The 1863 federal False Claims Act (FCA) has gone through many changes. The act was revised in 1986, which strengthened it and made it the prime federal whistleblower statute. FCA reports of fraud have increased from an average of six per year pre-revision to 450 per year in 1998.
Lawsuits brought under the FCA are known as “qui tam” actions. Under the 2002 FCA, a successful lawsuit brought by a whistleblower will net the whistleblower between 25 and 30 percent of all money recovered by the action if the government decides not to join in the lawsuit. If the government does join the lawsuit, the whistleblower can net between 15 and 25 percent of the total proceeds of the suit. This is in addition to reasonable expenses and attorneys fees.
Under the False Claims Act, a business found guilty of defrauding the federal government can be fined from a minimum of $5,000 to a maximum of$10,000 for each violation. In addition, a business found liable under the act must pay three times the amount of damages that the government sustains as a result of the violation. There is a statute of limitations under the act of 10 years. An employee can also file a separate lawsuit if the person is fired, demoted, or harassed at work as a result of bringing an FCA action against the employer.
FCA lawsuits can be very lucrative. Since 1986, over 3,000 FCA cases have been filed and about $3 billion has been recovered. The average recovery in an FCA case is $5.8 million, and the average whistleblower’s reward has been about $1 million. The government intervenes in only 21 percent of the FCA cases. The only limitations the FCA puts on these types of suits is that a member of the armed forces is precluded from asserting a claim against another member of the armed forces.
FCA cases generally include three common elements in order to prove fraud under the act. The defendant must present a claim for payment to the federal government, or the defendant must cause a third party to submit a claim; that claim must be made knowingly; and the claim must be false or fraudulent.
Claim is defined under the FCA as any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.
“Knowingly” is defined as actual knowledge of the false information; acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard of the truth or falsity of the information.
The Supreme Court recently upheld the FCA. In the 2000 case of Vermont Agency of Natural Resources v. United States, the high court determined that citizens have standing to file whistleblower suits under the act, though the court also ruled that states and their agencies are not liable under the provisions of the act.
