January 3, 2024
Over the history of the False Claims Act (FCA), many billions of dollars in penalties have been paid by liable defendants in penalties following allegations of wrongdoing by whistleblowers, with a good portion of those financial payments going to the whistleblowers themselves as a reward for coming forward with information regarding fraud against the US government.
In 2022 alone, FCA settlements and judgements under the False Claims Act resulted in the payment of over $2.2 billion in penalties by FCA defendants, whether through trial or in a settlement, and over $72 billion have been recovered in FCA lawsuits since 1986, when the FCA (which has existed in some form since the Civil War) was strengthened. FCA whistleblower plaintiffs in successful FCA lawsuits are eligible to receive a financial reward of between 15 and 30 percent of the total penalties recovered by the government. With a number of recent FCA settlements reaching into the hundreds of millions, the simple math is that there can be an extraordinary financial incentive for potential whistleblowers with knowledge of wrongdoing to come forward.
The numbers alone indicate that for both potential FCA plaintiffs and defendants alike, the stakes in FCA litigation can be incredibly high, and thus potential FCA litigants on both sides of the table are encouraged to work with experienced FCA counsel as early as possible in the process.
Types of False Claims
The FCA makes it illegal to, among other things, knowingly submit a false claim for payment to the federal government. Any individual or organization who defrauds the US government by violating the FCA can be sued under the FCA. Such fraud can take the form of the following:
- Healthcare Fraud: A leading type of fraud underlying successful FCA lawsuits is related to the federal Medicare and Medicaid programs as well as TRICARE, the federal health care program for military service members and their families. Such fraud may take the form of billing for services or drugs that were not provided and/or necessary, upcoding, improper classification of pharmaceuticals and services, and providing substandard services.
- Covid-Related Fraud: In recent years, there has been increased FCA litigation related to Covid fraud, such as fraudulent PPP payments and vaccine-related fraud.
- Military Procurement and Law Enforcement Fraud: A common type of FCA fraud since the statute’s beginnings in the 1860s is fraud related to the military and law enforcement. This can include providing defective goods, taking kickbacks, using government funds for unnecessary services, and failing to meet cybersecurity requirements.
- Customs Fraud: Violations of US customs laws can also result in FCA liability for a company, including misclassification of goods, country-of-origin fraud, and other fraudulent attempts to avoid paying accurate customs duties.
Steps to Take if You Suspect Fraud
In many cases, the federal government – and the US taxpayers who are the ultimate victims FCA fraud – have very low visibility in knowing that FCA fraud is occurring, making enforcement of federal laws challenging for law enforcement and federal agencies alone. When one considers the sheer number of healthcare transactions each day for which there is Medicare or Medicaid reimbursement, or the staggering amount of imported goods entering the US on a constant basis, it makes sense that the federal government often has to rely on private individuals with knowledge of the fraud to come forward and present such evidence. Oftentimes, FCA whistleblower plaintiffs are employees or former employees of the offending business, but a plaintiff can be essentially any person with knowledge of the fraud, even in some cases where the plaintiff played some role in the perpetuation of the fraud.
Potential whistleblower plaintiffs who believe they have evidence of a FCA violation are encouraged to speak with an attorney early in the process to determine whether a potential FCA claim exists, what next steps should be taken, and how best to proceed. There are numerous provisions in the law affecting whistleblower eligibility for a financial reward, and it is important to understand and conform with these legal provisions to protect one’s interests. Furthermore, it is critical to properly navigate internal dynamics at the earliest stages to avoid retaliation and other negative consequences, which can be extremely difficult and potentially fatal to the success of an FCA whistleblower recovery without legal counsel.
Dealing with Potential FCA Liability
Given the huge liability that can come with an FCA lawsuit, it is of obvious and utmost importance for a potential or current FCA defendant to work with experienced counsel to assess their risk and move forward towards a positive resolution of the situation. The directors and chief officers of a company are often not necessarily in a position to know that those in the organization have taken or are currently taking illegal actions that can result in FCA liability, and the manner in which the company responds early and aggressively to proactively deal with internal wrongdoing while also appropriately responding to litigation can be just as important as the underlying FCA violations themselves.
For individuals and companies facing potential FCA claims, it is important to engage counsel at the first sign of such a claim, even if no such claim has yet been asserted. Whistleblower plaintiffs typically are working with counsel for weeks or months prior to asserting a claim (as is in their strategic interest to do so), thus waiting for a lawsuit to be served before engaging counsel can put you and your company far behind the starting line.
Working with Experienced California FCA Counsel
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.