In 2019, the Department of Justice obtained more than $3 billion in settlements and judgments from civil cases involving fraud and false claims against the government. Many of these cases are initiated by a Whistleblower – referred to as a qui tam “relator” – who files a lawsuit in order to expose a company’s fraudulent practices.
Types of Whistleblower Lawsuits
There are many types of Whistleblower cases, but most fall into three categories: (1) healthcare and pharmaceutical fraud; (2) defense/government contractor fraud; and (3) financial industry fraud.
Fraud against the government can take on many forms, including:
- Taking kickbacks in exchange for referring patients for certain services or prescribing certain medications, in violation of the Anti-Kickback Statute;
- Prohibited physician self-referrals in violation of Stark Law;
- Billing Medicare and Medicaid for phantom patients, services that were not rendered or services that were not medically necessary;
- Billing the government for products for which cheaper/inferior parts were used;
- Delivering goods in violation of inspection, testing or other technical requirements;
- False certification of regulatory and statutory compliance
In the United States, there are several federal programs that have the potential to reward whistleblowers for exposing false or fraudulent claims to the government for money or property. Additionally, many states have their own whistleblower programs to combat fraud upon state/local government funds and/or whistleblower retaliation. If you suspect a company is committing fraud against the federal or state government, you should strongly consider retaining an attorney to file a Whistleblower lawsuit on your behalf.
Enacted in 1863, The False Claims Act (“FCA”) is the Federal Government’s primary means of combating fraud against the government. The FCA authorizes and empowers the whistleblower to file a lawsuit, known as a “qui tam” lawsuit, on behalf of the government to expose wrongdoing. In return, the government rewards the whistleblower, also known as the “Relator,” with a share of the settlement or judgment obtained against the wrongdoer.
Generally, the FCA imposes liability on a wrongdoer for defrauding the government by making false or fraudulent claims to the government for money or property. A person or entity may also be liable under the FCA for:
(1) making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;
(2) delivering or causing to be delivered less than all of the money or property the Government is entitled to receive; and
(3) concealing, improperly avoiding, or decreasing an obligation to transmit money or property to the government.
In determining whether you have a whistleblower/qui tam case, one of the most important inquiries is whether federal government funds are involved in the fraudulent scheme. The False Claims Act does not reward whistleblowers for exposing fraud upon or between private persons or entities, such as commercial healthcare payors.
Federal government funds are usually found in cases involving:
- Medicare and Medicaid programs
- Military/Defense contracting and procurement
- Government contracting
- Federal grant and loan programs for students (GI Bill/Veteran’s Affairs, student loans, Head Start programs)
- Federal research grants
- FHA, HUD loans
- Environmental programs/regulations (Clean Air, EPA, Energy, etc.)
Whistleblower claims filed under the False Claims Act have resulted in substantial recoveries for the United States and the Whistleblowers. Under the False Claims Act, the Whistleblower is usually entitled to a share of the recovery in the amount of 15-25% of the settlement or judgment.
Additionally, many states have their own whistleblower programs to combat fraud upon state/local government funds and/or whistleblower retaliation. In Texas, those programs are the Texas Medicaid Fraud Prevention Act and The Texas Whistleblower Act.
In 1995, Texas enacted its own version of the False Claims Act, called the Texas Medicaid Fraud Prevention Act (“TMFPA”). While the False Claims Act is meant to combat fraud against the federal government, the TMFPA combats fraud against the Texas Medicaid program. The TMFPA allows private individuals to file a lawsuit on behalf of the State of Texas. Like the False Claims Act, the TMFPA rewards whistleblowers with a share of the settlement or judgment against the wrongdoer. The Texas Attorney General’s Office prosecutes claims filed under the TMFPA.
The TMFPA casts a wider net than the FCA in terms of prohibited conduct. Under the TMFPA, a person commits an unlawful act if the person knowingly:
- makes or causes to be made a false statement or misrepresentation of a material fact to receive a benefit or payment under the Medicaid program;
- conceals or fails to disclose information that permits a person to receive a benefit or payment under the Medicaid program;
- applies for and receives a benefit or payment on behalf of another person under the Medicaid program and converts any part of the benefit or payment to a use other than for the benefit of the person on whose behalf it was received;
- makes, causes to be made, induces, or seeks to induce the making of a false statement or misrepresentation of material fact concerning the conditions or operation of a facility in order that the facility may qualify for certification or recertification required by the Medicaid program;
- pays, charges, solicits, accepts, or receives a gift, money, a donation, or other consideration as a condition to the provision of a service or product or the continued provision of a service or product if the cost of the service or product is paid for, in whole or in part, under the Medicaid program;
- presents or causes to be presented a claim for payment under the Medicaid program for a product provided or a service rendered by a person who is not licensed to provide the product or render the service;
- makes or causes to be made a claim under the Medicaid program for a service or product that has not been approved or acquiesced in by a treating physician or health care practitioner, a service or product that is substantially inadequate or inappropriate or a product that has been adulterated, debased or mislabeled;
- fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service on a claim;
- conspires to commit a violation of the TMFPA;
- obstructs an investigation by the attorney general of an alleged unlawful act;
- makes, uses, or causes the making or use of a false record or statement material to an obligation to pay or transmit money or property to this state; or
- conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to this state under the Medicaid program.
