The False Claims Act (FCA) is a federal law that holds individuals and companies accountable for defrauding the federal government. It is the government’s primary tool in combating fraud. It was passed during the Civil War to address the fraudulent sale of decrepit horses, ill mules and faulty rifles to the Union Army (which not only defrauded the government but endangered soldier’s lives). The FCA has since grown to encompass protecting all government dollars, including healthcare spending such as Medicare, Medicaid and Tricare.
Under the law’s qui tam provision, individuals and entities (sometimes called Relators) can sue the alleged defrauders on behalf of the federal government and earn a reward if they are successful. Those who bring claims under the FCA’s qui tam provisions are awarded between 15% and 30 % of the amount the government recovers.
For example, in 1995, an employee sued Northrop Grumman, his employer, for selling faulty military equipment to the federal government. Fourteen years later, the company paid a $325 million settlement to the government, and the employee was awarded a portion of the settlement in the amount of $48.7 million (or 15%).
Having a Case Under the Qui Tam Provision
Whether you can sue under the qui tam provision depends on whether the organization’s fraudulent activities have been publicly disclosed. If the fraudulent activities have not been publicly disclosed, an individual can sue regardless of whether they have direct knowledge of the fraudulent activities. In the Northrop Grumman case, the alleged fraud was not publicly disclosed.
On the other hand, if the activities have been publicly disclosed, like say through the news, then only individuals with first hand knowledge of the activities can sue, independent of the publicly disclosed information.
What constitutes defrauding the government under the False Claims Act? Deliberately making false claims or making claims to the government without regard to their truth in exchange for money or some benefit. Northrop Grumman, for example, knowingly sold faulty military equipment to the federal government.
Reporting wrongdoing to the government and filing an FCA case under the qui tam provisions is a highly technical process. Most importantly, such cases are initially filed under seal — meaning the individuals or entities who file the suit are prohibited from discussing the case with anyone. The non-public nature of these lawsuits affords the government the opportunity to investigate the allegations without tipping off the target of the investigation. Following this initial review of the allegations (which can take several years), the government must then decides how it wants to proceed. At that point, the case is usually unsealed and the allegations are made public.