by Mary Hodges
Last year marked a record setting year for the Justice Department’s (“DOJ”) recovery from companies that filed false claims against the government. In 2012, the DOJ collected $5 billion under the False Claims Act (“FCA”). The Huffington Post reported that Tony West, Acting Associate Attorney General, described the FCA as the “most powerful tool in the government’s legal arsenal for protecting the integrity of government programs such as Medicare and Defense Spending.”
The DOJ recovered $3 billion in health care fraud cases, $1.4 billion in housing and mortgage-related cases, including $900 million of a $25 billion settlement between the government and the nation’s five largest mortgage services. More importantly, of the $5 billion recovered, $3.3 billion stemmed from whistle-blower (or qui tam) cases. Explained more fully below, under the FCA, whistleblowers can file cases on behalf of the government and share in the amount of recovery based upon the whistleblowers disclosures. In 2012, whistleblowers filed nearly 650 cases of which about one-fourth were intervened in by the DOJ.
The FCA was first enacted in 1863 and has since been amended several times, with the most significant changes occurring in 1986. In the FCA’s current form, generally, under §§ 3729(a)(1)(A) and (B), any person who knowingly submits a false claim to the government, causes another to submit a false claim to the government, or knowingly makes a false record or statement to get a false claim paid by the government, is liable under the statute. Section 3729(a)(1)(G), however, is known as the reverse false claims section; it provides liability where one acts improperly to avoid having to pay money to the government. Section 3729(a)(1)(C) creates liability for those who conspire to violate the FCA.
One who is found liable under the FCA must pay a civil penalty between $5,000 and $10,000 (adjusted for inflation) for each false claim, along with treble the amount of the government’s damages. The FCA allows for alleviation of damages under certain circumstances for persons who report their own FCA violations to the government. An important aspect of the FCA is the knowledge requirement. One is not liable merely for submitting a false claim to the government. The person must have knowledge of the claim’s falsity. Pursuant to § 3729(b)(1), knowledge of false information is defined as being (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard of the truth or falsity of the information.
A unique facet of the FCA is its qui tam provisions. Qui tam gets its name from the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “[he] who sues in this matter for the king as [well as] for himself.” Essentially, the qui tam provisions allow private persons to file suit for violations of the FCA on behalf of the government. The private individual bringing the action is known as a “relator.”
For individuals filing qui tam actions, § 3730(b)(2) states that the complaint must be filed under seal and, along with a written disclosure of all the relevant information known to the realtor, must be served on the U.S. Attorney General for the judicial district where the claim was filed and on the Attorney General of the United States. The complaint stays under seal for 60 days, in which time the government is required to investigate the allegations to determine whether or not it wants to intervene in the case, or allow the relator to proceed with the claim on his or her own. If the government decides to intervene, it has the primary responsibility of prosecuting the case. Over the relator’s objection, the government can decide to dismiss or settle the case so long as the court gives the relator an opportunity for a hearing. Furthermore, the government and the defendant can seek to limit the relator’s participation in the litigations.
The enticement to file qui tam claims on behalf of the government is likely because the relator generally is entitled to receive between 15 and 25 percent of the amount recovered by the government if the government intervenes in the case, and between 25 and 30 percent if the government does not intervene. The relator may also be entitled to legal fees and other expenses if the qui tam action is successful.
Finally, for various reasons, some individuals may be barred from bringing qui tam claims under the FCA. Those reasons include: (1) if the individual was convicted of criminal conduct arising from his or her role in the FCA violation; (2) another qui tam claim or government proceeding concerning the same conduct has been filed; and (3) the claim is based on information that has already been disclosed to the public, unless the relator was the original source of the disclosure.
Indeed, 2012 was a recording-setting year for the False Claims Act, especially for claims instituted by whistleblowers. Mid-year, the DOJ announced the resolution of the largest health care fraud settlement in U.S. history and the largest payment ever by a drug company. GlaxoSmithKline (“GSK”), a global health care giant, agreed to plead guilty and pay a $3 billion fine to resolve its criminal and civil liability stemming the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its alleged false price reporting practices. Four individuals originally instituted a qui tam action in a District Court in Massachusetts and the United States decided to intervene. A copy of the United States complaint against GSK can be found here.
If you believe you have a potential qui tam claim, contact the experienced attorneys at Cosgrove Law Group, LLC.