Question 1

What do I do if I have Uncovered Fraud?

Accepted Answer

If you believe you have discovered fraud at your workplace, you should try to assess the magnitude of the fraud and gather whatever documentary or electronic evidence is lawfully available. This should be done without violating the law or the terms of any employment agreement. If you have attended meetings at which the fraud was discussed, or has been involved in relevant events, as soon as you can after these meetings you should write the details of these events and meetings, including when they took place, what was said by whom, who was present, and what documents exist that memorialize the events of meetings. These notes should be written in the form of a memorandum to your qui tam attorney to be protected by the attorney-client privilege.

Question 2

What if my Claims Have Already Been Publicly Disclosed?

Accepted Answer

If the qui tam action is “based upon” the public disclosure it may be not be allowed to be brought. Public disclosures include: criminal, civil, or administrative hearing; congressional, administrative, or General Accounting Office report, hearing, audit, or investigation; or the news media, If the information is "based upon" a public disclosure you may still qualify as an “original source” and fall within an exception to the public disclosure bar. In order to fall within the exception, you must have direct and independent knowledge of the fraud and you must voluntarily provided the information to the federal government. If your job duties require you to report fraud to the government or you are required to answer questions about the fraud to a federal investigator, the disclosure may not qualify as "voluntary."

Question 3

What is the Likelihood of Winning my Qui Tam Case?

Accepted Answer

Question 4

Should I Tell my Employer or Anyone Else About the Fraud?

Accepted Answer

Before you raise concerns about the alleged fraud with the employer, it is important to talk with your qui tam lawyer. One reason to inform the employer would be to determine whether the fraud is being committed intentionally and/or whether there is a valid reason for the suspected improprieties. Another reason would be to bring you within the protection of section 3730(h) of the statute and/or other applicable whistleblower protection provisions. A drawback to informing is that the employer might retaliate . You should weigh the pros and cons with counsel and make a determination of what to do. You should never discuss the alleged fraud with others, or disseminate information about it. Doing so may create a public disclosure bar to a later qui tam suit or inspire co-workers or others to file their own qui tam actions, thereby barring your case. Moreover, you should not announce the filing or contemplated filing of a qui tam action to your employer, as by tipping them off you could inadvertently prejudice the government’s investigation as well as violate the seal provisions of the statute.

Question 5

How Does a Qui Tam Case Work Procedurally?

Accepted Answer

Assuming you have a case, after assessing the fraud and conceptualizing it in terms the government can relate to, your lawyer is ready to draft the complaint. Counsel must determine what federal causes of action are available and whether any analogous or potentially applicable state law exists and possibly other claims altogether. After settling on the appropriate legal theories, your lawyer must prepare a disclosure statement. The disclosure statement is not filed in court, but must be served on the government. The disclosure statement should include all the details of the alleged false claims. Unlike most other lawsuits, a complaint under the False Claims Act is filed under seal. This means that the complaint is served on the government but must not be served on the defendant until ordered by the court. A comprehensive memorandum detailing the factual underpinnings of the complaint with copies of all relevant documents is also given to the government, but is not filed in court. It is not permissible for the attorney or you, the plaintiff or relator, to discuss the case or to disclose its existence to anyone, including the defendant, the media, your friends, family, or current or former employers as to do so could impair the government’s ability to investigate the allegations in secret. Failure to follow these unique statutory requirements can result in dismissal of the action. Within 60 days after the complaint is filed, the government may intervene, decline to intervene or request an extension of time to determine whether to intervene, seek dismissal of the action, or settle the case. Usually, the government will request numerous extensions of the 60-day initial investigatory period, as 60 days typically seems to be an unrealistically short period of time for the government to complete an investigation. Upon completion of its investigation, the government has the option to take over the case (“intervene”). The government intervenes in about one-fifth of the cases that are brought. Even if the government declines to intervene the whistleblower (if he or she followed the proper procedures and is not otherwise barred from recovery) may pursue the case on behalf of the government and still be entitled to a share of the recovery. The goal in a qui tam case should be to persuade the government to intervene. The government must be convinced that your claims contain all the elements of a prima facie case, can be proven at trial, can be understood by a jury, and involves sufficient damages to justify the expenditure of resources necessary to recover them. Unlike other civil fraud and tort cases, where much of the work takes place in depositions and other discovery after suit is filed, in a qui tam case, the work relator’s counsel does before filing suit – “packaging” the case for the government – may be the most important work done on the case.

Question 6

What are Possible Consequences of Bringing a Qui Tam Action?

