Ultimate Guide to Understanding the False Claims Act

If you know of fraud against the government, you can file an action under the False Claims Act and expose the fraud without fear of retaliation from your employer. A False Claims Act attorney with experience in this type of case can protect your rights and help you pursue justice. Herman Law Group is located in Providence, Rhode Island, and serves the states of Rhode Island and Massachusetts. We also offer our services all over the United States in False Claims Act cases. We provide comprehensive services for False Claims Act whistleblowers such as yourself, protecting you from retaliation while helping you pursue justice under the Act.

Our clients have received millions of dollars in whistleblower rewards and helped recover more than 40 million dollars that the government would otherwise have lost. If you know of fraud against the government and would like to take action, contact Herman Law Group immediately.

What Is the False Claims Act?

During the U.S. Civil War, the Federal government became aware that some suppliers were committing fraud against the Army. Congress passed the False Claims Act in 1863 to encourage whistleblowers to come forward and expose cases of fraud. The original version of the Act included penalties of double the government’s damages plus $2,000 per violation. In 1986, Congress increased this to treble damages plus $5,000 to $10,000 per violation. The financial penalties for a violation have increased steadily since then to keep pace with inflation.

Significant penalties are common under the False Claims Act. According to the Justice Department, the government collected more than $2.68 billion under the Act in fiscal 2023.

Under the False Claims Act, whistleblowers are allowed to file suit on behalf of the government in a legal action known as “qui tam.” A whistleblower who files a qui tam action under the False Claims Act is known as a “relator” and is protected from retaliation under Federal law.

The relator also has the right to a percentage of whatever penalty the government recovers from the defendant. Under the False Claims Act, this penalty is between 15 and 25 percent if the government agrees to intervene. The percentage is between 25 and 30 percent if the government decides not to intervene and the relator is forced to pursue the case independently. The relator is allowed to collect this share of the penalty to encourage whistleblowers to come forward when they know something about fraud against the government.

The State False Claims Act is similar to the Federal False Claims Act and has been reviewed and approved by the Federal Office of Inspector General. This gives Rhode Island the right to collect an additional 10 percentage points as their share of recovery under the Social Security Act, Section 1909.

Key Rules of the False Claims Act

Both individuals and organizations can be held liable under the Act. The Act targets those who commit fraud against the government by submitting false claims, such as inflated invoices, or who don’t provide what they have promised.

A person or organization can be held liable under the False Claims Act if they:

Submit a false claim to the government
Cause someone else to submit a false claim to the government
Knowingly make a false statement to get a false claim paid
Knowingly submit a false record to get a false claim paid
Do anything improper to avoid paying money owed to the government

The Act defines “knowingly” in broad terms. To knowingly submit a false claim or make a false statement under the Act, you don’t necessarily have to know that the claim or statement was false. You have still violated the Act “knowingly” if:

You submitted the claim or made the statement without knowing if it was true or false or
If you did so with “reckless disregard” for the truth of the matter.

Submitting a claim without knowing the facts is considered deliberate ignorance. That counts as knowledge of fraud even if you did not specifically intend to defraud the government.

Liability under the State False Claims Act is similar. In Rhode Island, a person or organization is liable if they:

Submit a false claim
Submit a false record or statement
Conspire to violate the State False Claims Act
Have possession of state money or property and fail to hand all of it over to the state
Submit a false receipt
Buy public property from a person who has no authority to sell it
Try to avoid paying money owed to the state

How Employees Can Take Action

To file a qui tam action under the False Claims Act, you must file a complaint and a written statement in the United States District Court, explaining whatever information you have about the matter. For instance, you could file a statement explaining that a particular series of invoices was fraudulent, how you know this to be the case, and outlining what evidence you have to support this claim.

Once your complaint and written statement are ready, you must have them served on the Attorney General of the United States and the U.S. Attorney for the district where you are filing your complaint.

Not everyone is allowed to file a qui tam action. You cannot file a qui tam action if:

You’re convicted of criminal conduct due to your own role in the fraud you’re reporting
Someone else has already filed a qui tam action in the same case
The government has already filed a civil suit or an administrative proceeding about the same situation
The facts you want to reveal have already been publicly disclosed

The information you’re sharing with the government must be new information the government would not otherwise have. The purpose of the False Claims Act is to encourage whistleblowers to come forward with this type of material.

