Just before the holidays, the U.S. Department of Justice (DOJ) announced a very nice Christmas present for U.S. taxpayers: more than $2.8 billion recovered through False Claims Act settlements during the 2018 fiscal year.

These funds came as the result of judgments from civil cases that had been filed by whistleblowers, involving fraud against the federal government. Since Congress strengthened the False Claims Act under the Reagan Administration, qui tam claims have reclaimed nearly $60 billion for the national treasury in False Claims Act Settlements from corporate criminals seeking to defraud the country’s taxpayers.

About False Claims Act Settlements and Qui Tam Law

The False Claims Act is a federal statute that does two things. Primarily, it imposes liability on individuals and corporations (most often those with federal contracts) who attempt to defraud the federal government. According to Principal Deputy Associate Attorney General Jesse Panuccio, these fraudsters are usually “unscrupulous actors [who] undermine federal healthcare programs or circumvent safeguards meant to protect the public health…[or] deceitful contractors overcharge our military or sell faulty equipment to our law enforcement agencies.”

The other component is the qui tam provision that protects individuals who come forward as whistleblowers from retaliation by employers who are involved in fraudulent activities. The qui tam provision also rewards whistleblowers by giving them a percentage of any False Claims Act settlements.

A Brief History of the False Claims Act

The False Claims Act (FCA) traces its origins to the American Civil War of 1861 – 1864, and is often referred to as the “Lincoln Law.” During that conflict, contractors on both the Union and Confederate sides reportedly sought to defraud their respective governments by selling sick and aged horses and mules, defective armaments, tainted rations and more. One infamous example was the the “Hall Carbine Affair,” in which J.P. Morgan (founder of the bank that now bears his name) financed the purchase of 5,000 defective surplus rifles, which were subsequently re-sold to the Union Army at a markup of over 500 percent.

During the two World Wars, as the U.S. Attorney General’s Office chose to prosecute offenders under existing criminal statutes – after which lawyers would file civil complaints in order to obtain False Claims Act settlements. During the massive increases in military spending under the Reagan Administration, the issue of fraud among federal contractors became a significant issue, leading to revisions of the FCA in 1986.

Qui Tam Provisions

More than 70 percent of False Claims Act settlements are due to the courage of whistleblowers. Qui tam laws trace their origins to ancient Rome and Anglo-Saxon England; the term itself is an abbreviation of a Latin phrase, meaning “He who sues in this matter for the king as well as for himself.” As it is today, such laws encouraged private citizens to inform authorities of illegal activities by giving rewards to the informer (known today as a “relator”).

During colonial times and in the first years of the republic, the newly-formed U.S. government relied on whistleblowers, as its enforcement powers were limited. The Continental Congress passed the first whistleblower protection laws in 1778.

Filing a Claim Under the FCA

Those who have knowledge of fraudulent activity by an employer should contact an experienced qui tam attorney. Be aware that in order to qualify for a percentage of any False Claims Act settlements, a relator must file a complaint within a certain time frame, as these claims are subject to a statute of limitations.