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What is the False Claims Act?

The federal False Claims Act (“FCA”) is codified at 31 U.S.C. §§ 3729- 3733, as amended May 2009. The FCA is also referred to as the “Lincoln Law, the “Informer’s Act”, or the qui tam statute. It originally took effect in 1863 and has been amended three times since then in 1943, 1986, and 2009. “Qui tam” is short for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur”, meaning “who brings the action for the king as well as himself”.

It is a federal law that allows people with knowledge of fraud committed against the government to file a lawsuit against that individual or company for the federal government with protection and compensation for doing so.

Due to the success of qui tam cases in recovering fraudulently obtained taxpayer funds, many states, and even some cities, now have their own false claims acts including the following:

California, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Wisconsin, New York City, The City of Chicago

What is a “false claim”?

The FCA defines “claim” as “any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient” if any portion of it will be provided or reimbursed by the United States. Thus, even if the false claim is made to a party other than the government, it may be actionable under the FCA if payment of the claim would result in a loss to the federal government.

Does the False Claims Act provide protection for Whistleblowers?

The False Claims Act provides protection to employees who are retaliated against by an employer because of the employee’s participation in a qui tam action. The protection is available to any employee who is fired, demoted, threatened, harassed or otherwise discriminated against by his or her employer because the employee investigates, files or participates in a qui tam action.

The “whistleblower” protection includes reinstatement and damages of double the amount of lost wages if the employee is fired, and any other damages sustained if the employee is otherwise discriminated against.

What is a “Relator”?

A Relator is the whistleblower in a qui tam case brought under the FCA.This is an individual who recognizes fraudulent practices occurring within a company and reports the fraud to the government through a Qui Tam lawsuit. The individual who brings the Qui Tam case to the US Government is awarded a portion (between 15% and 30%) of the Government’s recovery from the case.

What are common examples of Qui Tam Cases?

Healthcare: Fraudulent violations made by health care providers including pharmaceutical companies, hospitals, health maintenance organizations, medical marketing firms, nursing homes, long-term care facilities, pharmacies, group purchasing organizations, physician practice management groups, among others.

Some common schemes include, but are not limited to: DRG fraud, upcoding, unbundling, DME overbilling, hospice fraud, home health care fraud, and ambulance service fraud.

Unbundling: HCPCS codes, Healthcare Common Procedure Coding System numbers, are the codes used by Medicare for medical billing. Some healthcare providers defraud Medicare and Medicaid programs through “unbundling” or “exploding” of HCPCS codes. “Unbundling” or “exploding” refers to a billing procedure where a medical test or component of the “bundled” test is billed separately to Medicare or Medicaid in order to obtain a higher payment from government than the amount permitted.

AntiKickback: Anti-kickback includes compensation paid to encourage or reward medical referral decisions involving services or treatments covered by Medicare and Medicaid.

Stark Law: Stark Law prohibits physician self-referral; the practice of physicians referring patients to a specific medical facility in which the physician has financial interests i.e. ownership, investment or a compensation arrangement.

Anti-Kickback Vs. Stark Law–What is the difference?

Despite their fundamental similarity of purpose, the anti-kickback statute and the Stark law have significant differences.

The anti-kickback statute is a criminal statute that prohibits any knowing or willful solicitation or acceptance of any type of compensation to increase referrals for health services that are reimbursable by the Federal government.

Example: a provider may not routinely wave a patient’s co-payment or deductible because the government would see this as a way to sway patients to choose the provider for reasons other than medical benefit.

Because the anti-kickback statute is a criminal statute, violations of it are considered felonies, with criminal penalties of up to $25,000 in fines and five years in prison.

In contrast, the Stark law is a civil statute. The Stark Law essentially states that a physician may not refer a patient to an entity with which the physician has an ownership interest or compensation arrangement and the payment for the medical services are made by the Medicare/ Medicaid programs.

As a civil statute, the Stark law does not subject violators to the threat of imprisonment. However, violations of the Stark law could result in required refunding of payments with penalties ranging from $15,000 to $100,000, and exclusion from Federal program participation.

What types of damages are there in qui tam cases?

In a successful FCA or qui tam suit, the government may recover its actual damages, trebled damages, in addition to civil penalties of between $5,500 and $11,000 for each false claim. The whistleblower (or “relator”) may recover between 15% and 30% of this total.

What if I become a whistleblower or relator and I am retaliated against by my employer?

Section (h) of the federal FCA prohibits an employer from retaliating against an employee for attempting to uncover or report fraud on the federal government. If retaliation does occur, the relator may also be awarded reinstatement, back pay, liquidated damages, costs and attorneys fees.

Is there a statute of limitations associated with qui tam or FCA suits?

Yes. The federal FCA’s statute of limitations is tiered as follows: a qui tam action must be brought:
a. within 6 years after the date on which the false claim is made;

b. within 3 years after the date on which the 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

c. in no event more than 10 years after the date on which the violation(s) is committed.

Are tax fraud cases the same as qui tam cases?