Accepted Answer

Filing a qui tam suit can put the relator at significant personal and professional discomfort. There are several possible consequences of your bringing a qui tam action against your former employer, such as: harm to your reputation in the industry and ability to obtain new employment; possibility of separate lawsuits against you for defamation or tortious interference; the risk of being assessed defense costs and attorney fees in an unsuccessful, declined case or if the court finds that the case has been brought for vexatious, harassing, or improper purposes; retaliation by your employer ; among others. These risks need to be balanced against the likelihood of winning the case, but you should know that qui tam suits often take years to resolve, and the results cannot be predicted. The False Claims Act provides that the qui tam relator shall be awarded between 15 and 30 percent , depending on whether the government intervenes or not and several other factors. These factors include, but are not limited to: whether the relator planned or initiated the false claims; how promptly the relator reported the fraud; whether the complaint warns the government of a significant safety issue; whether the complaint exposed a nationwide practice; whether the relator knows extensive, first-hand details of the fraud; whether the government knew of the fraud; whether the relator provides substantial assistance during the investigation and/or pretrial phase of the case; whether the relator was an excellent, credible witness at his deposition; how big of a recovery it will be; whether the filing of the complaint has a substantial adverse impact on the relator Retaliation by your employer Section 3730(h) of the False Claims Act prohibits an employer from retaliating against you for attempting to uncover or report fraud on the federal government. If retaliation does occur, you may also be awarded “all relief necessary to make the employee whole,” including reinstatement, back pay, two times the amount of back pay, litigation costs, and attorney fees. There are limitations and pitfalls however: The retaliation case must be brought within the applicable statute of limitations; You must as an “employee;” The acts that you did must be “in furtherance of” an action under the False Claims Act as the courts have interpreted those words. There may be additional or alternative damages available to you under applicable state statute, common law, or other whistleblower statutes.

Question 7

What can be done to report tax fraud to the IRS?

Accepted Answer

The Tax Relief and Health Care Act of 2006 made significant changes to the Informants Reward Program under the False Claims Act in favor of the informant (also known as a whistleblower). A whistleblower can receive a financial reward of 15% to 30% of the monies recovered under the updated IRS whistleblower rewards statute. The potential amount owed to the IRS for taxes, penalties and interest must be greater than $2 million in order to be eligible to receive an incentive award. In cases of individuals who defraud the government, the taxpayer's gross annual income must exceed $200,000. A whistleblower will be rewarded for bringing information about tax law violations to the attention of the IRS that results in the actual collection of money by the IRS. The IRS investigation that results in the recovery of tax revenues may be either an administrative or judicial action. However, getting the attention of the IRS takes a clear presentation of the information you possess that gives rise to tax code violations. Any person with information about tax fraud can be the source of information to file a report. Former and current CEOs, CFOs and other corporate executives are uniquely privileged with information to report tax fraud and file for substantial IRS rewards under the law (IRC § 7623). Whether an employee continues to be employed or has left the company, he or she may report tax fraud. IRS rewards may be in the millions or tens of millions of dollars, depending on the facts of the individual matter and the amount of back taxes, penalties and interest ultimately collected by the IRS. However, timing does matter. Only the first person reporting specific tax fraud can be paid this reward. Whistleblowers can be located anywhere in the world. The informants’ claims will be processed in the IRS area and the service center having jurisdiction of the returns of the taxpayer or in the area and service center to which the returns have been transferred for examination. Claims filed by a corporation or partnership must be signed by an officer or employee who has the authority to legally bind the entity, and the most knowledgeable employee of the entity will be required to provide testimony in any judicial or administrative proceeding that may arise as a result of the information provided. If the whistleblower came into possession of information relating to violations of the Internal Revenue laws while serving as an officer or employee of the Department of the Treasury, that person is ineligible for a reward under the law. Congress requires the IRS to conduct an examination and to collect any taxes within 3 to 6 years from the date when a tax return was filed. However, in some cases there is no statute of limitations, such as in those situations where a taxpayer did not file a tax return or if the fraud was intentional. Some examples of income tax fraud against the government that have gained IRS rewards for those who reported them include: General Tax Fraud is committed by individual taxpayers who willfully do not file income tax returns or who fail to pay the correct amount of income, employment or excise taxes. Tax fraud may involve deliberately under-reporting or omitting income, overstating the amount of deductions, keeping two sets of books, making false entries in books and records, claiming personal expenses as business expenses, claiming false deductions, and hiding or transferring assets or income. Corporate Fraud is committed by corporate officers who falsify information about securities and shareholder investments or who do not properly report or pay corporate taxes. Abusive Return Preparers knowingly overstate deductions or understate income for their clients in exchange for exorbitant fees or a percentage of the under-reported tax liability. Money Laundering involves hiding money or income earned from both legal and illegal activities. Tax Shelters take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit and debit cards issued from offshore financial institutions. Non-filers argue that taxes are voluntary or unconstitutional. The courts have repeatedly rejected their arguments as frivolous and routinely imposed financial penalties for raising such frivolous arguments. The IRS places a high priority on identifying such tax cheats. Employment Tax Evasion involves pyramiding (withholding taxes from employees but intentionally failing to remit them to the IRS), off-shore employee leasing, paying employees in cash, filing false payroll tax returns or failing to file payroll tax returns. Fuel Excise Tax Evasion involves schemes to avoid paying federal and state motor tax needed to maintain and improve our national transportation systems.

