False Claims Act Cases Result in $Billions Recovered

The United States Department of Justice announced that it recovered $4.9 billion in settlements and judgments in civil cases that involved fraud against the Government during fiscal year 2012. It was also reported that since January 2009, total recoveries under the False Claims Act totaled $13.3 billion, the largest four year total in the Justice Department’s history. Why should private citizens care about cases involving fraud against the Government? The answer is money.

Under the federal law known as the False Claims Act, private citizens can sue individuals or businesses that are committing fraud against the Government and recover money on behalf of the Government. Most states have similar laws, allowing private citizens to bring cases involving fraud against state agencies. These lawsuits are known as whistleblower, or qui tam, lawsuits. They allow the whistleblowers, known as the relators, to be rewarded for the risk they take in pursuing the case and exposing the fraud against the Government. If the Government prevails and recovers money, the whistleblower can receive anywhere from 15% to 30% of the amount recovered. Consider this fact in the context of the $4.9 billion in recoveries that the U.S. Government secured for fiscal year 2012. The private citizens, who obtained evidence of fraud against the Government and took the risk of pursuing qui tam lawsuits, were rewarded amounts totaling between $735 million and $1.47 billion.

Qui tam lawsuits have become a very powerful tool for private citizens to aid the Government in stopping various types of fraud, such as Medicare or Medicaid fraud perpetrated by healthcare providers, defense contractor fraud perpetrated by military suppliers, and other types of fraud that have a significant financial impact on the Government. The following list of qui tam lawsuits were brought by the whistleblower employees of companies who were defrauding the Government:

• A hospital employee exposed the hospital’s practice of billing the Government under Medicare and Medicaid programs for treatment of patients who were not eligible for these federal programs. The employee received $3 million after the Government entered into a $15 million settlement with the hospital.

• A nurse brought a qui tam lawsuit against her hospital employer, alleging fraudulent billing. After the hospital settled for $6.2 million, the nurse received 20% of the recovery.

• An employee of a defense contractor alleged that the contractor was defrauding the Pentagon by overcharging. The U.S. recovered $88 million as a result of the employee’s whistleblower lawsuit, and the employee received an award of almost $19 million, representing 21.5% of the Government’s recovery.

• In one of the largest qui tam awards in history, a former employee of pharmaceutical giant Pfizer, Inc. brought a qui tam lawsuit against the drug manufacturer, alleging the company was engaged in off-label marketing of one of its drugs for uses that were considered unsafe and dangerous. Ultimately, Pfizer paid a total of $2.3 billion to settle the Medicare fraud claim brought on behalf of the Government. The whistleblower received an award of more than $51.5 million.

How do you bring a qui tam lawsuit under the False Claims Act? Once a person, who is usually an employee or former employee of the wrongdoer, has adequate evidence of fraud against the Government, that person needs to retain a lawyer who has the expertise and resources to represent him or her. After a thorough investigation, the lawyer then files a lawsuit on behalf of the whistleblower against the wrongdoer. The lawsuit is filed under seal, which means that it is kept confidential from everyone except the Government. The purpose of the lawsuit being filed under seal is to allow the Department of Justice adequate time to investigate the allegations in the lawsuit, usually with the assistance of the whistleblower’s attorney.

Once the Government has completed its investigation, it decides whether to join, or intervene, in the case. If the Government decides not to intervene, the whistleblowers have the right to pursue the cases on their own. However, the chances of succeeding are higher when the Government chooses to join in the lawsuit. One reason for this is because when the Government is involved, the Government has the leverage of pursuing not only the civil lawsuit, but also filing criminal charges against the corporate or individual wrongdoer. The threat of corporate officers having to serve jail time for the alleged wrongdoing is often enough to bring about a settlement. Another factor which often results in a settlement, as opposed to a jury verdict, is that Defendants who are found liable may have to pay three times the amount of the Government’s losses plus penalties for the false claims that were proven. Consequently, most qui tam lawsuits are ultimately resolved through settlement negotiations between Justice Department attorneys and the attorneys for the wrongdoer.

The whistleblower’s award depends upon the quality of the evidence and case that was presented to the Government, the work of the whistleblower’s attorney, and the amount recovered by the Government. In cases where the Government chooses to intervene and it recovers money through a settlement or verdict, the whistleblower is entitled to recover anywhere from 15% to 25% of the recovery. In cases where the Government chooses not to intervene and the case is pursued successfully by the whistleblower and the whistleblower’s attorney, the award is between 25% and 30% of the recovery. As evidenced by the above-referenced, successful qui tam lawsuits, the potential reward to a whistleblower, or relator, can be quite lucrative.

Individuals who have evidence of fraud being committed against the Government and who are willing to become whistleblowers, or relators, should retain lawyers who have the experience and resources to investigate and pursue such cases. The attorneys representing the whistleblowers typically handle such cases on a contingency fee basis, meaning their fee is a percentage of the reward received by the whistleblower.