No. Claims for tax fraud are barred under the FCA. However, the Tax Relief and Health Care Act of 2006, codified at 26 U.S.C. § 7623, includes a whistleblower provision. Specifically, Section 406 of the Act allows whistleblower rewards for individuals who provide information about tax law violations that involve tax, penalties, and interest of over $2 million dollars by an individual whose annual gross income exceeds $200,000.00. The reward is between 15 and 30 percent of the collected proceeds if the IRS moves forward with an administrative or judicial action.

What does the “First to File” rule mean?

The FCA prevents anyone other than the government from intervening or bringing an action based on the same facts and allegations underlying an already filed qui tam suit. The effect of this bar is a “race to the courthouse”. In other words, if you are interested in filing a qui tam suit, it is imperative that you consult a knowledgeable qui tam attorney immediately.

What is the “public disclosure” bar?

p>If a qui tam case is based upon facts or allegations that have been publicly disclosed, then the whistleblower or relator is barred from receiving any reward in the event of a recovery, except, however, where the relator is considered an “original source”. An original source is someone who has direct and independent knowledge of the facts or allegations and provided that information to the government before filing suit. If you are considering filing a qui tam suit, it is important that you retain knowledgeable and experienced qui tam attorneys who understand the public disclosure bar and original source exception in order to maximize the likelihood of receiving an award.

Are qui tam suits like any other lawsuit?

No. The most notable difference between a common civil or criminal lawsuit is that qui tam suits are required to be filed under seal. Also, after being filed, the Complaint is served on the United States Department of Justice, Civil Division, but not the defendant(s). In fact, the defendant(s) are not served until ordered by the court. In addition, in qui tam suits, the Complaint must be accompanied by what is known as a “disclosure statement” or “relator statement”. The relator statement is much like a prosecution memorandum in which counsel details at great length the specific allegations, evidence in support thereof, and identification of witnesses. Unlike other lawsuits, so long as the qui tam case remains under seal, the relator is prohibited from discussing the case with anyone (other than his or her attorney) including co-workers, friends, family and other loved ones.

Can I file a qui tam case pro se?

No. Due to the fact that claims brought under the FCA are considered to be the government’s claims (relator brings the claims on behalf of the government), relators are required to retain counsel.

Should I want the government to intervene in my qui tam case?

Yes. This is perhaps the most important reason why relators must carefully select an experienced qui tam attorney who know what it takes to persuade the government to intervene in cases. If the government does intervene, it will take the lead in litigation and any settlement negotiations bringing with it the full power and resources of the United States Department of Justice. While qui tam cases are litigated even when the government decides not to intervene, the chances of success are much greater when the government is persuaded to join the relator’s case.

What determines the Relator’s share or reward if a qui tam case is successful?

The FCA provides that a qui tam relator shall be awarded between 15% and 30% of the government’s recovery. The amount awarded depends on a number of factors including, but not limited to: whether the government intervenes or not, how promptly the fraud was reported, what the relator did to report the fraud prior to filing a qui tam case, whether the defendant stopped its fraudulent practices after the relator reported the fraud, if applicable, whether the government already had knowledge of the fraud, whether the relator provided substantial assistance during the investigation during the pre-trial phase of the case, and whether relator’s counsel provided substantial assistance.

How much money has been returned to the U.S. Treasury as a result of qui tam lawsuits?

The United States Department of Justice has reported that since 1986, settlements and judgments under the FCA total over $14 Billion Dollars.

Can I file a qui tam case even if I already reported the alleged fraud to the government?

Yes. You do not give up your right to bring a qui tam action by going to the Government before filing your qui tam lawsuit. However, it is important to note that you are barred from bringing a qui tam suit based upon allegations or transactions which are the subject of a False Claims Act suit already filed by the Government. So, if you deliver your information to the Government before filing a qui tam action, and the Government in turn files a False Claims Act action before you file, then you will have lost your right to bring a qui tam lawsuit. However, this can be avoided if you file promptly after informing the government.

Will my identify be revealed as a Whistleblower?

At some point, yes. If you file a qui tam suit, the government will know your identity, and your name will likely be disclosed to the defendant at some point. During the initial seal period, (under the law) the defendant is not supposed to learn that you have filed the lawsuit; however, (in practice) defendants sometimes figure out that a False Claims Act case has been filed, as well as the identity of the relator. After the seal period ends, when the Government announces its decision regarding intervention and the complaint is served on the defendant, your identity will be revealed. There are circumstances in which you may be able to file a qui tam action and then voluntarily dismiss it during the seal period without having your identity ever revealed to the defendant, but there is no guarantee of anonymity. If you are seriously concerned about the disclosure of your identity, your qui tam attorney may be able to help you minimize that eventuality.

How long do I have to report the fraud?

The Qui Tam deadline is dependent on the type of case you are filing, so the answer will vary. However, you must file within 6 years of the date when the fraudulent act occurred. Qui Tam statute of limitations also indicates that the filing must be done within three years of the time the government should have or did know about the fraudulent act. This cannot be longer than 10 years after the fraudulent act occurred. So, you have file your case within 6 years of the fraudulent act, or within 3 years of the time when the government learned of the fraudulent act- up to 10 years after it occurred. As You can see, the statute of limitations is confusing, which is why you should consult with The Qui Tam Team on your case.

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