Under the Collar

Early in our democracy, the government recognized the importance of incentivizing private citizens to report government fraud and abuse. The False Claims Act was enacted during the Civil War to help catch and punish contractors supplying the Union army with shoddy goods. Qui tam, or whistleblower actions under the False Claims Act, put a civilian in the place of the government and permit actions on the government’s behalf. Whistleblower laws not only permit a percentage-based recovery for that individual if the action is successful, but protect the whistleblower from retaliation.

More often than not, this plays out in a scenario where an entity contracts with the government to provide a service, and the entity either fails to provide the service as promised or lies about the value of the service provided. Someone – specifically, someone with inside knowledge – becomes aware of the nature of the scheme and follows the guidance under the False Claims Act for filing a complaint. The Act promises that “[i]f the suit succeeds, the private party may receive up to 30% of the government’s award.” 

Whistleblowers filed 598 qui tam suits in 2021, resulting in about $1.6 billion in settlements and judgments. Of that amount, whistleblowers collected between 15% and 30% of the total recovery in their cases.

After filing a case as a whistleblower or “relator,” the government has the opportunity to step in and handle the litigation. If the government declines, the relator litigates at his or her own expense. The government declining a qui tam action does not necessarily mean that the action is not valid, but, practically, the cases that the government litigates are far more likely to succeed. 

Like any incentive, qui tam actions can be abused. To protect against vexatious or frivolous whistleblower suits, the False Claims Act provides a mechanism for awarding fees to a prevailing defendant if the suit was brought simply for harassment.

Whether you are accused by a relator of violating the False Claims Act, or you believe you may have a qui tam action yourself, do not hesitate to reach out to the Bowles Rice White Collar Defense team for a consultation. In the meantime, you can celebrate National Whistleblower Appreciation Day on July 30.