Common Types of Fraud Covered by the F.C.A.

Common types of fraud covered by the False Claims Act include:

Billing for services that were never rendered
Misrepresenting the quality of products or services
Recommending and providing unnecessary services
Upcoding, or providing one service but billing for a more expensive service
Billing for nonexistent employees or for hours that were never worked
Offering or accepting kickbacks or bribes
Billing for premium products while providing inferior products
Double billing for products or services
Inflating expenses
Misusing grant funds and falsifying compliance with requirements

There are many different ways to violate the Act. Any attempt to get money from the government without earning it or to get more money than you have earned can constitute a violation.

What Constitutes a Violation?

The False Claims Act lists seven types of violation:

Presenting a false claim for payment
Making a false statement or presenting a false record
Conspiracy to violate the False Claims Act
Failure to return property belonging to the government
Presenting false receipts
Unlawful purchase, or buying something from a government employee who had no authority to sell it
Trying to avoid a financial obligation to the government, an act known as a reverse false claim

Presenting a false claim for payment is the most fundamental violation of the False Claims Act. For instance, a contractor could bill for services it never rendered or hours its employees never worked. Most of the other violations are simply variations of this behavior, such as making a false statement or presenting false receipts, both of which are acts in support of a false claim for payment.

Planning with business partners to defraud the government would be a conspiracy to violate the False Claims Act. Other possible violations include failing to return government property or pay money owed to the government.

The False Claims Act is intended to provide severe penalties for defrauding the government, so every Act of fraud committed against the government is treated as a separate violation. For instance, if a doctor committed Medicaid fraud on 500 forms submitted to the government, that would count as 500 separate violations at trial. Each carries a potential penalty of between $13,946 and $27,894 for any violation occurring after February 12, 2024. With hundreds of violations, it is easy to see why False Claims Act cases can result in seven-figure penalties on conviction.

Obtaining a contract through fraud has the same penalties as submitting a fraudulent claim. For instance, if a contractor makes false statements while bidding for a job, then every claim submitted under that contract is considered false.

Although the fines can be substantial if a defendant is convicted under the Act, defendants can often protect themselves from the worst possible outcome by offering to settle the case without a trial. If the government offers the defendant a settlement, the final figure probably won’t be based on these penalties. Instead, the government will use multiples of the damages inflicted through the fraud to determine the settlement amount.

The government may also decide to pursue criminal charges through the False Claims Act under 18 U.S.C. 287. This act states that anyone submitting a “false, fictitious, or fraudulent” claim to a U.S. government official can be imprisoned for up to five years and fined. If the government decides to pursue criminal charges against the defendant, then every act of fraud counts as a separate violation.

Protection for Whistleblowers

A person who is in a position to discover fraud against the government is also likely to be an employee of the person or organization committing the fraud. That leaves the whistleblower vulnerable since they could lose their job, be denied a promotion, or suffer some other form of retaliation for telling the truth. That’s why the False Claims Act includes protection for whistleblowers: so that employees who become aware of fraud won’t be discouraged from revealing the facts to the government.

Safety Measures for Reporters of Fraud

Employers are not allowed to retaliate against whistleblowers for trying to prevent violations of the False Claims Act. Specifically, employers may not:

Discharge a whistleblower
Demote or suspend a whistleblower
Threaten, harass, or discriminate against a whistleblower

If a company does retaliate against a whistleblower under the F.C.A., the company will be required to:

Reinstate the employee with no loss of seniority
Pay the employee double back pay plus interest
Compensate the employee for any special damages, including attorney fees and litigation costs

The State False Claims Act contains similar protections for whistleblowers, including the requirement to reinstate the employee at the same level of seniority, with double back pay plus interest and damages.

Financial Rewards for Reporting Fraud

The False Claims Act includes financial rewards for reporting fraud, intended to motivate people to step forward when they discover evidence of fraud against the government. These financial rewards amount to:

15 to 25 percent of all money collected from the defendant if the government decides to intervene in the case
25 to 30 percent of the money if the government decides not to intervene

Even though your share of the total will be higher if the government decides not to intervene, it is still in your interest for the government to get involved. The government has access to such extensive resources that it is much more likely you will win the case and that the defendant will have to pay a penalty. If the government does decide to intervene, then either the government or the defendant may seek to limit your involvement in the case, but if you are eligible for compensation, you should still receive it.

