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  • Writer's pictureJames A. Gustino

False Claims Act primer

Updated: Apr 29

The False Claims Act (FCA) is an extraordinarily effective tool to recover taxpayer-funded losses sustained by the U.S. government. It dates back to 1863, and originated as a means of combating the vendor fraud that was pervasive during the Civil War.

In 1986, Congress reworked the terms of the statute to invigorate its reach and offer powerful incentives to employees (and contractors) to come forward and bring to light the fraudulent billing practices of the companies and organizations for whom they work (or worked). Specifically, the FCA authorizes those employees and contractors (commonly referred to as "relators" or, more colloquially, "whistleblowers") to engage counsel to bring litigation on behalf of the U.S. government. The complaint that is filed with the federal district court is initially maintained "under seal" to allow the U.S. government to confidentially investigate the claims presented without the defendant organization receiving any notice that a lawsuit has been filed. After the government's investigation has sufficiently progressed, it elects whether it wishes to take the lead in prosecuting the case or allow the Relator's counsel to do so.

FCA cases can be time-intensive and expensive to bring to trial. However, should the case prove successful -- either at trial and through any appeals or via settlement -- the rewards are potentially quite significant. Generally speaking, in a successful FCA case the relator is entitled to receive a share of the recovery, which can vary between 15 to 25% if the U.S. government takes on the lead prosecution role, and between 25 to 30% if the relator's private counsel prosecutes the case.

Of great import to employees and contractors, the FCA incorporates strong anti-retaliation provisions that offer protection from adverse consequences should they investigate and report potential fraudulent activity. Employees and contractors may not be "discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer" because they investigated, reported or opposed fraud that "reasonably could lead to a viable FCA action,” or under circumstances where it could be determined that litigation was a reasonable possibility. To prove that the employer unlawfully discriminated against the employee or contractor he or she must show that the company had knowledge of the employee's protected activity and that the retaliation was prompted, at least in part, as a consequence of that activity. The legal remedies available to a successful FCA plaintiff are intended to "make the employee whole," and may include: (1) reinstatement with the same seniority status that the employee (or contractor) would have enjoyed but for the discriminatory behavior of the employer; (2) double the amount of back pay that would have been earned (and interest on that back pay award); (3) compensation for any "special damages" suffered (e.g., relocation expenses, severe emotional distress); and (4) reasonable attorneys’ fees and litigation expenses.

FCA cases have been highly effective in uprooting fraud and recovering taxpayer funds lost as a result of such fraud. In fact, since the FCA was amended in 1986, over $62 billion has been recovered by the government: If you would like more information concerning your rights under the FCA, you are invited to contact the firm for a confidential consultation at no cost to you.

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