False Claims Act whistleblowers (also known as relators) are eligible to receive 10% to 30% of the recovery. In an intervened case, the relator can obtain 15% to 25% of the recovery, depending upon the extent to which the person substantially contributed to the prosecution of the action.
In a non-intervened case, the relator can obtain between 25% to 30% of the recovery. Additionally, a qui tam relator (whistleblower) who prevails in an FCA action-regardless of whether the government intervenes-is entitled to “reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs.” 31 U.S.C. § 3730(d). Qui tam whistleblower lawsuits have enabled the government to recover more than $60 billion.
In 2022, a qui tam relator obtained $266.4 million in whistleblower awards from a $900 million settlement with Biogen Inc. Mr. Bawduniak alleged that Biogen, to prevent its multiple sclerosis drugs from losing market share to newer drugs, knowingly paid its largest prescribers for services Biogen did not need and never intended to use, and which payments served no legitimate business purpose.
The False Claims Act also protects whistleblowers from retaliation.
If you are seeking representation in a False Claims Act qui tam action, call our whistleblower lawyers today at 202-262-8959. We also represent whistleblowers in False Claims Act retaliation and NDAA retaliation actions.
| Amount | Violations | Date | Source |
|---|---|---|---|
| $900M | Biogen Inc. agreed to pay $900 million to resolve allegations that it violated the FCA by paying kickbacks to physicians to induce them to prescribe the company’s multiple sclerosis drugs. The relator alleged that Biogen held programs through which it offered and paid remuneration, including speaker honoraria, speaker training fees, consulting fees and meals, to health care professionals who spoke at or attended Biogen’s speaker programs, speaker training meetings or consultant programs to induce them to prescribe the drugs Avonex, Tysabri and Tecfidera in violation of the Anti-Kickback Statute. | September 26, 2022 | Biogen Inc. Agrees to Pay $900 Million to Settle False Claims Act Allegations Related to Improper Physician Payments |
| $260M | Mallinckrodt resolved allegations that it violated the FCA by knowingly: 1) underpaying Medicaid rebates due for its drug H.P. Acthar Gel; and 2) using a foundation as a conduit to pay illegal co-pay subsidies in violation of the Anti-Kickback Statute for Acthar. | March 7, 2022 | Mallinckrodt Agrees to Pay $260 Million to Settle Lawsuits Alleging Underpayments of Medicaid Drug Rebates and Payment of Illegal Kickbacks |
| $61M | A jury ordered Eli Lilly and Co. to pay $61 million in damages for false claims about pricing to Medicaid programs to lower rebates that it owed to the states. | August 2022 | Jury orders Lilly to pay $61M in whistleblower Medicaid fraud case |
| $48.5M | In the largest-ever False Claims Act recovery based on allegations of small business contracting fraud, TriMark agreed to pay $48.5 million to resolve allegations that its subsidiaries, TriMark Gill Marketing and Gill Group, Inc. improperly manipulated federal small business set-aside contracts around the country. TriMark identified federal set-aside contract opportunities for the small businesses to bid on using their set-aside status; instructed them regarding how to prepare their bids and what prices to propose; “ghostwrote” emails for those companies to send to government officials to make it appear as though the small businesses were performing work that TriMark was performing; and affirmatively concealed TriMark’s involvement in the contract. | February 23, 2022 | Government Contractor Agrees to Pay Record $48.5 Million to Resolve Claims Related to Fraudulent Procurement of Small Business Contracts Intended for Service-Disabled Veterans |
| $45M | BioTelemetry, Inc. agreed to pay $44.875 million to settle allegations that it defrauded U.S. taxpayers by outsourcing critical remote medical services to technicians in India who were not properly trained. | December 21, 2022 | Philadelphia-area Company To Pay $45 Million Whistleblower Settlement For Outsourcing Heart Monitoring To India |
| $45M | Modernizing Medicine Inc., an EHR technology vendor, agreed to pay $45 million to resolve allegations that it violated the FCA by accepting and providing unlawful remuneration in exchange for referrals and by causing its users to report inaccurate information in connection with claims for federal incentive payments. | November 1, 2022 | Modernizing Medicine Agrees to Pay $45 Million to Resolve Allegations of Accepting and Paying Illegal Kickbacks and Causing False Claims |
| 38.5M | Academy Mortgage Corporation agreed to pay $38.5 million to resolve allegations it violated the False Claims Act by improperly originating and underwriting mortgages insured by the Federal Housing Administration. | December 14, 2022 | Academy Mortgage Corporation Agrees to Pay $38.5 Million to Settle False Claims Act Allegations Related to Mortgages Insured by the Federal Housing Administration |
