Corporate Whistleblowers Get a Boost

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The highest court in the land recently sided with those who want to stop and punish a company’s bad acts.

In May the U.S. Supreme Court issued a ruling that extends the time a whistleblower has to bring legal action against corporations that are defrauding the federal government.  More specifically, whistleblowers now have four more years to file False Claim Acts litigation, also known as qui tam lawsuits, in which the federal government decides not to join.

Prior to the Supreme Court ruling, the statute of limitations for such qui tam cases was six years.  It is now 10, which is the same timeframe for cases when the federal government gets involved.  This means that all whistleblowers can file claims up to 10 years after a corporation’s fraudulent act.

What is the False Claims Act?

It is a law originally passed during the Civil War to protect the federal government from companies that were supplying defective products to the Union Army. Qui tam provisions of the act provide legal protections for individuals who bring forth charges of fraud against companies dealing with the federal government.  In those legal cases, the whistleblower is bringing charges on behalf of the federal government.

Those individuals have a legal right to compensation, which is a portion of what the federal government receives via a settlement or trial verdict.  That percentage is anywhere from 15 to 30 percent of the total financial award.  If the Department of Justice declines participation in a whistleblower case, the whistleblower may get that higher percentage of the recovery.

And the financial compensation is often significant.  In 2017, financial awards in whistleblower lawsuits relating only to the healthcare industry amounted to $445 million.  These typically involve overcharging the government via Medicare or Medicaid fraud.

When the False Claims Act was amended in 1986, whistleblowers were given the right to sue for up to three times the government’s alleged damages caused by a company’s fraud.

How Does a Qui Tam Lawsuit Work?

An individual can bring a False Claims Act lawsuit when he or she uncovers corporate behavior that harms the federal government.  The litigation must be based on internal information – company records that were not previously publicly disclosed or uncovered.  The whistleblower is not required to first bring the information to the company before filing the lawsuit.

When the Department of Justice declines to join, a qui tam lawsuit can still proceed, but the whistleblower is the sole plaintiff.  Often times when this happens, the defendant – the allegedly fraudulent company – treats the action and the whistleblower less seriously or ethically.

This Supreme Court ruling helps level the playing field for whistleblowers, offering similar statute of limitation protections whether or not the federal government is involved.

Even though whistleblowers have legal protections that encourage them to spotlight fraudulent companies, such litigation can be challenging.  Those who can and want to expose a company’s bad acts should discuss what they know with an attorney who represents whistleblowers.

The choice of a lawyer is an important decision that should not be based solely on advertisements.

Authored by Gray Ritter Graham, posted in Blog June 6, 2019


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