Overview of the False Claims Act

The federal False Claims Act, sometimes referred to as the "Lincoln Law," allows those not affiliated with the government (i.e. private sector employees) to file claims alleging fraud against the government. The law was strengthened in 1986 in the wake of reports that defense contractors were routinely engaged in price gouging. For instance, a federal contractor that sells the government equipment known to be defective may be accused of violating the False Claims Act. To file a False Claims Act is to "blow the whistle;" but as with other whistleblower claims, qui tam actions must be made in good faith in order to receive legal protections.

Those who bring qui tam actions under the False Claims Act are eligible for between 15 percent and 30 percent of the amount of fraud recovered. So if a contractor overcharges the government by $100,000, the person bringing the claim may receive between $15,000 and $25,000 as a reward once the money is recovered.

False claims include overcharges; charges for services not provided; failure to deliver items that were sold; false reports about a product's quality; failure to properly test products; or any action that is intended to defraud the government.

How to Bring a Qui Tam Action: The Basics

Any invidivual may bring a qui tam action against an entity that has allegedly defrauded the government, not just employees of that entity. When the qui tam claim is initiated by a private individual, called the "relator," it is filed "under seal" for at least 60 days -- often much longer -- and thus kept confidential. The government investigates the allegations during this time and takes over the qui tam action if it decides to get involved. Absent government involvement, the individual still may pursue the action on his or her own.

The civil complaint pertaining to the qui tam action must include a "written disclosure of substantially all material evidence and information," according to federal law. But it's important to stress that this information may not be freely disclosed outside of the complaint.

Damages and Awards in Qui Tam Actions

Damages paid by defendants found guilty of violating the False Claims Act are set at three times the amount of money unlawfully obtained. In addition, the liable defendant may have to pay a $5,000 to $10,000 penalty per claim; punitive damages in extreme cases; and the court and attorney costs for all parties. In other words, it can be extremely expensive for those who violate the Act.

Awards for successful quit tam actions are fixed by the court and based on whether the government intervened on the relator's behalf. If so, then the relator may be awarded between 15 percent and 25 percent. If not -- if the relator prevails without the help of the government -- he or she may be eligible for an award of between 25 percent and 30 percent of the fraud amount.

To learn more about qui tam whistleblower actions, click on one of the following links.