Qui Tam Lawsuits Offer Incentives for Whistleblowers to Come Forward

Thanks to a federal law that dates back to the Civil War, private individuals can sue other individuals, companies or organizations they suspect are defrauding the U.S. government. Fraud that today runs into the billions of dollars.

The False Claims Act, passed in 1863, was an effort to stop and catch contractors selling the U.S. government shoddy goods during the Civil War. A key part of that law is called the "qui tam" provision, which is basically an incentive for individuals to step forward with their evidence of fraud. In qui tam actions, citizens are filing suit on behalf of the U.S. government and can receive a percentage of what the government recovers by either verdict or settlement - typically 15 to 30 percent.

Those bringing suit are called "relators." The actual amount a relator receives depends on a few factors, including how large a role the relator played in the prosecution of the case.

Guidelines for Bringing Whistleblower Claims

The Department of Justice has the option to join lawsuits brought under the False Claims Act. If for some reason the DOJ declines, the citizen bringing the suit can receive an even higher percentage of the recovery.

When a qui tam lawsuit is filed, it's under seal as the government reviews the claims and the defendant is unaware of the action. Employees are not required to first bring their allegations of fraud to the attention of their employers, but their proof must be based on "inside" company information and records. Information that was previously disclosed publicly cannot be used in qui tam litigation. There are other guidelines with qui tam litigation. With such complexities it may be prudent to consult an attorney when considering bringing a qui tam lawsuit.

$2.2 Billion in Financial Awards from Qui Tam Lawsuits

Whistleblower protections guaranteed under the law include reinstatement, double back pay, and compensation for other damages. The False Claims Act was amended in 1986 to increase protection from employer retaliation as well as increase the amount of damages the whistleblower may sue for - up to three times the government's damages. Since 1986, more than 4,000 qui tam lawsuits have been filed. According to the Department of Justice, from 1987 to 2008 the monetary awards whistleblowers received in all qui tam matters totaled $2.2 billion.

The most common industries subjected to whistleblower lawsuits are:

  • Healthcare - primarily filing false or inflated Medicare and Medicaid charges. According to ABC News, the federal government experiences $60 billion in Medicare fraud each year.
  • Defense - falsified testing, contractor kickbacks and/or overcharging
  • Pharmaceuticals - fraudulent sales and marketing practices. This type of fraud often involves drugs approved by the Food and Drug Administration

Whistleblower lawsuits can also be brought under various state and local laws.

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