False Claims Act Update
In
2018, total judgments and settlements under the federal False Claims
Act amounted to more than $2.8 billion dollars with health care fraud
accounting for more than 85% of the recoveries. This month’s
article revisits “Lincoln’s Law.”
According
to a report issued by the Justice Department in December, total
judgments and settlements the Department recovered under the False
Claims Act (“FCA”) topped $2.8 billion. Notably, 2018 statistics show
that health care remains the top driver of FCA activity, both in the
number of cases filed and total dollars recovered. More than 85%
of all 2018 recoveries were healthcare related.
While reviewing the 2018 False Claims press release it struck me that
it has been five years since I offered a primer to our readers regarding
false claims litigation and whistleblower protection.
The first remarkable fact to know about the FCA is just how
old it is! In an attempt to curb a rash of fraud against the
federal government during the Civil War, Congress passed the initial
version of the FCA 156 years ago! It was signed into law on March
2, 1863 by President Abraham Lincoln ‒ hence it was also known as
“Lincoln’s Law” ‒ for the purpose of creating incentives for private
individuals to report federal contractors engaged in fraud against the
government during the Civil War. It subjected violators to both
civil and criminal penalties.
Now codified at 31 U.S.C. §§ 3729 – 3733 and commonly referred to as the FCA, the law’s Qui Tam provisions
authorize persons and entities in the private sector with evidence of
fraud against federal programs or federal contracts to sue the wrongdoer
on behalf of the United States Government. A Qui Tam
complaint must be filed with the court “under seal,” or secretly. The
complaint, together with a written disclosure of all the relevant
information known to the private plaintiff (called the “relator”), must
be served on the U.S. Attorney for the judicial district where the
complaint is filed, and on the Attorney General of the United States.
The government is required to investigate the allegations in the
complaint within 60 days, but extensions of that time limitation are not
uncommon. Once it completes its investigation, the government
must then notify the court either that it is electing to prosecute the
action itself (generally referred to as “intervening” in the action), or
that it is declining to intervene in the action, in which case the
relator can proceed with the action.
If the government intervenes in the Qui Tam action
it has the primary responsibility for prosecuting the action. It is
then empowered to settle or dismiss the action ‒ even over the objection
of the relator, so long as the court gives the relator an opportunity
to be heard and, in the case of settlements, the court determines that
the settlement is fair. (By contrast, a relator cannot settle or
dismiss a Qui Tam action without the consent of the government.)
Relators
The “incentives” embodied in the FCA are substantial. Upon government intervention in the Qui Tam
action, the relator is entitled to receive between 15 and 25 percent of
whatever single damages the government recovers. If the government
declines to intervene in the action, and the relator successfully
prosecutes the action alone, the relator’s share is increased to 25 to
30 percent plus the relator’s legal fees and other expenses in bringing
the action.
The FCA also provides that if the government chooses to
obtain a recovery from the defendant by an alternative remedy ‒ for
example, by “recoupment” of health care expenses from the violator’s
future revenues ‒ the relator is entitled to the same share of the
recovery as if the recovery was obtained through the relator’s FCA suit.
To be eligible to recover money under the Act, a relator must actually file a Qui Tam
lawsuit ‒ simply notifying the government about the alleged fraud does
not merit an award. A relator only receives an award if the
government recovers money from the violators as a result of the lawsuit.
To protect those who are brave enough to expose fraud
against the United States, the FCA also provides “whistleblower”
protection. Under § 3730(h), any employee who is discharged,
demoted, harassed, or otherwise discriminated against because of lawful
acts by the employee in furtherance of an action under the Act is
entitled to all relief necessary to make the employee whole. Such relief
may include, reinstatement, double back pay and additional compensation
for special damages including litigation costs and reasonable
attorneys' fees.
Violators
To be found guilty of violating the FCA a person must
have submitted, or caused the submission of, the false claim (or made a
false statement or record) with knowledge of the falsity.
In § 3729(b)(1) of the FCA, 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.
Violators of the False Claims Act themselves are liable for
three times the dollar amount of the “single damages” of which the
government is defrauded, as well as civil penalties for each false
claim. Currently, the civil penalty ranges between $5,500 and
$11,000 for each false claim (those amounts are adjusted from time to
time). The numbers of “claims” can be huge; for example, a health
care provider who knowingly submits false billing records regarding
medical treatments for each of its patients may be liable for civil
penalties regarding many thousands of “claims.”
The FCA also defines a “claim” as any demand for money or
property made directly to the Federal Government or to a contractor,
grantee, or other recipient if the money is to be spent on the
government’s behalf and if the Federal Government provides any of the
money demanded.
Many states, including North Carolina, have enacted similar false claims act provisions. North Carolina's False Claims Act
allows whistleblowers to bring suit in the name of the State of North
Carolina where a wrongdoer engages in conduct that defrauds the state or
local governments of taxpayer dollars. The NC False Claims Act
provisions are expansive in their scope and are designed to parallel the
Federal False Claims Act’s procedures and remedies. It also includes a
whistleblower protection provision.
The Justice Department’s 2018 Report and an associated Press Release are both available online.
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