Kahn Gauthier Swick is investigating possible legal actions on behalf of whistleblowers, who may be able to share in any financial recovery by the government that results from the whistleblowing. Many Americans don't realize that if they know of a company that has defrauded the U.S. government, they can file a legal action against that company, in the government's name, and then share in the money that the government recovers through the lawsuit. This is all done under the "qui tam" (qui rhymes with eye) provision of a federal law called the False Claims Act (31 U.S.C. §§3729-3733), which imposes civil liability on any person or entity who submits a false claim for payment to the U.S. government. The private person who brings a qui tam action is called the "relator," or whistleblower. A number of states also have similar laws relating to fraud against the state or local government.

Lots of money is recovered in qui tam actions. Since the federal law was amended in 1986, over 3,400 federal qui tam actions have been filed, over $4 billion has been recovered by the U.S. government, and the private citizens filing the suits have received $630 million as their shares in the recoveries. Violators must pay three times the amount they defrauded the government, plus a penalty.

Procedure in Federal Qui Tam Actions

When a qui tam relator, or whistleblower, files a federal qui tam complaint, the whistleblower must also file a "written disclosure of substantially all material evidence and information the person possesses." At that point, the U.S. Department of Justice has 60 days to investigate the information and determine whether it will join in the lawsuit. If the government joins the case and successfully prosecutes it, the whistleblower receives between 15 and 25 percent of the recovery, depending on the extent of the whistleblower's contribution to the case. If the government does not join, and the whistleblower successfully prosecutes the case, the whistleblower will receive between 25 and 30 percent of the proceeds. In either case, if the action is successful, the whistleblower will be reimbursed for expenses incurred, including attorneys fees.

The term "qui tam" comes from the Latin phrase "qui tam pro domino rege quam pro si ipso in hac parte sequitur," meaning "who sues on behalf of the King as well as himself." During the Middle Ages, England did not have an organized police force to enforce laws. English common law, by adopting various qui tam provisions, attempted to provide for the enforcement of the law by those who were injured by violations of the law. Qui tam provisions allowed private parties to act like a policeman. The private party was paid a bounty to make the effort worthwhile and to give incentives to other individuals to bring similar suits. The federal False Claims Act was first enacted in 1863 to protect the Union Army from the numerous fraudulent suppliers who sold it faulty war supplies during the Civil War.

Restrictions on Federal Qui Tam Actions

There are some important restrictions on federal qui tam actions. Because the action is designed to encourage people with confidential knowledge to come forward, a qui tam action generally is not possible if there has already been a public disclosure of the information underlying the action. However, even if public disclosure has already occurred, a qui tam action can still be filed so long as the whistleblower meets the "original source" test--the whistleblower had "direct and independent knowledge" of the information and "voluntarily provided the information to the government" prior to filing the action. In some cases, it is also sufficient if the whistleblower was a direct or indirect source to the person who made the disclosure.

A whistleblower also can not recover if someone else has already filed a qui tam action on the basis of the same information. Only the first person to file such an action gets the money. And qui tam actions can't be based on income tax fraud.

There are several general types of cases filed as qui tam actions. The most well-known is the over-charging case. Another type of case is the false negotiation or defective pricing case that involves the submission of false cost and pricing data to the government. Other common types of cases involve product and service substitution and false certification of entitlement for benefits. Many cases are brought against either defense contractors or healthcare companies, but any government contractor can be the defendant in a qui tam action.

Notable Federal Qui Tam Awards

Here are some notable private citizen recoveries in federal qui tam actions:

Tufts Health Plan of Waltham, Massachusetts blew the whistle in 2000 on TAP Pharmaceutical Products, which was illegally inflating the price of the drug Lupron, and will receive $17.2 million.

Louis Mueller received $678,584 from a 1999 settlement with Walgreen Company, the retail pharmacy chain, after Mueller filed a qui tam case reporting that Walgreen billed Medicaid the full amount for prescriptions that were only partially filled.

As part of a 1998 settlement, Francine Mettevelis and Rhea Adams received $903,899 for reporting that Charter Behavioral Health Systems in Orlando billed Medicare for medically unnecessary psychiatric care for elderly patients with severe dementia, Alzheimer's disease and other organic brain disorders.

The estate of Teresa Semtner received $3.2 million after Semtner brought a suit against Emergency Billing Services, disclosing the company's practice of "upcoding" the claims of its clients.

George Denoncourt received approximately $4 million as part of the settlement of his allegations that the State of New York was overcharging the federal government under various Social Security Act programs, including Medicaid.

Donald McLendon, the former Vice President of Olsten Corp., received $9.8 million as part of a 1999 settlement of his allegations that Olsten charged Medicare for unallowable sales and marketing costs.

State Qui Tam Statutes

A number of states also have false claim or qui tam laws permitting a private person to file an action against a company that is defrauding the state or local government. These laws generally are modeled on the federal statute and so follow a similar procedure. Most of these state laws apply to a wide variety of false claims against the government, but the Louisiana and Tennessee laws apply only to health care billing.

California False Claims Act (West's Ann. Cal. Gov. Code §§12650-12655)
Delaware False Claims and Reporting Act (6 Del.C. §§1201-1209)
District of Columbia False Claims Act (DC ST §§2-308.13 to 2-308.19)
Florida False Claims Act (West's F.S.A. §§68.081-68.092)
Hawaii False Claims Act (HRS §§661-21 to 661-29)
Illinois Whistleblower Reward and Protection Act (740 ILCS 175/1-175/8)
Louisiana Medical Assistance Programs Integrity Law (LSA-R.S. §§439.1-439.4)
Massachusetts False Claims Law (M.G.L.A. 12 §§5-5O)
Nevada False Claims Act (N.R.S. 357.010-357.250)
Tennessee Medicaid False Claims Act (§§71-5-181 to 71-5-186)