What does “qui tam” mean?
“Qui tam” stands for a longer Latin phrase (qui tam pro domino rege quam pro se ipso in hac parte sequitur) that means “he who brings an action for the king as well as for himself.” Qui tam is the technical legal term for the unique mechanism in the federal False Claims Act that allows persons and entities with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the government. There are a number of pronunciations of qui tam, however the simplest is pronounced key tam (rhymes with “ham”).
What is a “relator”?
A whistleblower that files a suit under the False Claims Act is known as a “relator.” Technically, the United States (or the state in a state False Claims Act case) is the plaintiff.
What is the False Claims Act?
The False Claims Act is the most effective tool the United States government has to recover the billions of dollars stolen through fraud every year. Under the False Claims Act, those who knowingly submit, or cause another person to submit, false claims for payment of government funds are liable for up to three times the government’s damages plus civil penalties of $5,500 to $11,000 for each false claim. The False Claims Act contains qui tam provisions, which allow people with evidence of fraud against the government to sue on behalf of the government. People who sue under the False Claims Act are called “relators” or “whistleblowers,” and are eligible for 15 to 30 percent of the amount recovered.
What about State False Claims Acts?
Because of the success of the federal False Claims Act, a growing number of states have enacted legislation similar to the False Claims Act that allows whistleblowers to sue on behalf of a state government. However, not all state False Claims Acts cover all types of frauds. Some state False Claims Acts only cover Medicaid fraud, which leaves those states vulnerable when banks commit pension, construction, tax, utility, energy, and escheatment fraud. Some cities, such as New York and Chicago, have their own False Claims Acts. Often, a relator will sue under both federal and state False Claims Acts.
What types of activities are covered by the False Claims Act?
The False Claims Act covers most fraud perpetrated against the federal government. This includes healthcare fraud, defense contracting fraud, and grant fraud. It does not cover tax fraud, which is covered by the IRS Whistleblower Law, and it does not cover government waste and mismanagement.
Does the False Claims Act cover tax fraud?
No. The False Claims Act explicitly excludes tax fraud. That said, there is an IRS Whistleblower law, separate from the Federal False Claims Act, which provides for whistleblower awards of 15 to 30 percent of the amount recovered. To file under this section of the law, the tax, penalties, interest, and additions in dispute must total a sum in excess of $2 million. Tax fraud for significant sums of less than $2 million may also generate a smaller associated reward. For smaller sums, an alternative course of action is to call the IRS Fraud Hotline at 1-800-366-4484 or to fill out the information referral form on the IRS web site.
Does the False Claims Act cover government waste and mismanagement?
No. While the government undoubtedly loses millions of dollars each year through its own waste and mismanagement, as well as that of outsiders (e.g., government contractors), the False Claims Act does not provide a remedy for waste or mismanagement that does not rise to the level of fraud. The Act is aimed only at fraud committed against the government.
Does the false claims act cover securities fraud or commodities trading fraud?
Yes, as does the SEC Whistleblower Program, which covers all violations of SEC regulations and whose goal is to incentivize integrity and to bring law enforcement and regulatory attention on schemes that undermine America’s securities and investment markets.
What are the penalties for violating the False Claims Act?
Violators of the False Claims Act are liable for three times the dollar amount stolen from the government (i.e., treble damages) and civil penalties of $5,500 to $11,000 for each false claim (the civil penalty is periodically adjusted for inflation). Of course, cases usually settle, and a settlement is a negotiation. In health care cases, the government may settle for double damages. And penalties are usually not part of the settlement dialogue (although they are mandatory where there is a trial). A defendant must also pay the relator’s reasonable expenses, costs, and attorneys’ fees incurred in bringing the qui tam action.