10 Fun Facts About the False Claims Act

1. The False Claims Act (“Act”) is over 150 years old. The Act, originally known as the Lincoln Law, after its original proponent, President Abraham Lincoln, was implemented during the Civil War. The Act was a response to war profiteering by federal contractors who attempted to defraud the government by selling inadequate firearms and horses.

2. The Act has a “qui tam” provision.
Qui Tam is Latin for “in the name of the king.” This part of the statute allows a private person, usually referred to as a relator, to file a suit on behalf of the United States against those who have filed false or fraudulent claims or caused such claims to be filed. This part of the Act provides for incentives for the relator, so that he or she can receive part of the proceeds of a victory on behalf of the government.

3. From 1986 to 2013, the False Claims Act has allowed the federal government to recover over $40 billion. Nearly half of all these recoveries were a result of False Claims Act lawsuits brought by whistleblowers or relators. Whistleblowers have been paid upwards of $2 billion in statutory rewards for filing False Claims Act cases.

4. Most of the recoveries under the Act have been a result of healthcare fraud cases. Healthcare fraud cases represent the largest industry for False Claims Act cases. For example, in 2009, healthcare fraud cases accounted for about $1.6 billion in recoveries under the Act,  more than two-thirds of the $2.4 billion collected under the Act that year.

5. There have also been recoveries for areas outside of healthcare fraud, including fraud and abuse in government contracts for defense, energy, construction, housing, natural disaster recovery, Iraq War reconstruction, and other forms of government procurement.

6. The Act is a first-in-time, first-in-right statute. As stated in previous posts, the Act bar subsequent cases that are based on the same facts underlying a pre-existing action. This first to file rule was intended to encourage the prompt reporting of fraud.

7. False Claims Act cases cannot be based solely on publicly disclosed information. The Act is designed to encourage individuals to report fraud on the government. Therefore, the Act prohibits cases in which the relator seeks to rely only on information that is substantially the same as allegations in the public domain, unless the relator is an “original source” of the information. An “original source” is defined as someone who has information independent of and materially adds to the publicly disclosed information.

8. False Claims Act cases are filed under seal and can remain so for many years. These cases are filed in federal court under seal and are not initially served on the defendant. The purpose of filing the case under seal is to give the government an opportunity to investigate the allegations without the defendant’s knowledge. While the initial statutory period of time for the case to be under seal is 60 days, the government is allowed to ask the court to extend this period and often does so, especially in complex False Claims Act cases.

9. False Claims Act cases cannot be brought against states, but may be brought against local governments and municipalities. In 2000, the Supreme Court ruled that a state government or agency cannot be sued for fraud in administering federally-funded programs under the Act. However, in 2003, the Supreme Court ruled that local governments and municipalities are not so exempt under the Act.

10. Relators who were involved in the fraud may have their reward substantially reduced or totally eliminated. Under the Act, the court is authorized to reduce the reward of a relator who planned and initiated the wrongdoing.

To learn more about the False Claims Act and filing a whistleblower case, please contact Waters & Kraus at 800.226.9880. This article was contributed by Anne Izzo, one of the firm’s whistleblower attorneys. Anne represents whistleblowers who have uncovered fraud against the government in the pharmaceutical, Medicare/Medicaid, and government contracting industries.

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