Compliance Operations Overview: What are False Claims Act and Qui Tam Lawsuits?

Compliance Operations Overview: What are False Claims Act and Qui Tam Lawsuits?
The federal False Claims Act (FCA) prohibits fraud, waste, and abuse. Under this law, someone who knowingly (intentionally) submits false claims for goods or services to the federal government is liable for treble (three times) the amount of the government’s damages (losses). False Claims Act cases are brought by the federal government against individuals. The False Claims Act contains a provision allowing private individuals to allege an FCA violation. Lawsuits involving these private individuals are known as qui tam lawsuits.  

What Kinds of False Claims Can be Submitted?
The False Claims Act prohibits submitting false claims to the federal government for goods or services. An example of a false claim: I am a healthcare provider that participates in Medicare. I submit a claim to Medicare for services provided to a patient. I know that I didn’t actually provide the services, but I bill the government for them anyway. Or, I submit the claim without making sure it is accurate - without bothering to discover that in fact I really did not provide the services. Either way, I have “knowingly” submitted a false claim to Medicare and am liable for damages in a civil False Claims Act lawsuit.

How Are False Claim Lawsuits Handled?
The federal government can file a lawsuit against someone for a False Claims Act violation. In addition, the FCA has a whistleblower provision allowing private individuals to file suits on behalf of the government against those who may have violated the FCA. These lawsuits are known as qui tam (kee-TAM) lawsuits. Private individuals who successfully bring “qui tam” actions may receive a portion of the government’s recovery.

What is a Qui Tam Lawsuit?
“Qui tam” is short for the Latin phrase "qui tam pro domino rege quam pro se ipso in hac parte sequitur," or "Who brings the action for the King as well as for himself." Qui tam laws originated in Middle-Ages England, allowing private citizens to sue on behalf of the Crown, in return for a share of the reward. Qui tam lawsuits typically involved allegations of monetary fraud against the Crown.

English colonists brought the concept of a qui tam lawsuit to America. The first American law specifically allowing for these lawsuits was the False Claims Act of 1863. The law was passed to address fraud committed by defense contractors during the Civil War.

In a modern qui tam lawsuit, the private individual, known as a relator, files a complaint under seal (with legal protection of secrecy) in court, and provides a copy to the US Attorney General and the US Attorney for the jurisdiction where the lawsuit is filed.

The federal government then investigates the complaint, and determines whether it will intervene and take over the case. If the government intervenes, and demonstrates an FCA violation, the relator may be entitled to a percentage of the damages the court awards to the federal government. Alternatively, the government may decline to intervene. If this happens, the relator may continue to pursue the claim. If the relator can prove an FCA violation, the relator may be entitled to a percentage of the damages to the federal government.

Who Brings Qui Tam Lawsuits?
Qui Tam lawsuits are frequently brought by individuals with “inside knowledge” of activity that may be illegal under the FCA. These individuals can include business partners, hospital or office staff, patients, or competitors.

How Much Money Can the Relator Receive?
In qui tam cases where the government intervenes, the person initiating the lawsuit is eligible to receive between 15% to 25% of the proceeds or settlement of the lawsuit.  The precise amount depends upon the extent to which the relator made a substantial contribution to helping the government secure its damages. In cases where the government does not intervene, the person initiating the lawsuit receives between 25 and 30 percent of the proceeds of the lawsuit or settlement. Regardless of whether the government intervenes, an individual whose qui tam claim is successful is also entitled to their attorneys’ fees.

What Role Do Qui Tam Lawsuits Play in Enforcing the FCA?
Qui tam lawsuits play a significant role in ensuring compliance with the FCA’s provisions. In 2024, relators received over $400 million in total awards, mostly from cases where the Department of Justice decided to intervene. In 2024, a record-breaking 979 qui tam lawsuits were filed. These lawsuits generated an enormous recovery for the federal government. In 2024 FCA settlements and judgments amounted to $2.9 billion. Of this total, about $2.4 billion, or 83%, came from qui tam cases.

Conclusion
The False Claims Act’s qui tam provision gives the federal government a powerful tool to combat fraud, waste, and abuse. Qui tam lawsuits provide incentives to individuals with inside knowledge to act on that knowledge. As a result, the FCA is enforced to a greater degree than the federal government is able to achieve on its own, creating a deterrent to fraud, waste, and abuse.