When fraud impacts taxpayer dollars, federal and state false claims acts allow whistleblowers to step into the shoes of the government and take legal action against wrongdoers. These types of lawsuits are actually brought by the whistleblower (known as a relator) on behalf of the government.
The Federal False Claims Act allows for the recovery of federal dollars while parallel state statutes allow for the recovery of state and municipal dollars. In addition, the cities of New York and Chicago have their own false claims acts allowing suits to be initiated in the name of those cities to capture lost city dollars. While the Federal False Claims Act is a broad remedial statute, certain state false claims acts are limited to the recovery of lost healthcare dollars. This would include Medicaid fraud and fraud impacting state employee health and welfare funds. Those state statutes that are not so limited provide for the recovery of dollars that have been diverted by any fraud including those perpetrated by school lunch program providers, janitorial companies serving schools, and construction companies working on state projects.
Whistleblowers bringing suit under False Claims Acts have enabled the government to recover more than $20 billion since 1986. These statutes generally provide for recovery of three times actual damages in addition to civil penalties for each false statement used to secure payment from the government. Whistleblowers who initiate false claims cases are entitled to a portion of the money recovered by the government. Depending on the circumstances, this “bounty” ranges from 15 to 30 percent of the government’s total recovery. Since 1986, False Claims Act whistleblowers have been paid more than $2 billion in bounties.
As important as the monetary portion of the recoveries, false claims act lawsuits expose wrongdoing that causes harm to shareholders, consumers, and the government. Exposing harm means that regulators can take corrective action and consumers can avoid harmful products or use them in a way that is prudent or safe. This is particularly true where the false claims case exposes harmful marketing practices by pharmaceutical companies.
These statutes also allow government attorneys to tap the resources of private counsel representing whistleblowers. And, with some exceptions, where the government does not proceed with a case, whistleblowers represented by private counsel may proceed in court on behalf of the government.
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