Must a False Claims Act qui tam relator have firsthand knowledge of all aspects of the fraud?
Generally, the qui tam relator (the whistleblower) need not have firsthand knowledge of every aspect of the fraud scheme. The First, Third, Fifth, and Ninth Circuits have taken a more nuanced reading of the Rule 9(b) heightened pleading requirement, holding that it is sufficient for a plaintiff to allege “particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that [false] claims were actually submitted.”
Recently the First Circuit held that “nothing in the statutory text limits ‘direct knowledge’ to knowledge gained from participation in or observation of the fraud. The statute requires only that the person have ‘direct and independent knowledge of the information on which the allegations are based,’ not direct and independent knowledge of the fraudulent acts themselves.” United States ex rel. Banigan v. PharMerica, Inc., 2020 WL 813258 (1st Cir. Feb 19, 2020).
In U.S. ex rel. Galmines v. Novartis Pharm. Corp., 88 F.Supp.3d 447, 456 (E.D.Pa. 2015). the court indicated “that Third Circuit appellate precedent does not require [relator] to have firsthand knowledge of `all the relevant information’ on which his allegations are based, and that “a relator’s allegations need not be strictly limited to the information as to which she has direct and independent knowledge, provided that the relator has direct and independent knowledge of the critical elements of the alleged fraudulent scheme.” The court in Galmines found that it should “allow original-source relators to pursue the entire fraudulent scheme for which they have direct and independent knowledge of the operative substantive facts, and not to limit relators to the specific time periods for which they have direct and independent knowledge, particularly where the relator has alleged the scheme was `continuing’ as of the day they lost their direct and independent knowledge by reason of a cessation of employment or equivalent development.” An “original source” is “an individual who has direct and independent knowledge of the information on which the allegations are based.” 31 U.S.C. §3730(e)(4)(B).
False Claims Act Qui Tam Whistleblower Rewards and Protections
The qui tam provisions of the False Claims Act have been enormously effective in enlisting private citizens to combat fraud against the government. Qui tam whistleblowers, also known as relators, have enabled the government to recover more than $30 billion. In fiscal year 2017 alone, qui tam actions brought by whistleblowers resulted in $3.4 billion in settlements and judgments, and the government paid $392 million in whistleblower awards to False Claims Act whistleblowers.