Understanding the False Claims Act: How Whistleblowers Can Help Combat Government Fraud

Fraud can take place in many industries, and not everyone realizes how many of them are taxpayer-driven. Your tax dollars go to government contractors, hospitals and healthcare, defense manufacturers, insurance agencies, pharmaceutical companies, universities and schools, small businesses, and many more. When those businesses submit false claims to the government, they can be held accountable via the False Claims Act (FCA). The FCA enables whistleblowers to make a difference by reporting scams and receiving protections as well as compensation in the process. 

What is the False Claims Act?

The False Claims Act originated during the American Civil War. Passed by President Lincoln to prevent faulty supplies from being sold to the Union Army, the FCA has been amended over the years to become a multi-purpose tool to fight fraud whenever it involves taxpayer dollars. 

Under the False Claims Act, private whistleblowers have the ability to file qui tam lawsuits. A qui tam lawsuit under the FCA is essentially a fraud reporting tool where the federal government is the plaintiff (or harmed party). With the help of a qui tam law firm, the whistleblower (or relator) brings evidence about false claims to the attention of federal investigators. These investigators from the Department of Justice, as well as any other applicable federal agency, examine the claim based on the strength of the evidence provided, the testimony of the whistleblower, the reputation of the law firm, and any other relevant factors.

After a 60-day period under seal, the government will decide whether to intervene in the case. If they do, and the case is successful, the whistleblower may receive up to 25% of the total settlement. If the government does not intervene, the whistleblower’s qui tam law firm still has the option to pursue the case. When this happens, the whistleblower may receive 30% of the overall recovery in a successful case.

The False Claims Act is a powerful law because it imposes treble liability upon violators. For each individual false claim, the perpetrator can be held liable for up to three times the government’s loss, as well as an individual penalty linked to the rate of inflation. Because of this, qui tam whistleblower payouts tend to be high. Relators also receive protections under the FCA that help them stand up to their employers when they are retaliated against for reporting fraud. 

Examples of False Claims Act Violations

The limits of False Claims Act violations are bound only by scam artists’ imaginations. However, there are patterns that tend to repeat themselves when reporting false claims involving government funds. Some examples include:

• False certifications: In order to receive funding from the government, most contractors must certify they meet certain standards. This may include environmental or fair labor standards, or they may need to verify they use materials made in the U.S., or even just that their product is safe and functions as it should. A false certification might include a business that dumps hazardous waste but certifies it met EPA guidelines or a software company that claims its product meets cybersecurity standards despite it containing vulnerabilities. 
• Up-charging: Contractors that substitute shoddy materials or cut corners can be reported for fraud. Examples might include defense or infrastructure contractors who don’t use premium materials but still charge as if they did. 
• Billing without doing the work: An example of this might be a telehealth provider who bills the government without actually accepting calls from their patients or a home health care aide who certifies they took care of a patient when they spent the time instead on their phone. 
• Cross-charging: A contractor might perform work for a private client but bill the work instead to their government contract. In this way, they can underbid in the private sector and win contracts while showing steady profits subsidized by taxpayer dollars. 

The False Claims Act in Healthcare: A Major Area of Enforcement

Healthcare accounts for a disproportionate amount of fraud recovery actions each year. Of the close to $3 billion in FCA settlements and judgments from FY2024, over $1.67 billion came from the healthcare industry. Pharmaceutical companies, hospitals, laboratories, home health care, telehealth, and individual providers have all been implicated in healthcare scams like Medicare Advantage fraud, Best Price Fraud, and more. Some of the most common kinds of fraud in healthcare include:

• Double billing, such as billing both private insurers as well as Medicare
• Upcoding, or billing for more expensive services than were provided
• Unbundling, like billing for individual services that should be grouped together

What Are the Penalties for Violating the False Claims Act?

FCA penalties currently range from a minimum of $14,308 per false claim to a maximum of $28,619 per violation. This amount varies and is linked to inflation. FCA violators can also be held accountable for up to treble damages as well as the full cost of legal fees and prosecution.  Finally, healthcare companies may become ineligible for future reimbursements through Medicare, Medicaid, and other government insurance programs. 

Thinking of Reporting Fraud? Here’s What You Should Know

Before you blow the whistle, here are a few key points you should know:

• You have protection against retaliation under the FCA: Qui tam relators who have been fired, suspended, demoted, harassed, or otherwise retaliated against by their employer can sue for double back pay with interest and additional damages. However, you must report before you see consequences as an employee in order to qualify.
• You may be able to recover a portion of the settlement: Whistleblowers can walk away with anywhere from 15% to 30% of the final settlement if they cooperate with investigators and contribute substantially to the recovery. 
• You must be the first to file previously undisclosed information: Information previously reported on the news or shared online does not qualify for an FCA reward. 
• You do not need to be a U.S. citizen: A whistleblower can be an employee of a company, a competitor in the field, or just an average person with previously unreported knowledge of fraud. They do not have to be a US citizen to qualify under the FCA.
• You will need to work with a qui tam lawyer: In most states, you cannot bring a qui tam lawsuit pro se and must work with a qui tam law firm to file.

Reporting fraud with the help of a qui tam lawyer can help you make a real difference. You have the opportunity to hold scam artists accountable and stop the waste of taxpayer dollars. What’s more, you can also be rewarded in the process.