| $40M | Relator Simpson alleged that Bayer paid kickbacks to hospitals and physicians to induce them to utilize the drugs Trasylol and Avelox, and also marketed these drugs for off-label uses that were not reasonable and necessary. Simpson further alleged that Bayer downplayed the safety risks of Trasylol. Simpson also filed a second lawsuit alleging that Bayer knew about, but downplayed, Baycol’s risks of causing rhabdomyolysis. | September 2, 2022 | Bayer to Pay $40 Million to Resolve the Alleged Use of Kickbacks and False Statements Relating to Three Drugs |
| $34M | Eargo agreed to pay $34.37 million to resolve allegations that it submitted or caused the submission of claims for hearing aid devices for reimbursement to the Federal Employees Health Benefits Program (FEHBP) that contained unsupported hearing loss diagnosis codes. | April 29, 2022 | Hearing Aid Company Eargo Inc. Agrees to Pay $34.37 Million to Settle Common Law and False Claims Act Allegations for Unsupported Diagnosis Codes |
| $24.5M | Physician Partners of America LLC (PPOA), its founder, and its former chief medical officer agreed to pay $24.5 million to resolve allegations that they violated the FCA by billing federal healthcare programs for unnecessary medical testing and services, paying unlawful remuneration to its physician employees and making a false statement in connection with a loan obtained through the PPP. | April 12, 2022 | Physician Partners of America to Pay $24.5 Million to Settle Allegations of Unnecessary Testing, Improper Remuneration to Physicians and a False Statement in Connection with COVID-19 Relief Funds |
| $24M | Respironics, Inc. agreed to pay over $24 million to settle an FCA qui tam alleging improper inducement to DME suppliers. The government and the relator alleged that the defendant violated the Anti-Kickback Statute when it provided DME suppliers with free physician prescribing data for its marketing efforts to physicians. The purported illegal inducement allegedly caused the DME suppliers to submit false claims for respiratory-related medical equipment. | September 1, 2022 | Philips Subsidiary to Pay Over $24 Million for Alleged False Claims Caused by Respironics for Respiratory-Related Medical Equipment |
| $22.9M | CHC Holdings, LLC d/b/a Carter Healthcare, an Oklahoma limited liability company that provides home healthcare through subsidiaries in multiple states, as well as Stanley Carter and Brad Carter agreed to pay $22,948,004 to resolve allegations that Carter Healthcare wrongfully paid physicians to induce referrals of home health patients under the guise of medical directorships, resulting in the submission of false claims to the Medicare and TRICARE programs. | October 18, 2022 | Oklahoma City Home Health Company and Two Former Corporate Officers Agree to Pay $22.9 Million to Settle Federal False Claims Act and Kickback Allegations Arising From Improper Payments to Referring Physicians |
| $22.5M | Dignity Health agreed to pay $22.5 million pursuant to two separate settlements to resolve allegations that they violated the FCA and CA FCA by causing the submission of false claims to Medi-Cal related to Medicaid Adult Expansion under the ACA. | December 7, 2022 | Three Health Care Providers Agree to Pay $22.5 Million for Alleged False Claims to California’s Medicaid Program |
| $20M | BayCare Health System Inc. and entities that operate four affiliated Florida hospitals (collectively BayCare) have agreed to pay the United States $20 million to resolve allegations that BayCare violated the False Claims Act by making donations to the Juvenile Welfare Board of Pinellas County (JWB) to improperly fund the state’s share of Medicaid payments to BayCare. The four hospitals are Morton Plant Hospital, Mease Countryside Hospital, Mease Dunedin Hospital and St. Anthony’s Hospital. Specifically, the United States alleged that during this time, BayCare made improper, non-bona fide cash donations to JWB knowing that JWB would and then did transfer a portion of the cash donations to the State of Florida’s Agency for Health Care Administration for Florida’s Medicaid Program. The funds transferred by JWB to the state were “matched” by the federal government before being returned to the BayCare hospitals as Medicaid payments, and BayCare was thus able to recoup its original donations to JWB and also receive federal matching funds, in violation of the federal prohibition on non-bona fide donations. BayCare’s donations to JWB increased Medicaid payments received by BayCare, without any actual expenditure of state or local funds. | April 6, 2022 | Florida’s BayCare Health System and Hospital Affiliates Agree to Pay $20 Million to Settle False Claims Act Allegations Relating to Impermissible Medicaid Donations |
| $14.6M | Massachusetts General Hospital, the clinical teaching arm for Harvard Medical School, resolved a federal whistleblower case stemming from allegations that some of the hospital's orthopedic surgeons engaged in overlapping surgeries that violated federal Medicare and Commonwealth of Massachusetts Medicaid rules. | February 19, 2022 | MASS GENERAL HOSPITAL TO PAY $14.6 MILLION TO RESOLVE OVERLAPPING SURGERY CLAIMS; STANDARDIZED CONSENT FORMS TO BE AMENDED |