A person who commits an unlawful act under the TMFPA is liable to the State of Texas for the amount of any payment or benefit provided under the Medicaid program as a result of the unlawful act, interest on the amount of the payment or benefit, a civil penalty of between $5,500 and $11,000 for each unlawful act plus two times the amount of the payment or benefit. The TMFPA provides for enhanced per claim penalties against the Defendant if the conduct in question resulted in injuries to the elderly, disabled, or a minor.
The state government will investigate the Relator’s claims of fraud and determine whether to intervene in the case. If the Texas Attorney General intervenes in the case, the Relator is usually eligible to collect 15 to 25% of the settlement or judgment. If the Texas Attorney General declines to intervene and the Relator proceeds with private counsel, the Relator is eligible to receive 25 to 30% of the settlement or judgment.
Like the FCA, the TMFPA also protects whistleblowers from retaliation by prohibiting an employer from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee who engages in protected activity. Under the TMFPA’s anti-retaliation provision, a whistleblower is entitled to two times the amount of back pay, reinstatement or front pay in lieu of reinstatement, interest, compensation for special damages (such as emotional distress), attorney’s fees and costs.
Under the TMFPA, cases remain under seal for an initial period of 180 days, as opposed to 60 days under the FCA. Like the FCA, state prosecutors may obtain extensions of the seal deadline.
The Texas Whistleblower Act protects public employees who report violations of law by their employer. The law prohibits a state or local government entity from suspending, terminating, or otherwise taking adverse action against a public employee who, in good faith, reports a violation of law by the employing governmental entity or another public employee to an appropriate law enforcement authority. The Texas Whistleblower Act does not apply to private-sector employees.
Under the Texas Whistleblower Act, a public employee may be entitled to injunctive relief, actual damages, court costs, reasonable attorney’s fees, reinstatement to the employee’s former position or an equivalent position, compensation for lost wages, and reinstatement of benefits and seniority rights lost because of the wrongful suspension or termination.
The Texas Whistleblower Act provides for a short period in time in which an employee must file a lawsuit. A public employee must sue within 90 days of the date on which the wrongful termination or suspension occurred. Before filing suit, however, the employee must also exhaust any grievance or appeals procedure provided by the employing governmental entity.
The Whistleblower lawsuit is filed under seal, and remains under seal while the appropriate state and federal agencies investigate your claims. This means your name will be concealed during the investigative process and will not be made public unless the government elects to intervene and pursue the litigation, or you decide to pursue the suit on your own if the government fails to intervene. State and federal governments have the option of intervening in Whistleblower lawsuits and prosecuting your claims by utilizing government resources. Should these agencies decline to intervene in your Whistleblower case, you have the option of continuing the lawsuit with private counsel.
The importance of retaining a whistleblower protection attorney cannot be overstated. Sumner Schick attorneys, who have represented both individuals as plaintiffs and companies as defendants, have proven experience and a deep understanding of all aspects of qui tam law and procedure. Sumner Schick whistleblower protection attorneys have obtained millions of dollars for their Whistleblower clients.
False Claims Act Whistleblower FAQ
A. Do I need an Attorney to file a whistleblower lawsuit?
Yes, the False Claims Act requires that Whistleblowers be represented by counsel. If you believe you have a case under the False Claims Act, it is imperative that you quickly retain counsel to investigate your claims.
The False Claims Act states, “When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” This means that a whistleblower must be the “first to file” to qualify for a whistleblower reward. If two whistleblowers file suit against the same Defendant and allege the same fraudulent scheme, the second to file will not be permitted to share in the reward.
Sumner Schick prosecutes False Claims Act whistleblower cases on a contingency fee basis, which means there is no upfront cost to you. If your case is successful, Sumner Schick receives a percentage of the settlement or judgment as its fees. If there is no recovery, there is no cost to you.
