui tam litigation, but during a 6-month period in 1989, the Justice Department spent 11,000 hours on qui tam litigation.
On the down side, there are cases holding that the plaintiff (called a "relator" on behalf of the United States) had no case and was awarded nothing, upon dismissal of his case. The qui tam relator had failed to comply with the informer's statute. We'll cover the requirements in a later part of this booklet.
In another case, the relator held to be liable to the defendant for the defendant's legal fees, because the relator commenced an action which a majority of the court held to be "frivolous".
Thus, in some other cases, the amount paid to the plaintiff ("relator") amounted to millions of dollars. And in other cases the plaintiff gets nothing. It depends largely on the quality of the case (including whether the evidence is available before commencement of the case, the amount of money involved, the extent to which the information is public and the extent to which the qui tam plaintiff is the original source of the information, and the extent to which the qui tam plaintiff contributes to the success of the action.
9. Examples of Actionable Fraudulent Conduct
For those of you who want to see some examples of actionable fraud, I list the following circumstances:
1. Willful alteration of payroll cards to increase the number of hours chargeable under a defense contract, where the government is reimbursing the defendant for its costs.
2. Charging personal expenses to the government agency (such as for vacations, travel, meals, theater tickets).
3. Willful changing of test data by the defendant supplier so that the government agency is led to believe that the items supplied under a contract meet the contractual requirements when in fact they don't.
4. Adding a contractor's overhead to its direct costs to bill the government more for items than was set forth in the contract between the contractor and the government agency.
5. Failing to use union labor when this is called for under the government contract.
6. Certifying to the government, after negotiations were completed, that defendant's estimate of necessary hours to perform the contract was current, accurate and complete.
7. Willful failure to supply accurate information to the government agency which causes a relationship to be continued, including continued payments or benefits from the government agency to the defendant.
8. Any type of material knowingly-false information provided by a supplier to the government when the supplier makes a claim for payment.
9. False testimony made in support of a claim filed in the U.S. Court of Claims upon which the claimant obtained money (other than a refund of taxes).
10. Willful and material misrepresentation of the capabilities of an item when inducing an agency of the U.S. government to order such item.
11. Welfare fraud.
12. Medicaid or Medicare fraud.
13. Fraud as to any other type of U.S. government program (such farm subsidies and government loans to banks, businesses, students, foreign governments, others).
14. Outrageously high items (such as $5,000 toilet seats) charged to the government under a procurement program.
15. Rigging of bids on contracts which are awarded to the winning bidder (such as in federal highway construction projects).
16. Any bribes paid to government employees to obtain contracts with the government. These bribes are illegal as "commercial bribery" and recoverable under other principles of law, but the whole amount of the contract might be recoverable under the False Claims Act on the theory that none of the money would have been paid but for the fraud involved in bribing the government employee(s).
17. Underreporting to the Department of the Interior the amount of oil pumped by defendant and thereby paying lower royalties to the government than should have been paid. A recent report indicated that 7 oil companies may have underreported by $2.6 billion over the past 30 years, saving themselves $420,000,000 in fees. Money doubles every 10 years at 7% interest, so that the claim including interest would be in the neighborhood of $3,000,000,000 (i.e., $3 billion), when taking interest and trebling into account. The State of California brought this to the government's attention, and may well be in for a $1 billion qui tam award. Settle companies have already settled with the State of California according to the same report.
18. A bank's failure to disclose its true financial statement to enable the bank to stay in business longer, but causing the government to suffer increased losses when it was unable, because of the fraud, to close the bank earlier than it did. [One commentator has offered this as a very tenuous claim because the bank is not claiming anything from the government.]
10. Requirements to Commence a Qui Tam Action
There are very few limitations. The most important ones are:
1. That the qui tam plaintiff not have been convicted of doing any part of the fraudulent activities upon which the qui tam suit is (or is to be) based.
2. If the qui tam plaintiff participated in some of the wrongdoing, but was not convicted for such acts, then the court may reduce or eliminate his qui tam interest as the court sees fit under the circumstances.
3. That the information provided by the qui tam plaintiff, if it is publicly available, had been made public by him or her. (From 1943 to 1986, the "government knowledge" standard in the statute made it too difficult for qui tam actions to be commenced, since the action would not be allowed if the government already knew about the claim, even if it was the plaintiff who gave the information to the government. The main purpose of the 1986 amendment was to get rid of this standard, and substitute the "original source" standard. This term is defined in the statute as follows:
(4)(A) [No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions] in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. [Emphasis added.]Please note that the qui tam plaintiff must voluntarily provide the information to the government before filing the qui tam action.
(B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information. [Emphasis added.]
4. Employees of the U.S. government may commence a qui tam action and receive a share of the recovery unless they had participated in the wrongdoing.
