March 13, 2023

Whistleblower settlements and judgments are on the rise. In February 2023, the United States Department of Justice reported that during the 2022 fiscal year, ending September 30, 2022, the United States government and whistleblowers were party to 351 settlements and judgments, which was the second-highest number ever reported in a single year. During the prior fiscal year, the Department of Justice reported that total judgments and settlements exceeded $5.6 Billion, which was the second-largest amount in a single fiscal year in United States history.  During both years, the largest percentage of whistleblower settlements and judgments were for false claims related to the healthcare industry, although other forms of false claims are also on the rise.

Whistleblowers Are Often Employees With First-Hand Knowledge

As it relates to the United States’ False Claims Act, a whistleblower is an individual who reports a company, organization or individual for tendering a false claim to the United States.  A whistleblower must have firsthand knowledge of the false claim, meaning that the whistleblower must have personal knowledge of at least some of the facts underlying the false claim.  Often, this knowledge is gained by employees working at companies who perpetrate false claims on the government in the course of business.

Examples of whistleblowers include those who use the False Claims Act to report the following violations of law:

  • Employees who report a company for overcharging the United States for a product or service;
  • Employees who report a company for underpaying the United States;
  • Employees who report a company for avoiding an obligation to pay the United States, for example tariffs or duties;
  • Employees who report an employer for receiving an illegal kick-back related to government programs; or
  • Employees who report a company for keeping an overpayment received from the United States.

Importantly, the False Claims Act includes an “anti-retaliation provision” that is designed to protect employees who bring whistleblower claims from being retaliated against by their employer, including protections from being fired, demoted, suspended, or discriminated against.

Prospective Whistleblowers Should Immediately Contact an Attorney to Help Protect Their Claim

It is crucial for prospective whistleblowers to understand the “first to file” provision of the False Claims Act. Pursuant to the “first to file” provision, no person other than the United States Government may bring a false claims action based on facts that already underlie a pending action.  Basically, this means that the first person to file a claim about a specific false claim is the only person who can receive compensation upon successful prosecution of that claim.  Put another way, if there is a pending whistleblower action regarding the same false claims, the subsequent filer will not receive the incentives for bringing a complaint.

This makes it imperative for employees, or anyone else who believes they may have a whistleblower claim, to act immediately. For example, if multiple employees have the same “firsthand knowledge” and bring whistleblower actions separately regarding the same false claim made by their employer, only the “first to file” will have a chance to collect.  Any prospective whistleblower is advised to immediately contact an attorney who can help guide them through the process nuances and delicacies of the process.

Whistleblowers Can Receive Up to 30% of Total Damages Collected

The False Claims Act was originally enacted in 1863 to fight fraud by contractors selling goods to the United States Government during the Civil War. Since that time, Congress repeatedly revised the False Claims Act to provide enhanced incentives to whistleblowers, as well as additional protections for whistleblowing employees against retaliation.

A whistleblower who brings a successful claim under the False Claims Act can receive between 10% and 30% of the total damages collected, depending on whether the government “intervenes” (or joins) in the lawsuit. These damages can include not only a portion of the actual monetary losses to the government but also a percentage of the “treble damages”, which means three times the amount of actual damages. Further, prosecution of a whistleblower case can result in the imposition of a “per incident penalty”, which is essentially a per-incident fine on the company, organization or individual who perpetrated the false claim on the United States.  These per-incident penalties are also statutorily linked to inflation, meaning that they rise as inflation rises, as it has in recent years.   While statutorily called a “penalty”, these penalties create what is functionally punitive damages.

There is no question that prospective whistleblowers are highly incentivized to report false claims. According to the United States Department of Justice, during the 2022 fiscal year alone, the United States paid out over $488 Million to whistleblowers who filed the actions.

False Claims Actions Regularly Involve Medical Industry Fraud, Customs Fraud, COVID-19 Related Fraud, Procurement Fraud and Kickback Fraud

The False Claims Act covers a wide variety of fraud perpetrated on the United States. Examples of fraud giving rise to a claim under the False Claims Act include: 

  • Medical Industry Fraud, including Medicare Fraud, Medicaid fraud, dental fraud, nursing care fraud, and fraud related to kickbacks provided to healthcare providers;
  • Customs Fraud, related to goods imported into the United States including fraud relating to the underpayment of duties and tariffs, as well as fraud related to underreporting of countervailing duties and anti-dumping;
  • COVID-19 Related Fraud, including fraud related to businesses improperly receiving benefits under the Paycheck Protection Program;
  • Procurement Fraud, involves the United States’ purchase of goods and services, including government contractors falsifying pricing data, submission of materially false costs under government contracts, companies providing goods and services that did not comply with government requirements, or illegal kickbacks involving government contracts.

These frauds can range in varying dollar amounts and against different types of defendants. For example, according to the Department of Justice, for the 2022 fiscal year, settlements and judgments ranged from $2 Million to $843.8 Million, and included those against large corporations, closely held companies, and individuals.

If you have firsthand knowledge that your employer, or any other person or entity, has submitted false claims to the United States Government, you may be entitled for compensation for bringing a claim under the False Claims Act. However, due to the nuances and delicacies of bringing such a claim, you should consult with an attorney before doing so. Contact Zweiback, Fiset & Zalduendo for your free consultation today.  

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