The Potential of Qui Tam
First of all, the phrase "qui tam" is derived from a long Latin phrase "qui tam pro domino rege quam pro se ipso in hac parte sequiter", which means "a person who bring the action for the King as well as for himself".
The United States government is losing billions of dollars a year to fraudulent claims (not including claims for tax refunds or other fraudulent tax matters). Congress has stated in legislation known as the False Claims Act that the United States government is willing to give informers up to 30% of the claim plus expenses and attorneys' fees for commencing and possibly maintaining a lawsuit in the name of the United States against the wrongdoers. If you (or the government, if it takes over the lawsuit) wins the action by settlement or judgment, then you are entitled to a percentage of the recovery.
The False Claims Act, 31 U.S.C. sections 3729-3732
Section 3729. False Claims
(a) Liability for certain acts. -- Any person who --
(1) knowingly presents, or causes to be presented, to an officer
or employee of the United States Government or a member of the
Armed Forces of the United States a false or fraudulent claim for
payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false
record or statement to get a false or fraudulent claim paid or
approved by the Government;
(3) conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid;
(4) has possession, custody, or control of property or money used,
or to be used,by the Government and, intending to defraud the
Government or willfully to conceal the property, delivers, or
causes to be delivered, less property than the amount for which
the person receives a certificate or receipt;
(5) authorized to make or deliver a document certifying receipt of
property used, or to be used, the Government and, intending to
defraud the Government, makes or delivers the receipt without
completely knowing that the information on the receipt is true;
(6) knowingly buys, or receives as a pledge of an obligation or
debt, public property from an officer or employee of the
Government, or a member of the Armed Forces, who lawfully may not
sell or pledge the property; or
(7) knowingly makes, uses, or causes 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 is liable to the
United States Government for a civil penalty of not less than $5,000 and
not more than $10,000, plus 3 times the
amount of damages which the Government sustains because of the act
of that person, except that if the court finds that --
(A) the person committing the violation of this subsection
furnished officials of the United States responsible for
investigating false claims violations with all information known
to such person about the violation within 30 days after the date
on which the defendant first obtained the information;
(B) such person fully cooperated with any Government investigation
of such violation; and
(C) at the time such person furnished the United States with the
information about the violation, no criminal prosecution, civil
action, or administrative action had commenced under this title
with respect to such violation, and the person did not have actual
knowledge of the existence of an investigation into such
violation; the court may assess not less than 2 times the amount
of damages which the Government sustains because of the act of the
person. A person violating this subsection shall also be liable to
the United States for the costs of a civil action brought to
recover any such penalty or damages.
(b) Knowing and knowingly defined. -- For purposes of this
section, the terms "knowing" and "knowingly" mean that a person,
with respect to information --
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the
information; or
(3) acts in reckless disregard of the truth or falsity of the
information, and no proof of specific intent to defraud is required.
(c) Claim defined. -- For purposes of this section, "claim"
includes 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 the United States Government
provides any portion of the money or property which is requested
or demanded, or if the Government will reimburse such contractor,
grantee, or other recipient for any portion of the money or
property which is requested or demanded.
(d) Exemption from disclosure. -- Any information furnished
pursuant to subparagraphs (A) through (C) of subsection (a) shall
be exempt from disclosure under section 552 of title 5.
(e) Exclusion. -- This section does not apply to claims, records,
or statements made under the Internal Revenue Code of 1954.
Section 3730. Civil Actions for False Claims
(a) Responsibilities of the attorney general. -- The Attorney
General diligently shall investigate a violation under section
3729. If the Attorney General finds that a person has violated or
is violating section 3729, the Attorney General may bring a civil
action under this section against the person.
(b) Actions by private persons. --
(1) A person may bring a civil action for a violation of section
3729 for the person and for the United States Government. The
action shall be brought in the name of the Government. The action
may be dismissed only if the court and the Attorney General give
written consent to the dismissal and their reasons for consenting.
(2) A copy of the complaint and written disclosure of
substantially all material evidence and information the person
possesses shall be served on the Government pursuant to Rule
4(d)(4) of the Federal Rules of Civil Procedure. The complaint
shall be filed in camera, shall remain under seal for at least 60
days, and shall not be served on the defendant until the court so
orders. The Government may elect to intervene and proceed with the
action within 60 days after it receives both the complaint and the
material evidence and information.
(3) The Government may, for good cause shown, move the court for
extensions of the time during which the complaint remains under
seal under paragraph (2). Any such motions may be supported by
affidavits or other submissions in camera. The defendant shall not
be required to respond to any complaint filed under this section
until 20 days after the complaint is unsealed and served upon the
defendant pursuant to Rule 4 of the Federal Rules of Civil
Procedure.
(4) Before the expiration of the 60-day period or any extensions
obtained under paragraph (3), the Government shall--
(A) proceed with the action, in which case the action shall be
conducted by the Government; or
(B) notify the court that it declines to take over the action, in
which case the person bringing the action shall have the right to
conduct the action.