5. The matter should not relate to taxes.
6. The action must be filed on a timely basis (see the section on the applicable Statute of Limitations). There are other matters to be considered, but of less importance.
11. Qui Tam Procedures
The procedure for filing a qui tam action is simple. The action is filed under seal ("in camera") in a United States District Court. Quoting from the statute itself, the qui tam action "may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred". Even though the defendant is not a resident of the state or district, a specific district (such as the one in which you and/or your attorney reside) would be appropriate if any of the defendants committed any of the unlawful acts in such district, or if any of the defendants has significant business dealings in such district (perhaps as little as $10,000 in dealings in the preceding year, which could amount to "transacting business").
Service of process is nationwide and extraterritorial, so that every defendant with its offices in the United States can served with a copy of the summons and complaint no matter where its office is located, and defendants outside of the United States can be served outside of the United States. This provision makes it easy to bring in all important defendants.
Copies of the summons and complaint must be served upon the U.S. government (but not the defendant), and the U.S. government has 60 days in which to decide whether to take over the case from the qui tam plaintiff. The government can obtain, for "good cause" shown, one or more extensions of the 60-day period to investigate the matter and decide what to do. During the 60-day period and any extensions thereof the qui tam plaintiff is not to divulge the existence of the action to the defendant. This is to prevent any interference with the government's investigation and to prevent the defendant from destroying documents and tampering with witnesses.
Ultimately, the government will either decide to take over the case, in which case the qui tam plaintiff and his/her lawyer take a back seat and can be limited substantially in their participation; or the government may decide not to take over the case, in which case they may wish to receive copies of important documents (such as the defendants' answers and other pleadings in the case, and copies of all transcripts of deposition testimony, which the government will have to pay for itself). Even if the government initially decides not to take over a case, it can intervene at some later stage and take the case over, if it wishes. If the government takes a case over, it is anticipated that the prospects for recovery are much better for the qui tam plaintiff, although the 25% qui-tam ceiling will apply. If the government doesn't take over the case, the 30% maximum interest will apply. Of course, the court doesn't have to award the maximum amount, and in cases involving large dollar amounts the court would probably decline to award the highest percentage figure.
The judge determines the precise share of the recovery based on the value of the contribution of the qui tam plaintiff, with a minimum of 15% (and maximum of 25%) if the government took over the case and a minimum of 15% (and a maximum of 30%) if the government did not take over the case, and it was continued by the qui tam plaintiff.
Three additional "procedures" should be noted:
1. You can serve a subpoena for testimony at any trial or hearing on a nationwide basis. Ordinarily, in a federal civil lawsuit, you can only serve a subpoena within a 100-mile radius from the courthouse or within the district.
2. Fraud only has to be proven by a preponderance of the evidence; ordinarily, fraud has to be proven by "clear and convincing evidence". This is of major importance to the qui tam plaintiff, inasmuch as the mere tipping of the scales is sufficient, rather than to have a higher burden of proof to win the case.
3. There is no requirement to prove a specific intent to defraud, which makes this type of fraud far easier to prove than other types of fraud actions.
12. Statute of Limitations
The statute of limitations for claims under the False Claims Act is 6 years from the commission of the act or 3 years from the date the material facts were discovered or should have been discovered by the official of the United States charged with responsibility to act (but in no event longer than 10 years from the date on which the violation occurred. 31 U.S.C. section 3731(b). United States ex rel. and Duvall v. Scott Aviation, 733 F.Supp. 159 (W.D.N.Y. 1990). For those of you who want to read the statute itself, the False Claims Act provides the following statute of limitations:
"(b) A civil action under 3730 may not be brought --
"(1) more than 6 years after the date on which the violation of section 3729 is committed; or
"(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,
"whichever occurs last."
13. Gathering All Needed Documents before Departure
If you are going to be terminated (something which you may well suspect in advance of the event), you might consider gathering evidence you could use in support of your claim (although you should discuss this with an attorney before doing so, for a variety of legal reasons).
The documents you would want to copy would be evidence showing the fraudulent claims or representations, and the persons who made them to the U.S. government agency, as well as documents showing who knew about it within the company. The higher the better, since the company may try to defend on the ground that the fraudulent activities occurred by non-management persons who didn't know what they were doing, and that the company itself is not guilty of any fraud.
You should consult with your attorney about the proper way of doing this, since some of the documents you may need may have to be obtained through request of others working for your employer, and it may be obvious to the company and such persons that you have no need for the documents other than to cause trouble for the company and others. Your attorney can talk with you about the best way of going about this tricky business.
Also, there is the possibility that you may want this last chance to have your employer make statements to you about the fraudulent activities which will (or could) be binding on them once you bring suit, and put you in an exclusive position with respect to some of the evidence in support of the claim. You should talk about this with your attorney and draw up a plan for obtaining such evidence before your employment is terminated.
