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History of the False Claim Act
Often called Lincoln’s Law, the False Claims Act, 31 U.S.C. § 3729 et seq., provides for liability for triple damages and a penalty from $5,500 to $11,000 per claim for anyone who knowingly submits or causes the submission of a false or fraudulent claim to the United States.
The statute, first passed during the Civil War to fight war profiteering, includes an ancient legal device called a “Qui Tam” provision (a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself”). This citizen suit provision allows a private person (referred to as the “Relator” under the False Claims Act), to file a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States for payment.
Complex Filing and Prosecution Process
The False Claims Act has a highly complex process for the filing and pursuit of these claims. First, the Qui Tam Relator must be represented by an attorney. Second, the Qui Tam Complaint must, by statute, be filed under seal, which means that all records relating to the lawsuit are kept on a secret docket by the Clerk of the Court.
The Qui Tam Complaint, and all other court filings, remain under seal for a period of at least sixty days. At the conclusion of the sixty days, the Department of Justice must, if it wants the case to remain under seal, file a motion with the District judge showing “good cause” why the case should remain under seal. In most False Claims Act cases, the Department of Justice, with the consent of Relator’s counsel, files multiple motions to keep the case under seal, and these cases often remain under seal for several years while the investigation is conducted. So, if you are a Qui Tam Relator, do not expect fast results and prepare yourself for a life lesson in patience.
In addition to filing the Qui Tam Complaint under seal, the Qui Tam Relator, through counsel, must serve upon the Department of Justice a “Disclosure Statement” containing substantially all evidence in the Relator’s possession about the allegations in the Qui Tam Complaint. This Disclosure Statement is not filed in any court, and is not available to the named defendant.
Relator’s Share in the Recovery
The False Claims Act provides that the Qui Tam Relator is entitled to a reward from 15% to 25% of the Government’s recovery, if the Department of Justice intervenes, and 25% to 30% of the recovery if the Government does not intervene and the Qui Tam Relator and his or her counsel prosecute the case alone.
The False Claims Act does not offer guidance about the amount of the Relator’s share in the recovery. The statute only states that it depends on if the Qui Tam Relator “substantially contributed" to the prosecution of the case. This percentage is usually resolved by negotiation between counsel for the Qui Tam Relator and the Department of Justice. The Department of Justice has published guidelines for the Department of Justice attorneys to follow when approaching Qui Tam Relator’s with a percentage of the recovery offer. These guidelines, however, are not binding on courts.
The Government’s Investigation
Under the False Claims Act, the United States Attorney General (or a Department of Justice attorney) is required to investigate the allegations of False Claims Act violations in the Complaint. The investigation can involve law enforcement agencies (such as the Office of Inspector General of the victim agency, the Postal Inspection Service, or the FBI.) In some investigations where state agencies are also victims, state attorneys generals may participate in the investigation as well.
The government’s investigation will often involve specific investigative techniques, including subpoenas for documents or electronic records, witness interviews, compelled oral testimony from one or more individuals or organizations, and consultations with experts. In cases where the government undertakes a parallel criminal investigation, search warrants and other criminal investigation tools may be used to obtain evidence as well.
Possible Scenarios Following the Government Investigation
At the conclusion of the investigation, or earlier if so directed by the Court, the Department of Justice must choose one of three options named in the False Claims Act:
In practice, two other options exist for the Department of Justice:
The Department of Justice does not intervene in a Qui Tam case lightly, and usually requires approval by the Department of Justice in Washington, D.C. As part of the intervention decision process, the Department of Justice seeks the views of the investigative team, and prepares a detailed legal memorandum. This memorandum usually includes a discussion of efforts to advise the named defendant of the nature of the potential claims against it, any response provided by the defendant, and settlement efforts undertaken prior to intervention. This memorandum is considered to be attorney work product and is exempt from disclosure.
Upon intervention approval, the Department of Justice files:
Even if the Department of Justice intervenes, it does not necessarily mean that the Department of Justice will endorse, adopt or agree with every factual allegation or legal conclusion in the Relator’s Qui Tam Complaint. It has been the usual practice of the Department to file its own Complaint about 60 days after intervening, setting forth its own statement of facts that show the named defendant knowingly submitted false claims.
The Unsealing of the Qui Tam Complaint
After the Relator’s Quit Tam Complaint is unsealed, the Relator through his or her attorney has the obligation under the Federal Rules of Civil Procedure to serve the Qui Tam Complaint on each named defendant within 120 days.
Each named defendant has the duty to file an answer to the Complaint or a motion within 20 days after service of the government’s Qui Tam Complaint. Discovery begins shortly thereafter.
Often called Lincoln’s Law, the False Claims Act, 31 U.S.C. § 3729 et seq., provides for liability for triple damages and a penalty from $5,500 to $11,000 per claim for anyone who knowingly submits or causes the submission of a false or fraudulent claim to the United States.
The statute, first passed during the Civil War to fight war profiteering, includes an ancient legal device called a “Qui Tam” provision (a Latin phrase meaning “he who brings a case on behalf of our lord the King, as well as for himself”). This citizen suit provision allows a private person (referred to as the “Relator” under the False Claims Act), to file a lawsuit on behalf of the United States, where the private person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States for payment.