(5) When a person brings an action under this subsection, no
person other than the Government may intervene or bring a related
action based on the facts underlying the pending action.
(c) Rights of the parties to Qui Tam action. -- (1) If the
Government proceeds with the action, it shall have the primary
responsibility for prosecuting the action, and shall not be bound
by an act of the person bringing the action. Such person shall
have the right to continue as a party to the action, subject to
the limitations set forth in paragraph (2).
(2)(A) The Government may dismiss the action notwithstanding the
objections of the person initiating the action if the person has
been notified by the Government of the filing of the motion and
the court has provided the person with an opportunity for a
hearing on the motion.
(B) The Government may settle the action with the defendant
notwithstanding the objections of the person initiating the action
if the court determines, after a hearing, that the proposed
settlement is fair, adequate, and reasonable under all the
circumstances. Upon a showing of good cause, such hearing may be
held in camera.
(C) Upon a showing by the Government that unrestricted
participating during the course of the litigation by the person
initiating the action would interfere with or unduly delay the
Government's prosecution of the case, or would be repetitious,
irrelevant, or for purposes of harassment, the court may, in its
discretion, impose limitations on the person's participation, such
as --
(i) limiting the number of witnesses the person may call;
(ii) limiting the length of the testimony of such witnesses;
(iii) limiting the person's cross-examination of witnesses; or
(iv) otherwise limiting the participating by the person in the
litigation.
(D) Upon a showing by the defendant that unrestricted
participating during the course of the litigation by the person
initiating the action would be for purposes of harassment or would
cause the defendant undue burden or unnecessary expense, the court
may limit the participating by the person in the litigation.
(3) If the Government elects not to proceed with the action, the
person who initiated the action shall have the right to conduct
the action. If the Government so requests, it shall be served with
copies of all pleadings filed in the action and shall be supplied
with copies of all deposition transcripts (at the Government's
expense). When a person proceeds with the action, the court,
without limiting the status and rights of the person initiating
the action, may nevertheless permit the Government to intervene at
a later date upon a showing of good cause.
(4) Whether or not the Government proceeds with the action, upon a
showing by the Government that certain actions of discovery by the
person initiating the action would interfere with the Government's
investigation or prosecution of a criminal or civil matter arising
out of the same facts, the court may stay such discovery for a
period of not more than 60 days. Such a showing shall be conducted
in camera. The court may extend the 60-day period upon a further
showing in camera that the Government has pursued the criminal or
civil investigation or proceedings with reasonable diligence and
any proposed discovery in the civil action will interfere with the
ongoing criminal or civil investigation or proceedings.
(5) Notwithstanding subsection (b), the Government may elect to
pursue its claim through any alternate remedy available to the
Government, including any administrative proceeding to determine a
civil money penalty. If any such alternate remedy is pursued in
another proceeding, the person initiating the action shall have
the same rights in such proceeding as such person would have had
if the action had continued under this section. Any finding of
fact or conclusion of law made in such other proceeding that has
become final shall be conclusive on all parties to an action under
this section. For purposes of the preceding sentence, a finding or
conclusion is final if it has been finally determined on appeal to
the appropriate court of the United States, if all time for filing
such an appeal with respect to the finding or conclusion has
expired, or if the finding or conclusion is not subject to
judicial review.
(d) Award to Qui Tam plaintiff. --
(1) If the Government proceeds with an action brought by a person
under subsection (b), such person shall, subject to the second
sentence of this paragraph, receive at least 15 percent but not
more than 25 percent of the proceeds of the action or settlement
of the claim, depending upon the extent to which the person
substantially contributed to the prosecution of the action. Where
the action is one which the court finds to be based primarily on
disclosures of specific information (other than information
provided by the person bringing the action) relating to
allegations or transaction in a criminal, civil, or administrative
hearing, in a congressional, administrative, or Government
Accounting Office report, hearing, audit, or investigation, or
from the news media, the court may award such sums as it considers
appropriate, but in no case more than 10 percent of the proceeds,
taking into account the significance of the information and the
role of the person bringing the action in advancing the case to
litigation. Any payment to a person under the first or second
sentence of this paragraph shall be made from the proceeds. Any
such person shall also receive an amount for reasonable expenses
which the court finds to have been necessarily incurred, plus
reasonable attorneys' fees and costs. All such expenses, fees, and
costs shall be awarded against the defendant.
(2) If the Government does not proceed with an action under this
section, the person bringing the action or settling the claim
shall receive an amount which the court decides is reasonable for
collecting the civil penalty and damages. The amount shall not be
less than 25 percent and not more than 30 percent of the proceeds
of the action or settlement and shall be paid out of such
proceeds. Such person shall also receive an amount for reasonable
expenses which the court finds to have been necessarily incurred,
plus reasonable attorneys' fees and costs. All such expenses,
fees, and costs shall be awarded against the defendant.
