The False Claims Act Whistleblower Statute
There are a host of federal and state statutes (sometimes referred to as "qui tam" statutes) which provide financial incentives to private citizens (often referred to as "whistleblowers" or "relators") who report fraudulent acts that have been committed against the government. The primary federal statute is the False Claims Act (FCA), a law that dates back to 1863 and the Civil War. The FCA imposes triple damages and penalties against any business or person that commits fraud in connection with obtaining a payment from the federal government. The types of fraud that can give rise to liability under the FCA are myriad. Healthcare fraud, defense contractor fraud and fraud in the context of educational loans or grants are just a few of the general categories of fraud that have given rise to successful FCA lawsuits filed by private citizens. In recent years, as newspaper headlines have shown, alleged FCA violations by drug manufacturers (for overcharging the government for drugs, and promoting the sale of prescription drugs for uses not approved by the Food and Drug Administration (FDA), for instance) and other Medicaid and Medicare healthcare providers have resulted in settlements exceeding $1 billion dollars. Recently, the settlements of several large FCA cases against banks and mortgage lenders also have been announced. These cases include allegations of falsifying documents used to file Federal Housing Administration ("FHA") mortgage insurance claims, approving FHA mortgages that fail to meet federal guidelines, and illegally billing extra costs to U.S. veterans refinancing their homes through the Department of Veterans Affairs.
Many states (29 at last count) and the District of Columbia, have their own False Claims Act statutes, most of which parallel the federal FCA. Lawsuits arising under the federal and state false claims act statutes are required to be filed "under seal," which means that only the whistleblower, his or her counsel, the court and the government will know it has been filed. This provides the government an opportunity to investigate the claims on its own, while also providing anonymity to the whistleblower until the government reaches a decision as to whether it will pursue, or "intervene" in the case or not. The period of time during which the government conducts its investigation can last months or several years. If it chooses to intervene, the government takes over responsibility for litigating the case. Sometimes, however, the government looks to the whistleblower's counsel for assistance in the litigation. Generally, with respect to both the federal and state statutes, whistleblowers can receive awards ranging from 15% to 30% of any amount recovered, plus attorney's fees and costs.
The IRS Whistleblower Program
The IRS whistleblower program, established in 2006, offers monetary rewards to individuals who provide "specific and credible" information to the IRS which results in the collection of at least $2 million in combined taxes, penalties, interest or other amounts from any noncompliant payer such as a corporation. Under Internal Revenue Code 7623(b), the IRS is authorized to request assistance from the whistleblower and his or her counsel to analyze the claim of nonpayment. The IRS -generally must pay to the whistleblower 15% to 30% of the entire amount ultimately collected.
The SEC And CFTC Whistleblower Programs Under The Dodd-Frank Wall Street Reform And Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), which became law in July 2010, gave the Securities Exchange Commission (SEC) Congressional authorization to provide monetary awards to eligible individuals who provide original information regarding securities laws violations (such as insider trading or fraud). Under the Dodd-Frank Act, this information must lead to an SEC enforcement action in which over $1 million in sanctions is ordered. The SEC Office of the Whistleblower was established to implement this program. Also under the Dodd-Frank Act, the Commodities Futures Trading Commission (CFTC) must pay an award to eligible whistleblowers that provide the CFTC with original information about a violation of the Commodity Exchange Act that leads to a successful enforcement action resulting in sanctions exceeding $1 million. The range of awards is from 10% to 30% of the monies collected for whistleblowers who submit information regarding fraud to the SEC or, the CFTC.
Our Experience And Approach
The Cohen Milstein Sellers & Toll PLLC Whistleblower/False Claims Act Practice Group has decades of combined experience successfully pursuing whistleblower cases under the federal and state false claims act statutes in the health care, pharmaceutical, and defense contractor industries, and in other industries that transact business with the government. They are well versed in pursuing IRS tax fraud claims, as well as SEC and CFTC fraud claims under the Dodd-Frank Act.
Cohen Milstein is experienced in knowing how to pursue your case most effectively from the first interview, through the preparation of the complaint and submission of supporting documentation, to the presentation of your case to the government, to litigating your case to a successful conclusion. Further, over the years Cohen Milstein attorneys have developed close, productive relationships with attorneys representing the United States government as well as state attorneys general offices. Equally important, Cohen Milstein recognizes that critical to assembling the most compelling case possible is developing a close, productive relationship with the whistleblower, one in which there is an open and full exchange of information and ideas and where the client knows he or she is part of a team. To that end, the Cohen Milstein legal team makes it a top priority to be accessible and responsive to our clients. Ultimately, the Cohen Milstein team does all that it can to make the experience of serving as a whistleblower a positive and rewarding one.
We invite you to learn more about Cohen Milstein's Whistleblower/False Claims Act Practice Group. For more information or to schedule a confidential discussion about a potential whistleblower case, please contact:
Gary Azorsky, Partner
Jeanne Markey, Partner