Complex Filing and Prosecution Process
The False Claims Act has a highly complex process for the filing and pursuit of these claims. First, the Qui Tam Relator must be represented by an attorney. Second, the Qui Tam Complaint must, by statute, be filed under seal, which means that all records relating to the lawsuit are kept on a secret docket by the Clerk of the Court.
The Qui Tam Complaint, and all other court filings, remain under seal for a period of at least sixty days. At the conclusion of the sixty days, the Department of Justice must, if it wants the case to remain under seal, file a motion with the District judge showing “good cause” why the case should remain under seal. In most False Claims Act cases, the Department of Justice, with the consent of Relator’s counsel, files multiple motions to keep the case under seal, and these cases often remain under seal for several years while the investigation is conducted. So, if you are a Qui Tam Relator, do not expect fast results and prepare yourself for a life lesson in patience.
In addition to filing the Qui Tam Complaint under seal, the Qui Tam Relator, through counsel, must serve upon the Department of Justice a “Disclosure Statement” containing substantially all evidence in the Relator’s possession about the allegations in the Qui Tam Complaint. This Disclosure Statement is not filed in any court, and is not available to the named defendant.
Relator’s Share in the Recovery
The False Claims Act provides that the Qui Tam Relator is entitled to a reward from 15% to 25% of the Government’s recovery, if the Department of Justice intervenes, and 25% to 30% of the recovery if the Government does not intervene and the Qui Tam Relator and his or her counsel prosecute the case alone.
The False Claims Act does not offer guidance about the amount of the Relator’s share in the recovery. The statute only states that it depends on if the Qui Tam Relator “substantially contributed" to the prosecution of the case. This percentage is usually resolved by negotiation between counsel for the Qui Tam Relator and the Department of Justice. The Department of Justice has published guidelines for the Department of Justice attorneys to follow when approaching Qui Tam Relator’s with a percentage of the recovery offer. These guidelines, however, are not binding on courts.
The Government’s Investigation
Under the False Claims Act, the United States Attorney General (or a Department of Justice attorney) is required to investigate the allegations of False Claims Act violations in the Complaint. The investigation can involve law enforcement agencies (such as the Office of Inspector General of the victim agency, the Postal Inspection Service, or the FBI.) In some investigations where state agencies are also victims, state attorneys generals may participate in the investigation as well.
The government’s investigation will often involve specific investigative techniques, including subpoenas for documents or electronic records, witness interviews, compelled oral testimony from one or more individuals or organizations, and consultations with experts. In cases where the government undertakes a parallel criminal investigation, search warrants and other criminal investigation tools may be used to obtain evidence as well.
Possible Scenarios Following the Government Investigation
At the conclusion of the investigation, or earlier if so directed by the Court, the Department of Justice must choose one of three options named in the False Claims Act:
- Intervene as the Plaintiff in one or more counts in the pending Qui Tam Complaint. Fewer than 25% of filed Qui Tam lawsuits result in an intervention on any count by the Department of Justice.
- Decline to intervene in one or all counts in the pending Qui Tam Complaint. If the United States declines to intervene, the Relator and his or her attorney may prosecute the action on behalf of the United States, but the United States is not a party to the proceedings apart from its right to any recovery.
- Move to dismiss the Relator’s Quit Tam Complaint, either because there is no case, or because the case conflicts with significant statutory or policy interests of the United States.
In practice, two other options exist for the Department of Justice:
- Settle the pending Qui Tam lawsuit with the named defendant before the intervention decision. This usually, but not always, results in a simultaneous intervention and settlement with the Department of Justice (and is included in the 25% intervention rate).
- Advise the Relator that the Department of Justice intends to decline intervention. This usually, but not always, results in dismissal of the Qui Tam action.
The Department of Justice does not intervene in a Qui Tam case lightly, and usually requires approval by the Department of Justice in Washington, D.C. As part of the intervention decision process, the Department of Justice seeks the views of the investigative team, and prepares a detailed legal memorandum. This memorandum usually includes a discussion of efforts to advise the named defendant of the nature of the potential claims against it, any response provided by the defendant, and settlement efforts undertaken prior to intervention. This memorandum is considered to be attorney work product and is exempt from disclosure.
Upon intervention approval, the Department of Justice files:
- A notice of intervention, setting forth the specific claims as to which the United States is intervening;
- A motion to unseal the Qui Tam Complaint filed by the Relator and the notice of intervention. All other documents filed by the Department of Justice up to that point remain under seal.
Even if the Department of Justice intervenes, it does not necessarily mean that the Department of Justice will endorse, adopt or agree with every factual allegation or legal conclusion in the Relator’s Qui Tam Complaint. It has been the usual practice of the Department to file its own Complaint about 60 days after intervening, setting forth its own statement of facts that show the named defendant knowingly submitted false claims.
The Unsealing of the Qui Tam Complaint
After the Relator’s Quit Tam Complaint is unsealed, the Relator through his or her attorney has the obligation under the Federal Rules of Civil Procedure to serve the Qui Tam Complaint on each named defendant within 120 days.
Each named defendant has the duty to file an answer to the Complaint or a motion within 20 days after service of the government’s Qui Tam Complaint. Discovery begins shortly thereafter.
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