Whistleblower lawsuits (also known as qui tam lawsuits) are brought under the False Claims Act, an act that rewards citizens who uncover illegal activities. Private citizens are encouraged by the government to share information about a company’s illegal activities in exchange for receiving monetary compensation. These cases help protect government funds, and they provide job protection to whistleblowers who face professional and personal risks when they expose and stop fraud against the government.
Specific activities prohibited under the False Claims Act include overbilling the government for goods and services, billing for goods and services not provided, or preparing fraudulent claims to be approved and/or paid for by the government.
The types of fraud considered to be whistleblower claims include the following:
Once an individual has uncovered evidence of fraud against the government and decides to blow the whistle, they need to seek legal representation. A private citizen may sue an individual or a business that is defrauding the government and recover funds on behalf of the government. In return, the citizen may receive monetary compensation between 15% and 30% of the government’s total recovery.
It is important to file a whistleblower lawsuit as quickly as possible because the government uses a “first to file” rule. That is, the first person to file the suit is entitled to the reward. This lawsuit is filed “under seal,” which means it is kept a secret from everyone but the government. This allows the Justice Department sufficient time to investigate the allegations. Obviously, the individual or business being investigated for fraud is not told about the case.
The government will look into the evidence and allegations with the assistance of the whistleblower’s attorney and decide whether it will intervene in the case. The government usually intervenes in only a small percentage of qui tam lawsuits. A whistleblower case is sealed for 60 days, but courts will sometimes extend the seal multiple times to give the government enough time to investigate the allegations and to decide whether to join the case. Although whistleblowers have the option to file these types of cases on their own, their chances of winning the case are much greater when the government joins the lawsuit.
Successful lawsuits are usually resolved through settlement negotiations instead of a court trial. The amount of the whistleblower reward depends on many factors.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted by President Obama in 2010. The act enhances the whistleblower program set forth in the Sarbanes-Oxley Act and the False Claims Act by providing financial rewards to individuals who provide information about a violation of federal security law that came from the informant’s independent knowledge. It also provides protection for whistleblowers so that an employer does not terminate the employment of a whistleblower as a retaliatory act.
The law firm of Hach Rose Schirripa & Cheverie LLP is highly experienced in dealing with whistleblower litigation. Contact us at (212) 213-8311 for a consultation.