Be aware that the employer is (or should be) conscious of the activities you may be making to obtain evidence for use against the employer and may place obstructions in your path, such as terminating and evicting you right away.
14. Whistleblowers' Protection under the False Claims Act
The False Claims Act provides that the whistleblower shall be made whole if he/she is discharged, demoted or harassed in any way because of the whistleblowing activities. The statute says, specifically:
"(h) Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees. An employee may bring an action in the appropriate district court of the United States for the relief provided in this subsection."
Thus, the whistleblower can go into federal court and obtain an order for reinstatement, with two times the amount of back pay which the employee lost, plus interest on the back pay, and an award for any other special damages which the employee may have suffered, including litigation costs and reasonable attorneys' fees.
15. Costs of Litigation
The out-of-pocket costs (not including attorney's fees) of maintaining a qui tam action in the United States District Court can range from under $3,000 to more than $100,000 (or much more), depending on whether the U.S. government takes over the case, whether there is an early settlement (don't count on it), and the nature of the action itself, including the number and location of witnesses to be deposed, and the amount of documents (and the costs of copying). Also, there are witness fees, travel expenses, trial transcript costs and any appellate costs to be taken into account.
The real cost, however, is the attorneys' time, the value of which will often amount to 10 or 20 times more than the out-of-pocket expenses in a case.
Some attorneys may be willing to take an action on a contingent-fee basis, without requiring the client to advance any costs or pay any legal fees; some lawyers will not take a case other than on an hourly-rate basis (which fees could add up to tens or ev en hundreds of thousands of dollars); and some lawyers take qui tam actions (as with other types of commercial litigation) on a contingent-fee basis with some money paid up front to defray some of the anticipated out-of-pocket expenses.
If a proposed qui tam action is so good that an attorney believes that the U.S. government would have to take over the action, it should be much easier to find an attorney.
16. Interrelationship with Other Government Actions
The False Claims Act provides that even if the government chooses to use other proceedings or actions to obtain recovery from the defendant, the qui tam plaintiff is protected. The government has various ways in which it can bring suit (such as criminal proceedings, or claim under the U.S. False Statement Act, 18 U.S.C. section 1001, and so on). If the government proceeds to use the information supplied by the qui tam plaintiff in another proceeding, and collects money, the qui tam plaintiff is entitled to the share he/she would have had.
18 U.S.C. section 1001 prohibits any knowingly and willfully false or concealed statements or representations of fact to the government, which are material. The statute is a criminal statute, with fines up to $10,000, and a prison term up to 5 years, or both.
The specific provision in the False Claims Act, section 3730(c)(5), provides the interrelationship, as follows:
"Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this section. Any finding of fact or conclusion of law made in such other proceeding that has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court of the United States, if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to judicial review."
17. Finding an Experienced or Suitable Lawyer
Qui tam (as with other types of commercial litigation) is tricky and specialized, and a client should try to obtain the services of a lawyer or law firm which is experienced in the field. One way of identifying such lawyers is to cull through court cases , newspaper articles or court decisions available through Lexis and/or Westlaw to find qui tam cases and then determine the name of the plaintiff's lawyer.
Also, you could ask lawyers who they might recommend.
I would be interested in talking with any prospective client about a possible qui tam action even though I have never represented a qui tam plaintiff. I have had civil litigation involving fraud, which is pretty close.
APPENDIX A - The False Claims Act, 31 U.S.C. sections 3729-3732
Section 3729. False Claims
(a) Liability for certain acts. -- Any person who --
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;
(4) has possession, custody, or control of property or money used, or to be used,by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt;
(5) authorized to make or deliver a document certifying receipt of property used, or to be used, the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
(6) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge the property; or
(7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person, except that if the court finds that --
(A) the person committing the violation of this subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;
(B) such person fully cooperated with any Government investigation of such violation; and
(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have ac tual knowledge of the existence of an investigation into such violation; the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of the person. A person violating this subsection shall also be liable to the United States for the costs of a civil action brought to recov er any such penalty or damages.
(b) Knowing and knowingly defined. -- For purposes of this section, the terms "knowing" and "knowingly" mean that a person, with respect to information --
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information,
and no proof of specific intent to defraud is required.
(c) Claim defined. -- For purposes of this section, "claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides an y portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.
(d) Exemption from disclosure. -- Any information furnished pursuant to subparagraphs (A) through (C) of subsection (a) shall be exempt from disclosure under section 552 of title 5.
(e) Exclusion. -- This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1954.
