June 21, 2022
Defendants in a False Claims Act claim (also referred to as an FCA claim or “qui tam” claim when pursued by a private plaintiff) who are accused of submitting a false claim to a state or federal government – for example where an entity or individual charges the government for services that were never provided, or inflating the costs of goods or services that were provided in the context of healthcare or defense procurement – face the possibility of steep financial penalties, reputational risk, criminal liability, and the inability to contract with the government going forward.
Plaintiffs who pursue FCA claims (referred to as “relators”), on the other hand, may be able to win a financial reward for being a successful whistleblower in exposing fraud, which can include 15% to 30% of the financial penalties levied against an offending entity in an FCA suit. Such whistleblower rewards often amount to millions of dollars awarded to a plaintiff for successfully pursuing an FCA claim.
Notably, many states have their own state FCA statutory regimes as well. While this article focuses on the federal FCA framework, many state FCA statutory regimes share similarities with federal FCA law.
Understanding The False Claims Act and Its Purpose
While the False Claims Act may be unfamiliar to many (including those who learn about its existence after a lawsuit has been initiated against them or their company), it is actually a federal statute with a long history, dating back to the Civil War. In response to concern that privately-owned suppliers of goods to the Union Army were defrauding the US government, Congress passed the False Claims Act in 1863, which provided for specific penalties to be imposed on suppliers of goods and services that knowingly defrauded the federal government.
Over the 150+ years that the FCA has been in existence, it has been amended several times, and its reach has grown as the federal government itself has become more involved in the lives of Americans, e.g. in providing healthcare and other services to citizens.
The size of the penalties imposed upon those who are found to violate the FCA has also grown: currently, an offender faces penalties of $5,500 to $11,000 for each false claim submitted to the federal government as well as three times the damages (“treble damages”) incurred by the government due to the false claims. In some cases, these penalties can be enormous: for example, in 2012 GlaxoSmithKline paid $3 billion in penalties to resolve its criminal and civil liability related to illegal marketing practices involving its drugs Paxil, Wellbutrin, and Avandia, among others. That same year, Johnson & Johnson paid $2.2 billion as part of an FCA settlement related to its actions related to certain drugs.
Notably, both those cases were pursued by private whistleblower plaintiffs who were able to obtain enormous financial rewards for their efforts: an estimated $250 million in the case of GlaxoSmithKline and $167 million in the case of Johnson & Johnson.
The Elements of an FCA Claim
To bring a successful FCA claim, in most cases a whistleblower plaintiff will prove that a person or entity:
- Knowingly presented (or caused to be presented) a false or fraudulent claim for payment or approval; OR
- Knowingly made, used, or caused to be made or used, a false record a statement material to a false or fraudulent claim; OR
- Conspired with another to do one or both of the above (conspiracy means to make an agreement to commit a violation, even if the violation did not necessarily occur); OR
- Had possession, custody, or control of property or money used or to be used by the government but failed to deliver all of that money or property to the government; OR
- Provided documentation to the government of the receipt of property that is untrue with the intent to deceive the government; OR
- Knowingly bought or received a pledge of property from a government employee or official who was not authorized to sell or pledge property; OR
- Knowingly made a false record or statement relating to an obligation to transit money or property to the government, or knowingly concealed or improperly avoided or decreased an obligation to pay or transmit money to the government.
In practice, FCA claims are often brought against defendants in the pharmaceutical industry, healthcare industry, and defense procurement industry for actions such as:
- “Off label” marketing of drugs for uses other than their approved uses
- Billing for medical services that were either never provided or which were unnecessary
- Overbilling for medical services that were provided, e.g. “upcoding” of medical services
- Use of kickbacks to promote the selection of goods or services
- Overbilling for services or goods provided in the defense and military context
- Use of government resources for non-compliant financial products
Where a private plaintiff brings an FCA claim, the government will have the option of joining the private party in pursuing the claim. But even if the government does not join the private whistleblower in pursuing the claim, the private plaintiff may still pursue the claim and may even be eligible to receive a higher percentage of any penalties imposed as a result.
Requirements of the Plaintiff
A plaintiff seeking to bring a FCA claim is not required to have worked in the entity that committed the violation, although many do (frequent plaintiffs in FCA claims include doctors, nurses, and healthcare executives, for example). A plaintiff simply needs to have some knowledge of the violations in order to provide the initial evidentiary showing to pursue such an FCA claim. Typically, a whistleblower plaintiff with some knowledge of violations will work with an experienced FCA attorney in a completely confidential manner, and the attorney will work with the plaintiff to collect and assess the evidence, while protecting the plaintiff from retaliation and other negative collateral consequences.
In some cases, a whistleblower plaintiff may be a person who was involved in at least some part of the wrongdoing. In such cases, a plaintiff may get a reduced award, but they may still pursue the lawsuit in many cases assuming they were not convicted of conduct relating to the FCA violation.
Importantly, if another party has already initiated a qui tam lawsuit relating to the alleged FCA violations, or the government is already a party to a case involving such conduct, it may be impossible to bring a case. Thus, it is in the interest of a potential whistleblower to move quickly in working with an experienced FCA attorney in order to avoid being unable to pursue a claim.
Contact an Experienced False Claims Attorney
For both whistleblower plaintiffs and defendants alike, the process of litigating an FCA claim is often long (many such lawsuits average 3-5 years in length) and filled with risk. It is important to work with experienced FCA counsel from the earliest stages of either asserting or responding to a FCA claim to protect your interests and maximize your chances of a positive outcome. Our attorneys have combined decades of experience in both the federal government and in the highest levels of private practice, and are ready to work with you to counsel you and/or your business on any FCA issues you may be facing.