Qui Tam “Whistleblower” Lawsuits Protect Government Against Fraud

Our modern laws have deep roots.  Almost exactly one hundred fifty years ago, during the American Civil War, unscrupulous traders (our early defense contractors) regularly sold the Union Army swaybacked mules, decrepit horses, rancid provisions, defective guns, and useless ammunition.  This fraud was so widespread and wasteful that Congress responded with the 1863 False Claims Act, also known as the “Lincoln Law,” which offered a reward to citizens who successfully sued fraudsters on behalf of the government.  The Act contained what is called a “qui tam” provision, an abbreviation of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, which means “[he] who pursues this action on our Lord the King’s behalf, as well as his own.”  This concept of qui tam was imported into American jurisprudence from the same medieval English common law that still forms the foundation of large parts of our current legal system.

Qui tam lawsuits are a subset of a larger category of “insider information” lawsuits that are known under the general name of “whistleblower” cases.  In a generic “whistleblower” suit, someone with inside information (usually an employee) has information about an illegal business practice, and the lawsuit is designed to prohibit any further corporate fraud, which may affect other employees, shareholders, or the public.  A set of laws exists that is designed to protect the whistleblowing employee from retaliation from their employer.  In contrast, the qui tam version of whistleblower lawsuits suits is limited to suits against persons or entities that are defrauding the government, not private interests.

Under the current False Claims Act, 31 U.S.C. §3729, people possessing inside information about fraud committed against the federal government, known as “relators,” may file a suit against those government contractors.   Florida has a similar statute known as the “Florida False Claims Act,” §68.081 et seq. Fla. Stat., which is designed to protect against frauds committed against employees, officers, or agents of the State of Florida.  Similar statutes also exist in other states.  A relator who files suit under either Act need not be personally harmed by the fraud, but the information in the relator’s possession must not be public knowledge, unless the relator was the “original source” of the public disclosure.  Many qui tam cases involve fraudulent Medicare or Medicaid practices, improper activities against defense contractors, or contractors on public works projects such as road construction.

Only an individual represented by a lawyer may bring a qui tam suit, but the statute allows the relator to receive a portion (usually about 15-25 percent) of any recovery, as well as his or her attorneys’ fees.  It is common that attorneys handle qui tam cases on a contingency basis, so the relator has little (if any) economic risk in the litigation.

The process works as follows.  Once the qui tam relator with inside knowledge of a fraud against the government selects a lawyer, a lawsuit is filed with enough supporting factual allegations and documentation to permit a thorough governmental investigation.  A federal qui tam suit is filed “under seal,” meaning that it is kept secret from everyone but the government, and it remains initially sealed for 60 days.  This gives the Justice Department, the appropriate Attorney General in the district where the lawsuit is filed, or the appropriate State authorities (in a non-federal qui tam action) an opportunity to carefully investigate the suit’s factual allegations.  Frequently, even the target of the suit is not told about the existence of the sealed case.  The seal period is frequently extended, as the investigations can be protracted.  These investigations are assisted, in appropriate cases, by the Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service, or other appropriate State or federal agency.

A suit brought under Florida’s False Claims Acts is similar to a suit brought under the Federal Act, except that after investigation, the suit can be taken over by the Florida Department of Legal Affairs, or the Florida Department of Financial Services, both of which have statutory enforcement powers.

After the government investigates the allegations (often with the relator’s attorneys’ assistance), the government decides whether it will join or “intervene” in the suit.  Typically, the government intervenes in only a small percentage of qui tam lawsuits, and although relators have the option under the False Claims Act to proceed on their own, chances of success are much higher when the government joins in the action.  Sometimes, the government will have the Court partially lift the seal so that settlement options can be explored.  Many successful qui tam cases are resolved through these settlement negotiations rather than a full court trial.  Defendants found liable under the False Claims Act may have to pay as much as three times the government’s losses, plus additional penalties.

The amount of the relator’s reward can depend on many factors, including the quality of the case as presented to the appropriate governmental agency, and the participation of the relators’ attorney if and when the government decides to intervene.  The benefit to the relator is based on the procedural status of the resolution:  if government intervenes and recovers through a settlement or a trial, the relator will receive between 15 percent to 25 percent of the recovery. If the government doesn’t intervene in the case, however, but if the case is successfully pursued by the relator and his or her legal team, the stakes are increased and the relator’s reward will be between 25 and 30 percent of the government’s recovery.

The financial consequences of qui tam actions can be significant.  In 2012, a suit against Maersk Group, a Danish conglomerate active in shipping and transportation, was settled when Maersk agreed to pay $31.9 million in fines without admitting wrongdoing.  The relator, who had charged that Maersk overcharged when sending shipments to U.S. forces in Iraq and Afghanistan, was entitled to $3.6 million of that settlement.  Also in 2012, the British pharmaceutical giant GlaxoSmithKline agreed to pay $3 billion to settle two separate qui tam suits for “off-label” marketing, which is promoting drugs for uses not approved by the Food and Drug Administration.  Other charges included false pricing, Medicare fraud, and paying kickbacks to physicians to promote GSK products.   Another drug company, Pfizer, settled claims in 2011 for $14.5 million in connection with the off-label promotion of a drug.  Other substantial False Claims Act settlements have ranged from things as diverse as improper billings, the supply of defective munitions, and excessive markups.

Many successful qui tam cases, not surprisingly, have involved Medicare fraud.  In late 2012, a $95 million settlement was announced in a case first launched by a Florida resident who worked for a company for 14 years, before becoming concerned about illegal Medicare marketing practices.  The total reward to the relator in that case was approximately $20 million.  In late 2013, an ongoing qui tam action was unsealed which deals with deceptive billing practices at Vanderbilt University Medical Center.  According to the lawsuit, the Center engaged in a “scheme to maximize income from its medical practices by submitting false claims to federal and state health insurance programs for physician services” that did not meet Medicare’s billing standards.  Similar wrongdoing is frequent.

In conclusion, qui tam suits are a powerful way for private citizens who have inside knowledge of improper practices help the government stop fraud, including Medicare and Medicaid abuse.  Billions of dollars stolen from the U.S. Treasury (and taxpayers) have been recovered under the False Claims Act, and qui tam relators have received substantial rewards for their professional and personal risks and efforts.  Relators’ qui tam suits have stopped fraud which costs taxpayers money, and which might otherwise endanger the lives of medical patients, soldiers, and others.

Once a person has evidence of fraud against the government, and decides to blow the whistle in a qui tam suit or other whistleblower action, that person needs to carefully select a lawyer, whose work will be key to the success of the qui tam case – including subsequent government investigations and involvement.  To better understand how Johnson Pope can help with a “whistleblower” case, you can contact Guy M. Burns or Jonathan S. Coleman at Johnson Pope’s St. Petersburg offices, at (727) 800-5980.