A suit under the federal False Claims Act (FCA), also known as a “qui tam” action, allows people who have insider information of fraud against the Government, known as a “relator” or “whistleblower,” to file a suit to help stop the perpetrators from defrauding the United States Government. The False Claims Act seeks to deter fraud against the United States Government by providing for penalties of up to three times the amount of the fraud in addition to fines of $5,000 to $11,000 per violation. It is estimated that the United States has collected almost $8 billion in fines and penalties in False Claims Act cases since 1986.
The FCA is codified as 31 United States Code Sections 3729 – 3732. It is critical that the South Carolina whistleblower come forward with his or her information as soon as possible. The False Claims Act requires that the South Carolina relator be an “original source” of the information, which generally means that he has direct and independent knowledge of the fraudulent conduct and he has voluntarily provided this information to the Government before filing the qui tam suit. Information about fraudulent conduct which is in the public domain prior to the time the whistleblower reports the same to the Government generally precludes the prosecution of a qui tam suit.
If the qui tam suit alleging false claims is successful, the whistleblower or relator will also be entitled to 15%-30% of the government’s total recovery, which includes damages for the false claims, treble damages, plus civil penalties of from $5,500 to $11,000 per false claim. To recover this bounty, the relator must have complied with the complex and unusual statutory requirements, however. Merely providing information to a hotline will not entitle the relator to a recovery under the False Claims Act.
Some of the factors the U.S. Department of Justice considers for a possible increase in the percentage awarded to a relator are as follows:
• The relator reported the fraud promptly.
• When he 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 offender to halt the fraudulent practices.
• The complaint warned the Government of a significant safety issue.
• The complaint 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 his 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 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.
Some of the factors the U.S. Department of Justice considers for a possible decrease in the percentage awarded to a relator are as follows:
• 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 procedures, i.e., complaint served on defendant or not filed under seal, the relator publicized the case while it was under seal, or the statement of material facts and evidence not provided.
• The relator had little knowledge of the fraud or only suspicions.
• The relator’s knowledge was based primarily on public information.
• The relator learned of the fraud in the course of his 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 positions 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.
31 U.S.C.A. § 3729, entitled “False Claims,” provides as follows: (a) Liability for certain acts.–Any person who– (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid; (4) has possession, custody, or control of property or money used, or to be used, by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt; (5) authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true; (6) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge the property; or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person….
Unlike most other lawsuits, the initial civil complaint under the False Claims Act must be served upon the government but must not be served on the defendant until ordered by the court, must be filed under seal, and must be supported by a detailed disclosure memorandum, not filed in court, but served on the government, setting forth the factual underpinnings of the complaint, together with copies of all relevant documents.
The attorney for the South Carolina plaintiff/relator should not discuss the case or to disclose its existence to anyone, including the defendant and the media, as to do so could impair the government’s ability to investigate the allegations in secret. A whistleblower or qui tam plaintiff’s failure to follow these unique statutory requirements of the False Claims Act (FCA) can result in dismissal of the action. After the complaint is filed under seal, and a disclosure memorandum and related documents are served on the government, the government has 60 days to intervene or decline to intervene, move for an extension of time to determine whether to intervene, seek dismissal of the action, or settle the case per §3730(b)(4). The government will usually request numerous extensions of the 60-day initial investigatory period, however, as 60 days typically is too short a time period for the government to complete an investigation.
Upon completion of its investigation, the government has the option to take over, or intervene in, the case. Regardless of whether the government intervenes, the South Carolina relator or whistleblower who has complied with the proper procedures and is not otherwise barred from recovery, is still entitled to a share of the recovery, and may pursue the case on behalf of the government. The South Carolina qui tam lawyer should be aware that the statute of limitations for an FCA qui tam/whistleblower action is found in Title 31, Section 3731(b) of the United States Code: “A civil action under section 3730 may not be brought-(1) more than 6 years after the date on which the violation of section 3729 is committed, or (2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.” In determining which limitations period applies to an FCA action, courts examine the time at which either the relator or the Government became aware or knew of the violation. The South Carolina whistleblower attorney should be diligent in determining the date(s) when the qui tam relator became aware of the fraudulent conduct of the putative defendant. A qui tam complaint should contain references to as many specific fraudulent acts, dates, actors and related documents as possible because defense attorneys frequently try to have an FCA complaint dismissed for lack of specificity as required by Rule 9 of the Federal Rules of Civil Procedure with respect to allegations of fraud.
In 2009, important changes to the False Claims Act were enacted in a law known as the Fraud Enforcement and Recovery Act of 2009. These changes include as follows:
• The definition of a “claim” was expanded and fraud directed against government contractors, grantees and other recipients is now plainly covered by the law, thus overruling the U.S. Supreme Court decision of Allison Engine Co. v. United States ex rel. Sanders, 128 S.Ct. 2123 (2008).
• Funds which the United States government administers (such as in Iraq) are now covered by the False Claims Act.
• When an overpayment of money from the government is retained, such retention is a basis of FCA liability, which will be a source of concern for health care providers and defense contractors.
• Conspiracy liability to violate the FCA was broadened.
• The government was granted authority to broadly use “Civil Investigative Demands” and to share information with state and local authorities and with whistleblower/relator plaintiffs.
• Whistleblower anti-retaliation protection was extended to cover not only to ’employees,” but also “contractors” and “agents.”
• Defendants other than “employers” can now be liable for retaliation.
• Materiality as applied in False Claims Act cases was defined.
• In an amendment to the statute of limitations provisions, the government was authorized to assert its own claims after the whistleblower/relator has filed a qui tam case under the False Claims Act.
In South Carolina (SC), as in most states, civil False Claims Act cases are initially reviewed for prosecution by the U.S. Attorney’s Office for the District of South Carolina. Assistant U.S. Attorneys (AUSAs) will be assigned to the FCA case to investigate the claims and allegations contained in the complaint. The AUSA will work with federal agents from any number of different federal agencies who may be assigned to investigate the case, including, but not limited to, the Federal Bureau of Investigations (FBI), Homeland Security, Department of Defense (DOD), Health and Human Services Offices of the Inspector General.
There are many types of fraud perpetrated against the federal government in South Carolina, including, but not limited to, contractor fraud, defense industry fraud, environmental fraud, grant fraud, government sales fraud, healthcare fraud, Medicare fraud, Medicaid fraud, off-label prescription use fraud, tax fraud (in excess of $2 million), and procurement fraud.
In South Carolina, the Attorney General has established a state Medicaid Fraud Control Unit (MFCU) which specifically focuses on Medicaid fraud and abuse. Some of the Medicaid fraud which is targeted by the South Carolina MFCU include billing for nonexistent or unnecessary medical services, billing for more expensive products or services than were provided, paying kickbacks to patients or other providers for patient referrals, inflating a nursing home’s annual cost report, padding mileage accumulated on ambulance trips, and billing for professional services rendered by personnel lacking appropriate credentials.
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