February 22, 2024

Elements of a False Claims Act Case: Examining the legal requirements that must be met to establish a violation of the FCA

The False Claims Act (FCA) delineates distinct criteria that must be met for a case to be eligible for consideration under its provisions. Primarily, a prerequisite is the existence of a false claim or statement presented to the government. This may encompass the deliberate presentation or instigation of false information, with the intent of securing payment from a government program. The false claim may manifest in various forms, such as invoices, contracts, or other documentation employed in billing or reimbursement processes.

The false claim or statement must be material to the government’s decision to pay the claim. In other words, the information must be significant and have a direct impact on the government’s decision-making process regarding payment. Materiality is a crucial factor in establishing liability under the FCA.

The defendant must have knowledge of the falsity of the claim or statement, or at least act with reckless disregard for the truth. This requirement emphasizes the intent behind the submission of false information, whether through actual knowledge or a willful disregard for the accuracy of the information provided.

The false claim must be associated with a government program, and there must be a corresponding obligation on the part of the government to pay. The connection to a government program is fundamental to bringing a case, as the statute is designed to combat fraud against government entities. Additionally, the government must have suffered damages as a result of the false claim or statement. This could involve financial losses incurred by the government due to the fraudulent activity. The damages are a key component in determining the extent of penalties and compensation that may be imposed on the defendants.

The FCA includes a qui tam provision, allowing private individuals, known as relators, to bring a lawsuit on behalf of the government. The government can then decide whether to intervene in the case. This provision encourages individuals with knowledge of fraudulent activities to come forward and assist in combating fraud against the government. These elements form the foundation for a case, providing a legal framework to address and penalize fraudulent practices that involve government programs. Successful cases may result in significant consequences for individuals or entities found liable under the FCA.

The Department of Defense’s Role in a Qui Tam Case

Qui tam cases under the False Claims Act see significant participation from the Department of Justice (DOJ). The DOJ’s engagement in qui tam cases is pivotal because these instances revolve around accusations of fraud directed at the government. In this context, the DOJ acts as the representative of the government’s interests, actively pursuing and handling such claims.

Here’s an overview of the DOJ’s role:

  • Investigation: When a whistleblower files a qui tam lawsuit, the DOJ is responsible for conducting an investigation into the allegations raised by the whistleblower. This investigation aims to determine the validity of the claims and assess the evidence provided.
  • Decision to Intervene: After the investigation, the DOJ decides whether to intervene in the qui tam lawsuit. If the government chooses to intervene, it means that the DOJ will actively participate in the litigation as the lead plaintiff. The decision to intervene is based on factors such as the strength of the case, the amount of potential damages, and the public interest involved.
  • Settlement Negotiations or Litigation: If the DOJ decides to intervene, it may engage in settlement negotiations with the defendant to resolve the case. Alternatively, if a settlement cannot be reached, the DOJ may proceed to trial, representing the government’s interests in court.
  • Government’s Share of Recovery: In successful qui tam cases, where the government recovers funds as a result of the litigation, the DOJ is entitled to a share of the recovery. The share can vary but typically ranges from 70% to 80% of the total amount recovered.
  • Whistleblower’s Share: The whistleblower, who initiated the qui tam lawsuit, is entitled to a share of the recovery as well. The share for the whistleblower ranges from 15% to 30% of the total amount recovered, depending on various factors, including whether the government intervened and the whistleblower’s level of involvement.
  • Oversight of the Litigation: Even if the DOJ does not intervene, it monitors the progress of the qui tam lawsuit and may choose to take over the case at a later stage if it deems it necessary.

What Happens in a Qui Tam Case?

Though every qui tam case is different, typically, there are a few steps to the process:

  1. A private citizen, with non-public information about a business or an individual defrauding the government, contacts a qui tam law firm.
  2. After gathering the evidence and evaluating the merits of the case and financial stability of the defendant, the whistleblower’s attorney decides whether to enter into a contractual relationship with the whistleblower, which is generally done on a contingency fee basis. This includes the qui tam portion as well as any retaliation cause of action.
  3. If the attorney and whistleblower agree to contractual terms, the attorney will spend a significant amount of time preparing a disclosure statement for the government and a complaint to file with the court.
  4. The Department of Justice places the lawsuit “under seal” for 60 days (or more, upon the government’s request) to carefully examine the claims.
  5. During the seal period, the government is encouraged to subpoena records from the defendant company to further substantiate the claims.
  6. During the seal period the case is not public information, and the accused is not notified. Occasionally, however, the government may request the court to partially lift the seal to discuss the allegations with the defendant and negotiate a potential settlement.
  7. Typically with the help of the relator’s attorney, the government decides to intervene or not intervene in the case.
  8. What happens next depends on the government’s decision to intervene.