The Qui Tam provisions of federal and state False Claims Acts allow private individuals to file lawsuits under the Acts on behalf of the federal and state governments to recover funds stolen through fraud. The private individuals are referred to as “whistleblowers” or in legal parlance, “relators,” because they file or “relate” actions on behalf of the government, even though they have not personally suffered harm. To pursue a Qui Tam suit, the whistleblower must demonstrate knowledge that the defendant knowingly presented to the government false bills or other information either to swindle the government into paying more than it owes or to cheat the government out of monies it is owed.
Whistleblowers come from all walks of life, and often include employees of government contractors engaged in fraud, as well as government agency workers, and employees of private companies, such as suppliers to and competitors of the wrongdoer. To encourage individuals to report fraud against the government, and to compensate whistleblowers for the risk and effort required to bring a Qui Tam case, the federal and state False Claims Acts entitle relators to share in any recovery the government receives as a result of the suit, whether by trial or settlement. If the government participates in the Qui Tam action, the whistleblower is generally entitled to receive between 15- and 25 percent of the recovery. If the government elects not to join the action, and the whistleblower proceeds without government assistance, the share of recovery is greater—between 25 and 30 percent of the recovery under the federal and most state Acts. The Acts make further provision for recovery of whistleblowers’ reasonable expenses, costs and attorneys’ fees.
The False Claims Acts also provide additional financial reassurances for whistleblowers who sometimes risk losing their jobs and their financial security by reporting their own employers’ corporate wrongdoing. It is a further violation of the Acts for an employer to take any kind of retaliation against an employee who reports corporate fraud. The employee cannot be fired, demoted, or denied benefits. If an employer does take such action to punish a whistleblower employee, the whistleblower is entitled to sue for retaliation as part of the Qui Tam suit. The damages recoverable for the retaliation claim include lost wages, for both back pay and future wages.
“First to File” Requirement
To discourage a torrent of Qui Tam suits filed solely to capitalize on the False Claim Acts’ financial incentives, Congress and many states included in the Acts’ requirements that a whistleblower must be the “first to file” suit concerning a particular allegation of fraud and that suit be brought prior to “public disclosure” of the same information. If these requirements are not met, the suit may be dismissed for lack of jurisdiction. Where a whistleblower is the “original source” of the allegations of fraud, however, he or she is not barred from pursuing a Qui Tam action even though public disclosure has already occurred. Under the federal False Claims Act, an “original source” is “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.”