The State False Claims Act also allows the state or the defendant to ask the court to limit your involvement in the case if your involvement would interfere with the prosecution or constitute harassment of the defendant. If the court does decide to limit your involvement, you may face restrictions on:

The number of witnesses your attorney can call
The length of the testimony your witnesses can provide
The extent to which your attorney can cross-examine the witnesses

Financial rewards under the State False Claims Act are the same as under the Federal False Claims Act:

15 to 25 percent if the State government decides to intervene
25 to 30 percent if the State decides not to intervene

How to Report a Violation

There are several different ways to report fraud against the Federal government, including:

Notifying the Inspector General of the agency in question
Notifying the Federal Bureau of Investigation
Filing a qui tam action under the False Claims Act

To file a qui tam action under the False Claims Act, you must follow the correct procedure, including filing your complaint under seal with the court. This isn’t something the average person knows how to do, so most people who want to file under the F.C.A. seek legal assistance to ensure that they do everything correctly.

To file a qui tam action under the State False Claims Act, you must follow a similar procedure, filing a complaint under seal and serving the State Attorney General.

Steps to Take if You Suspect Fraud

If you suspect a violation of the False Claims Act, take the following steps:

Gather all the information and evidence you have in support of your claim, such as print-outs of invoices, bank statements, emails, and so on.
Write down all the facts you can remember, such as the details of conversations with dates and times.
Draft a statement explaining which violations of the False Claims Act you believe to have been committed and what evidence you have for these violations.

Preparing to Report: What You Need to Know

If you are preparing to report violations of the False Claims Act, the government will review your complaint and then decide whether to intervene. The most important point to understand is that you must include all your evidence in the disclosure statement you submit with your complaint. The government will use this evidence to decide whether to intervene in the case, so if you don’t have strong evidence to back up your claim, then the government may decide not to act.

To encourage the government to intervene in your case, be as thorough as possible in your disclosure statement. Include dates, times, and supporting evidence such as screenshots, emails, and bank statements. Include a written record of any conversations that support your claim of fraud. For instance, if your employer told you that a particular invoice included false information, make a note of exactly what they said, as well as the date and time of the conversation.

If you’re hoping to file a complaint under the State False Claims Act, you should know that Rhode Island bars actions brought by any member of the National Guard against any other member of the National Guard.

The Process of Filing a Claim

It is important to file your qui tam complaint correctly, as your case could be dismissed for any error. When you file a complaint under the False Claims Act:

You must file the complaint under seal.
You must file the complaint confidentially.
You must follow the Federal Rules of Civil Procedure.
You must have the U.S. Attorney General, and the U.S. District Attorney served with a copy of both your complaint and the disclosure statement containing all your evidence.
You must not reveal the complaint to anyone until the seal is lifted.
You must not have the defendant served with the complaint.

The complaint and the evidence are kept under seal so that the government can investigate the facts of the matter and determine whether to pursue the case. If you do anything to reveal to the defendant that they are under investigation, you will undermine your own case, and the court may even decide to dismiss it.

Filing a qui tam complaint correctly is beyond the abilities of most people without legal training. For this reason, most qui tam relators hire a False Claims Act attorney to help them with the complaint.

What to Expect After Reporting

Your complaint will be sealed for 60 days while the government investigates. According to the False Claims Act Primer, at the end of the 60 days, the government will either:

Ask for an extension so it can continue investigating
Announce its intention to intervene in the case
Announce that it isn’t going to intervene

If the government decides not to intervene, you can proceed with the action yourself if you wish to. If the government does decide to intervene, it will be responsible for any prosecution. The government will also have the right to either dismiss or settle the case, even if you object, as long as it gives you a hearing at which you can state your objections.

The government will pay you a share of whatever it collects from the defendant, plus your attorney’s fees and other reasonable expenses. This share is usually 15 to 25 percent if the government intervened in the case and 25 to 30 percent if it did not, but there are some circumstances in which your share could be reduced to no more than 10 percent.