B. Will the Defendant know I filed a whistleblower lawsuit?
False Claims Act lawsuits are filed under seal in Federal District Court and remain under seal for at least 60 days. While the case is under seal, the Defendant is not served with a copy of the lawsuit. Filing a case under seal and without notifying the Defendant enables the government to investigate your claims before the Defendant becomes aware of them. The government can request extensions of time for the case to remain under seal, and it is common for the cases to remain under seal for at least one to two years. Eventually, a Judge will order the case unsealed and your identity as the whistleblower will no longer be confidential.
During the government’s investigation, it is critical that you do not discuss the lawsuit with anyone but your attorney. Violation of the strict confidentiality requirements imposed by the FCA may affect the Relator’s ability to receive a share of the settlement or judgment proceeds.
C. What happens after the whistleblower lawsuit is filed?
After the lawsuit is filed, you will sit for one or more interviews with attorneys for the Department of Justice. These interviews may also include representatives from various government agencies, including the FBI, Office of the Inspector General, Health and Human Services, Department of Defense, Department of Labor, etc.
After the interview, the government will continue its investigation into your claims. It is common for the government to issue civil investigative demands or subpoenas for documents and to interview additional witnesses.
Once the government has completed its investigation, the government usually does one of three things:
D. How much do whistleblowers receive?
If the Defendant enters into a settlement agreement with the government, or a Judge enters a money judgment against the Defendant, the Relator is entitled to a share of the proceeds. The amount the Relator receives is dependent on a number of factors.
If the government declines to intervene in the case, and the settlement or judgment is obtained by Relator’s counsel, the Relator is usually entitled to 25 to 30% of the case proceeds.
If the government settles or intervenes in the case and secures a judgment, the Relator is usually entitled to 15 to 25% of the case proceeds.
The Department of Justice has identified a list of factors it considers in determining the percentage Relator should receive.
- The Relator reported the fraud promptly.
- When the Relator learned of the fraud, the Relator tried to stop the fraud or reported it to a supervisor or the Government.
- The qui tam filing, or the ensuing investigation, caused the wrongdoer to halt the fraudulent practices.
- The lawsuit warned the Government of a significant safety issue.
- The lawsuit exposed a nationwide practice.
- The Relator provided extensive, first-hand details of the fraud to the Government.
- The Government had no knowledge of the fraud.
- The Relator provided substantial assistance during the investigation and/or pretrial phases of the case.
- At the relator’s deposition and/or trial, the Relator was an excellent, credible witness.
- The Relator’s counsel provided substantial assistance to the Government.
- The Relator and his/her counsel supported and cooperated with the Government during the entire proceeding.
- The case went to trial.
- The FCA recovery was relatively small.
- The filing of the complaint had a substantial adverse impact on the Relator.
- The Relator participated in the fraud.
- The Relator substantially delayed in reporting the fraud or filing the complaint.
- The Relator, or Relator’s counsel, violated FCA procedure.
- The lawsuit was served on the defendant or not filed under seal.
- The Relator publicized the case while it was under seal.
- A statement of material facts and evidence was not provided.
- The Relator had little knowledge of the fraud or only had suspicions.
- The Relator’s knowledge was based primarily on public information.
- The Relator learned of the fraud in the course of his/her Government employment.
- The Government already knew of the fraud.
- The Relator, or Relator’s counsel, did not provide any help after filing the complaint, hampered the Government’s efforts in developing the case, or unreasonably opposed the Government’s position in litigation.
- The case required a substantial effort by the Government to develop the facts to win the lawsuit.
- The case settled shortly after the complaint was filed or with little need for discovery.
- The FCA recovery was relatively large.
E. Am I protected from retaliation?
The False Claims Act protects whistleblowers from retaliation. The statute prohibits an employer from discharging, demoting, suspending, threatening, harassing, or otherwise discriminating against an employee who engages in “protected activity.” A whistleblower need not have actually filed the qui tam lawsuit to be protected from retaliation as “protected activity” includes internal reporting of fraud or refusal to participate in an activity that would serve to defraud the federal government. To prevail on a whistleblower retaliation claim, the whistleblower does not need to prove that the Defendant actually violated the False Claims Act.
The False Claims Act provides for substantial damages when an employer illegally retaliates against an employee, including two times the amount of back pay, reinstatement or front pay in lieu of reinstatement, interest, compensation for special damages (such as emotional distress), attorney’s fees and costs.
The statute of limitations on a whistleblower retaliation claim is three years after the date when the retaliation occurred.