Question 8

How do I know if I have a False Claims Act case?

Accepted Answer

A False Claims Act violation occurs when a person or entity deceives the Federal Government to improperly obtain money from the Government or improperly be relieved from paying money to the Government. 31 U.S.C. Section 3729(a) lists the specific misconduct the Act covers. The FCA prohibits, among other things: knowingly presented or caused to be presented a false or fraudulent claim for payment or approval to an officer or employee of the United States government; knowingly made, used, or caused to be made or used, a false record or statement to get a false or fraudulent claim paid by the government; conspired to defraud the government by getting a false or fraudulent claim allowed or paid; or knowingly made, used, or caused 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, (reverse false claim). A "claim" is "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, requests for money or property made directly against the government or made to a party other than the government, will be actionable under the FCA if payment of the claim would ultimately result in a loss to the United States. Certain claims are not actionable, including: certain actions against armed forces members, members of Congress, members of the judiciary, or senior executive branch officials; claims, records, or statements made under the Internal Revenue Code of 1986 (tax fraud); suits based on allegations or transactions that are already the subject of a civil suit or administrative money penalty proceeding to which the government is already a party; suits based on prior qui tam suits; cases based on allegations or transactions that have been publicly disclosed, unless the relator has direct and independent knowledge of those allegations or transactions and has provided the information to the government prior to filing suit. mismanagement by government contractors that does not rise to the level of false statements knowingly made to the government for purposes of getting a claim paid, or allegations that the government’s own ineptitude or waste constitute a false claim, since only those who have made false claims to the government are proper defendants under the statute. Claims against states and state entities are also not actionable because states are not "persons" within the meaning of section 3729(a) of the act. Persons who violate the False Claims Act are required to pay back the Federal Government three times the actual damages suffered, in addition to mandatory civil penalties of $5,500 to $11,000 for each false claim. The relator may recover as much as 30 percent of this total. A successful qui tam suit not only stops the dishonest conduct, but also deters similar conduct by others.

Question 9

What can be done about health care fraud?

Accepted Answer

Health care fraud is a type of white-collar crime that involves the filing of dishonest health care claims in order to turn a profit. Fraudulent health care schemes come in many forms. Doctors and doctors' offices schemes of fraud can include: individuals obtaining subsidized or fully-covered prescription pills that are actually unneeded and then selling them on the black market for a profit; billing by practitioners for care that they never rendered; filing duplicate claims for the same service rendered; altering the dates, description of services, or identities of members or providers; billing for a non-covered service as a covered service; modifying medical records; intentional incorrect reporting of diagnoses or procedures to maximize payment; use of unlicensed staff; accepting or giving kickbacks for member referrals; waiving member co-pays; and prescribing additional or unnecessary treatment. Patients can commit health care fraud by: providing false information when applying for programs or services, forging or selling prescription drugs, using transportation benefits for non-medical related purposes, and loaning or using another’s insurance card. When a health care fraud is perpetrated, the health care provider passes the costs along to its customers. Because of the pervasiveness of health care fraud, statistics now show that 10 cents of every dollar spent on health care goes toward paying for fraudulent health care claims. Congressional legislation requires that health care insurance pay a legitimate claim within 30 days. The Federal Bureau of Investigation, the U.S. Postal Service, and the Office of the Inspector General all are charged with the responsibility of investigating health care fraud. However, because of the 30-day rule, these agencies rarely have enough time to perform an adequate investigation before an insurer has to pay. A successful prosecution of a health care provider that ends in a conviction can have serious consequences. The health care provider faces incarceration, fines, and possibly losing the right to practice in the medical industry.

False Claims Act Law

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