The final percentage is determined based on your level of involvement in the prosecution. If you contribute substantially to the case, then you will probably be given a larger share. If you don’t contribute as much, then you may receive a share closer to the lower end of the scale. If the court determines that the prosecution was primarily based on information you did not supply, your reward could be no more than 10 percent.

The government can also decide to pursue an alternate remedy, which could be some form of legal action against the defendant other than your original qui tam suit. In that situation, you’re still entitled to collect the same share of whatever the government ultimately recovers from the defendant that you would have collected in a qui tam suit.

If you’re filing under the State False Claims Act, the process is identical. Your complaint will remain under seal for 60 days while the State investigates, after which the State will either choose to intervene, ask for an extension, or choose not to intervene. If the State chooses not to intervene, you will have the choice to pursue the case on your own if you wish.

Statute of Limitations for Reporting

TheFalse Claims Act includes a statute of limitations, stating that a complaint under the F.C.A. may not be filed:

More than six years after the date of the violation
More than three years after the government knew or should have known about the violation, whichever comes last
More than 10 years after the violation under any circumstances

This means that if a fraud is committed, the statute of limitations runs out after six years, and prosecuting the case is no longer possible. However, if the relator files a qui tam action, the statute is extended by three years because the government now knows about the violation.

In Cochise Consultancy, Inc. v. United States Ex Rel. Hunt, the defendant argued that the additional three-year statute of limitations should only apply in cases where the government chose to intervene in the case.

According to the defendant, the relator couldn’t pursue the case on their own if the original six-year statute of limitations had already run out. According to the National Law Review, the U.S. Supreme Court ruled in 2019 that the defendant was incorrect, and that the additional statute of limitations applies regardless of whether the government had intervened or not.

Either way, the statute of limitations in a False Claims Act runs out after ten years. If you try to file after the statute of limitations has run out, the court will dismiss your case.

The statute of limitations under the State False Claims Act is the same as under the Federal Act. You have six years from the date of the violation plus an additional three years once the State knows about the violation. The statute runs out either way after ten years.

Getting the Right Help

If you know of fraud against the government and you want to file a qui tam action under the False Claims Act, you need the help of an attorney. Filing a qui tam action under seal in District Court and serving the U.S. Attorney General and District Attorney is far too complicated for the average person to attempt on their own.

However, not just any attorney will do. You need an attorney with experience in False Claims Act cases. The defendant in your case will have legal representation of their own. Their attorneys may even focus on defending against False Claims Act prosecutions.

Typical defenses in a False Claims Act case include:

The No Knowledge defense. The attorney using this defense will argue that their client had no knowledge that a claim was false. This isn’t necessarily an easy task, considering the broad definition of knowledge under the Act. The attorney would have to prove that the client had every reason to believe the claim was true. However, the prosecution may find it difficult to prove otherwise because it is impossible to know what a defendant was really thinking.
The No False Claim defense. The attorney using this defense will argue that the claim wasn’t false in the first place. This requires extensive evidence.
The Constitutional defense. The attorney using this defense will argue that the government’s evidence should not be admissible in court due to an invalid search or interrogation.

If the defense attorney cannot mount any effective defense, they will probably seek to settle the case without formal charges, thereby protecting their client from conviction. The effectiveness of any of these strategies depends on the defense attorney’s experience. However, a large organization will hire the best representation they can afford.

This is not the time to make do with an attorney who focuses on other types of cases. In a False Claims Act case, getting the right help is essential. That means finding an attorney with extensive knowledge of the False Claims Act and a track record of winning F.C.A. cases.

Contact Our False Claims Act Attorney at Herman Law Group Today

Herman Law Group is based in Providence, Rhode Island, and offers its services nationwide in False Claims Act cases. We pride ourselves on our comprehensive knowledge of the False Claims Act and our compassionate approach to helping whistleblowers pursue justice.

We’ve helped the government recover more than 40 million dollars in False Claims Act cases, and the whistleblowers we represent have received millions of dollars in compensation.

We know how upsetting it is to discover that your employer has been committing fraud against the U.S. government. Whistleblowers often want to do the right thing but are worried about the possible effect on their careers and lives. When you sit down with us to discuss your case, we will listen compassionately to your story and explain how we can help. Then we will start putting together your qui tam complaint so you can expose the truth about the fraud. Contact Herman Law Group today if you need to file a claim under the False Claims Act.