Section 3730. Civil Actions for False Claims
(a) Responsibilities of the attorney general. -- The Attorney General diligently shall investigate a violation under section 3729. If the Attorney General finds that a person has violated or is violating section 3729, the Attorney General may bring a civ il action under this section against the person.
(b) Actions by private persons. --
(1) A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General gi ve written consent to the dismissal and their reasons for consenting.
(2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. The complaint shall be file d in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the m aterial evidence and information.
(3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). Any such motions may be supported by affidavits or other submissions in camera. The defendant shal l not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure.
(4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall--
(A) proceed with the action, in which case the action shall be conducted by the Government; or
(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action.
(5) When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.
(c) Rights of the parties to Qui Tam action. -- (1) If the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall hav e the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).
(2)(A) The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a h earing on the motion.
(B) The Government may settle the action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumsta nces. Upon a showing of good cause, such hearing may be held in camera.
(C) Upon a showing by the Government that unrestricted participating during the course of the litigation by the person initiating the action would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant , or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, such as --
(i) limiting the number of witnesses the person may call;
(ii) limiting the length of the testimony of such witnesses;
(iii) limiting the person's cross-examination of witnesses; or
(iv) otherwise limiting the participating by the person in the litigation.
(D) Upon a showing by the defendant that unrestricted participating during the course of the litigation by the person initiating the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court may limit the participating by the person in the litigation.
(3) If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the Government so requests, it shall be served with copies of all pleadings filed in the action and shall be s upplied with copies of all deposition transcripts (at the Government's expense). When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to inte rvene at a later date upon a showing of good cause.
(4) Whether or not the Government proceeds with the action, upon a showing by the Government that certain actions of discovery by the person initiating the action would interfere with the Government's investigation or prosecution of a criminal or civil ma tter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. Such a showing shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the Government has pur sued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.
(5) Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this section. Any finding of fact or conclusion of law made in such other proceeding th at has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court of the United States, if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to judicial review.
(d) Award to Qui Tam plaintiff. --
(1)˙If the Government proceeds with an action brought by a person under subsection (b), such person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the proceeds of the action or settleme nt of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. Where the action is one which the court finds to be based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transaction in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the n ews media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to liti gation. Any payment to a person under the first or second sentence of this paragraph shall be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reas onable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.
(2) If the Government does not proceed with an action under this section, the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall no t be less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of such proceeds. Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily inc urred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.
(3) Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, the court may, to the extent the court consid ers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circum stances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.
(4) If the Government does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds tha t the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.
(e) Certain actions barred. --
(1) No court shall have jurisdiction over an action brought by a former or present member of the armed forces under subsection (b) of this section against a member of the armed forces arising out of such person's service in the armed forces.
(2)(A)˙No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government wh en the action was brought.
(B)˙For purposes of this paragraph, "senior executive branch official" means any officer or employee listed in section [sic] paragraphs (1) through (8) of section 101(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).
(3) In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.
(f) Government not liable for certain expenses. -- The Government is not liable for expenses which a person incurs in bringing an action under this section.
(g) Fees and expenses to prevailing defendant. In civil actions brought under this section by the United States, the provisions of section 2412(d) of title 28 shall apply. (h) Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the emplo yee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee who le. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result o f the discrimination, including litigation costs and reasonable attorneys' fees. An employee may bring an action in the appropriate district court of the United States for the relief provided in this subsection.
Section 3731. False Claims Procedure
(a) A subpena [sic] requiring the attendance of a witness at a trial or hearing conducted under section 3730 of this title may be served at any place in the United States.
(b) A civil action under 3730 may not be brought --
(1) more than 6 years after the date on which the violation of section 3729 is committed; or
(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,
whichever occurs last.
(c) In any action brought under section 3730, the United States shall be required to prove all essential elements of the cause of action, including damages, by a preponderance of the evidence.
(d) Notwithstanding any other provision of law, the Federal Rules of Criminal Procedure, or the Federal Rules of Evidence, a final judgment rendered in favor of the United States in any criminal proceeding charging fraud or false statements, whether upon a verdict after trial or upon a plea of guilty or nolo contendere, shall estop the defendant from denying the essential elements of the offense in any action which involves the same transaction as in the criminal proceeding and which is brought under subs ection (a) or (b) of section 3730.
Section 3732. False Claims Jurisdiction
(a) Actions under section 3730. -- Any action under section 3730 may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act prosc ribed by section 3729 occurred. A summons as required by the Federal Rules of Civil Procedure shall be issued by the appropriate district court and served at any place within or outside the United States.
(b) Claims under state law. -- The district courts shall have jurisdiction over any action brought under the laws of any State for the recovery of funds paid by a State or local government if the action arises from the same transaction or occurrence as a n action brought under section 3730.
[end of the United States False Claims Act]
Carl E. Person, Attorney at Law
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