Citizens can sue companies accused of defrauding taxpayers.
The federal False Claims Act (FCA) dates back to the Civil War. It was put in place to try to prevent fraud against the federal government and recover any money spent due to fraud. Using the FCA, an individual could step into the shoes of the federal government and file a claim to recover money fraudulently obtained (known as a qui tam lawsuit). In return for their efforts, these plaintiffs could get a share of the recovery if the case is successful. The federal government would also have a chance to join these lawsuits and take over their prosecution if it saw fit. States have their own versions of this law covering fraud against state and local governments.
The FCA is the federal government’s primary civil remedy to redress false claims for government funds and property under government programs and contracts. These contracts cover the range of goods and services from defense and national security, to food safety and inspection, federally insured loans and mortgages, money to maintain and build highways and roads, farm subsidies, disaster assistance and import tariffs.
Whistleblower lawsuits can claw back funds illegally obtained.
FCA lawsuits are major money makers for federal taxpayers. The DOJ states that in fiscal year 2017 the federal government was awarded $3.7 billion in damages from FCA lawsuits. Most of it, $2.4 billion, involved the health care industry, including drug companies, hospitals, pharmacies, medical laboratories and doctors. Defendants in these cases were involved in fraud against Medicare, Medicaid and Tricare (government managed healthcare for military service members, their families and some retirees).
The federal government paid out $392 million to those who exposed fraud and false claims by filing qui tam lawsuits. The number of these legal claims has grown sharply since 1986, with 669 qui tam suits filed this past fiscal year, though the DOJ isn’t joining these lawsuits at a higher rate. In a December 2017 press release, the DOJ praised those doing the right thing and working to end fraud.
“Because those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth.…The Department’s recoveries this past year continue to reflect the valuable role that private parties can play in the government’s effort to combat false claims concerning government contracts and programs.”
Individual plaintiffs are key to FCA lawsuits. The DOJ shouldn’t make their cases more difficult.
Two months later, the DOJ showed qui tam plaintiffs much less love. It issued an internal memo, according to Reuters, that, if enacted, would result in fewer qui tam lawsuits, not more. DOJ attorneys were advised not just to avoid joining lawsuits that may not have merit, but to take steps to have them dismissed. The memo called whistleblower actions not worth the DOJ’s time “meritless” or “parasitic.”
The Trump administration prides itself on being business-friendly, and businesses aren’t fans of FCA lawsuits. The U.S. Chamber Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce, claims the FCA is just a “lucrative money machine” for plaintiffs’ lawyers. What’s actually a far larger and far more lucrative money machine is fraud perpetrated against the federal government. One 2014 estimate of fraud perpetrated just against Medicare and Medicaid reported in Forbes was $100 billion.
Michael Granston, director of the DOJ’s Civil Fraud Section, wrote the memo and stated that in the past they “sparingly” sought dismissals, but he claimed they were wasting resources on monitoring cases DOJ didn’t join, including “meritless” ones that created bad court precedent when they were eventually dismissed. He suggested attorneys think about considering seeking the dismissal of “meritless” cases and “parasitic” lawsuits that duplicate earlier investigations.
These cases can be difficult to maintain. Defendants may try to prevent plaintiffs from obtaining important evidence needed to prove their claims. If millions of dollars are at stake, a defendant may spare no expense in flooding a case with motions seeking to limit or dismiss it to avoid the possibility of a massive financial and public relations hit that can come with a verdict for the plaintiff and taxpayers. As a practical matter, many qui tam lawsuits fail after the DOJ decides not to join the case, because plaintiffs simply lack the resources to continue the fight.
An unfavorable court decision can result in a legal precedent that can make other FCA lawsuits more difficult; but if the DOJ starts to switch sides in these cases and promote business interests instead of those of taxpayers, it will send a loud and powerful message to employees trying to do the right thing -- they may have not only have to fight their current or former employers but the federal government as well. Whether or not a whistleblower case is dismissed or not should be up to the judge, not the DOJ.
Whistleblower Claims Remain Vital and Worth Pursuing
These developments represent a trend that those in the whistleblower advocacy community will continue to watch closely. It’s important for whistleblowers to know that it is still one of the best times in our country to file lawsuits on behalf of the government. The False Claims Act is still utilized to great effect and whistleblowers are still rewarded for the good they do.
The qualities that constitute a successful claim have not changed. If you have a claim that is unique and uncovers fraud, abuse or waste, you should pursue it. Make sure your claim provides ample evidence and meets the standards of the federal authorities, and you can be confident that your claim has the best chances of being successful.
If you’re not sure where to begin or if you have a claim that meets these standards, consult someone who does. A skilled whistleblower attorney is a valuable resource for someone considering filing a claim. They can give you an honest assessment of your claim’s chances, help you plan the best path forward and avoid any pitfalls along the way.