(3) Whether or not the Government proceeds with the action, if the
court finds that the action was brought by a person who planned
and initiated the violation of section 3729 upon which the action
was brought, the court may, to the extent the court considers
appropriate, reduce the share of the proceeds of the action which
the person would otherwise receive under paragraph (1) or (2) of
this subsection, taking into account the role of that person in
advancing the case to litigation and any relevant circumstances
pertaining to the violation. If the person bringing the action is
convicted of criminal conduct arising from his or her role in the
violation of section 3729, that person shall be dismissed from the
civil action and shall not receive any share of the proceeds of
the action. Such dismissal shall not prejudice the right of the
United States to continue the action, represented by the
Department of Justice.
(4) If the Government does not proceed with the action and the
person bringing the action conducts the action, the court may
award to the defendant its reasonable attorneys' fees and expenses
if the defendant prevails in the action and the court finds that
the claim of the person bringing the action was clearly frivolous,
clearly vexatious, or brought primarily for purposes of
harassment.
(e) Certain actions barred. --
(1) No court shall have jurisdiction over an action brought by a
former or present member of the armed forces under subsection (b)
of this section against a member of the armed forces arising out
of such person's service in the armed forces.
(2)(A) No court shall have jurisdiction over an action brought
under subsection (b) against a Member of Congress, a member of the
judiciary, or a senior executive branch official if the action is
based on evidence or information known to the Government when the
action was brought.
(B) For purposes of this paragraph, "senior executive branch official" means any officer or employee listed in section [sic]
paragraphs (1) through (8) of section 101(f) of the Ethics in
Government Act of 1978 (5 U.S.C. App.).
(3) In no event may a person bring an action under subsection (b)
which is based upon allegations or transactions which are the
subject of a civil suit or an administrative civil money penalty
proceeding in which the Government is already a party.
(4)(A) No court shall have jurisdiction over an action under this
section based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative hearing, in a
congressional, administrative, or Government Accounting Office
report, hearing, audit, or investigation, or from the news media,
unless the action is brought by the Attorney General or the person
bringing the action is an original source of the information.
(B) For purposes of this paragraph, "original source" means an
individual who has direct and independent knowledge of the
information on which the allegations are based and has voluntarily
provided the information to the Government before filing an action
under this section which is based on the information.
(f) Government not liable for certain expenses. -- The Government
is not liable for expenses which a person incurs in bringing an
action under this section.
(g) Fees and expenses to prevailing defendant. In civil actions
brought under this section by the United States, the provisions of
section 2412(d) of title 28 shall apply. (h) Any employee who is
discharged, demoted, suspended, threatened, harassed, or in any
other manner discriminated against in the terms and conditions of
employment by his or her employer because of lawful acts done by
the employee on behalf of the employee or others in furtherance of
an action under this section, including investigation for,
initiation of, testimony for, or assistance in an action filed or
to be filed under this section, shall be entitled to all reliefF
necessary to make the employee whole. Such relief shall include
reinstatement with the same seniority status such employee would
have had but for the discrimination, 2 times the amount of back
pay, interest on the back pay, and compensation for any special
damages sustained as a result of the discrimination, including
litigation costs and reasonable attorneys' fees. An employee may
bring an action in the appropriate district court of the United
States for the relief provided in this subsection.
Section 3731. False Claims Procedure
(a) A subpoena requiring the attendance of a witness at a
trial or hearing conducted under section 3730 of this title may be
served at any place in the United States.
(b) A civil action under 3730 may not be brought --
(1) more than 6 years after the date on which the violation of
section 3729 is committed; or
(2) more than 3 years after the date when 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 in no event more than 10 years after
the date on which the violation is committed, whichever occurs last.
(c) In any action brought under section 3730, the United States
shall be required to prove all essential elements of the cause of
action, including damages, by a preponderance of the evidence.
(d) Notwithstanding any other provision of law, the Federal Rules
of Criminal Procedure, or the Federal Rules of Evidence, a final
judgment rendered in favor of the United States in any criminal
proceeding charging fraud or false statements, whether upon a
verdict after trial or upon a plea of guilty or nolo contendere,
shall estope the defendant from denying the essential elements of
the offense in any action which involves the same transaction as
in the criminal proceeding and which is brought under subsection
(a) or (b) of section 3730.
Section 3732. False Claims Jurisdiction
(a) Actions under section 3730. -- Any action under section 3730
may be brought in any judicial district in which the defendant or,
in the case of multiple defendants, any one defendant can be
found, resides, transacts business, or in which any act proscribed
by section 3729 occurred. A summons as required by the Federal
Rules of Civil Procedure shall be issued by the appropriate
district court and served at any place within or outside the
United States.
(b) Claims under state law. -- The district courts shall have
jurisdiction over any action brought under the laws of any State
for the recovery of funds paid by a State or local government if
the action arises from the same transaction or occurrence as an
action brought under section 3730.