| $14M | Georgia Cancer Specialists, agreed to pay $8 million to resolve allegations that GCS solicited and received kickbacks for more than a decade, first from Option Care, an infusion pharmacy and medical equipment provider, and later from Amedisys, a Medicare nursing company. The whistleblowers received $2.4 million dollars, the maximum possible relators’ share. | February 1, 2022 | Louis J. Cohen, Whistleblower Counsel, Announces Georgia Cancer Specialists Agrees to Pay $8 Million Dollars to Resolve Medicare Fraud Kickback and Stark Law Violations; Total Settlements Exceed $14 Million |
| $13M | Cardinal Health agreed to pay $13,125,000 to resolve allegations that it violated the False Claims Act by paying “upfront discounts” to its physician practice customers, in violation of the Anti-Kickback Statute. | January 31, 2022 | Cardinal Health Agrees to Pay More than $13 Million to Resolve Allegations that it Paid Kickbacks to Physicians |
| $12.95M | Medical device manufacturer Biotronik agreed to pay $12.95 million to resolve allegations that it violated the FCA by paying kickbacks to physicians to induce their use of Biotronik’s implantable cardiac devices, such as pacemakers and defibrillators. | July 22, 2022 | Medical Device Manufacturer Biotronik Inc. Agrees To Pay $12.95 Million To Settle Allegations of Improper Payments to Physicians |
| $12.6M | Advanced Bionics LLC, manufacturer of cochlear implant system devices, agreed to pay more than $12 million to resolve allegations that it misled federal health care programs regarding the radio-frequency emission generated by some of its devices. More specifically, Advanced Bionics is alleged to have manipulated testing conditions to obtain passing test results by not testing processors in “worst-case” configurations, and improperly shielding certain emissions-generating components of the cochlear implant system during emissions testing – all contrary to the standard’s requirements. | December 20, 2022 | Advanced Bionics LLC to Pay Over $12 Million for Alleged False Claims for Cochlear Implant Processors |
| $9.85 | BioReference agreed to pay $9.85 million to resolve alleged violations of the FCA arising from BioReference’s payment of above-market rents to physician landlords for office space to induce referrals to BioReference. | July 14, 2022 | BioReference Laboratories and Parent Company Agree to Pay $9.85 Million to Resolve False Claims Act Allegations of Illegal Payments to Referring Physicians |
| $9M | Aerojet Rocketdyne Holdings Inc. and whistleblower Brian Markus settled a False Claims Act suit alleging that the company misled the government about its cybersecurity practices to gain missile defense and rocket engine contracts. | April 29, 2022 | Aerojet Rocketdyne, Whistleblower Settle Cybersecurity Suit |
| $7.9M | Akorn agreed to pay $7.9 million to settle a qui tam action alleging fraudulent billing of Medicare. The government and the relator alleged that the FDA approved of a prescription only ("Rx-only") to over the counter ("OTC") status conversion for three brand name drugs. The defendant allegedly made generic equivalents of the drugs, which would require it to seek FDA approval for OTC status or seek withdrawal of the products' Rx-only status and halt marketing. This purportedly caused Medicare Part D to pay for products ineligible for coverage. | September 14, 2022 | Pharmaceutical Company Akorn Operating Company LLC Agrees to Pay $7.9 Million to Resolve Allegations of Fraudulent Billing |
| $7.4M | Six surgery centers and medical offices affiliated with Interventional Pain Management Center P.C. settled a qui tam action for mischaracterizing acupuncture as a surgical procedure in order to dishonestly obtain millions of dollars from Medicare and the Federal Employees Health Benefit Program. The defendants treated patients with electro-acupuncture devices called P-Stim and NeuroStim/NSS (“NSS”). P-Stim and NSS procedures transmit electrical pulses through needles placed just under the skin on a patient’s ear. Both treatments are considered acupuncture under Medicare and Federal Employees Health Benefit Program (“FEHBP”) guidelines and are therefore ineligible for reimbursement by the government. From January 2012 through April 2017, the IPMC surgery centers and medical offices submitted claims to Medicare and FEHBP for P-Stim and NSS treatment and associated administration of anesthesia. In submitting the claims, the defendants used a billing code that mischaracterized the acupuncture treatment as a surgical implantation of a neurostimulator. | January 12, 2022 | Surgery Centers and Medical Offices in New Jersey Settle Allegations of Federal Health Care Fraud |
| $6.85M | YRC Freight Inc, Roadway Express Inc. and Yellow Transportation Inc. agreed to pay approximately $6.85 million to resolve allegations that they knowingly presented false claims to DOD by systematically overcharging for freight carrier services and making false statements to hide their misconduct. | March 14, 2022 | Freight Carriers Agree to Pay $6.85 Million to Resolve Allegations of Knowingly Presenting False Claims to the Department of Defense |
| $6.8M | DermaTran Health Solutions, LLC; Pharmacy Insurance Administrators, LLC; Legends Pharmacy; TriadRx; and the former owners of Lake Side Pharmacy agreed to pay $6,8M to resolve allegations that they violated the FCA by waiving copays, charging the government higher prices than permitted, and trading federal healthcare business with other pharmacies. | October 12, 2022 | DermaTran and three other pharmacies pay over $6.8 million to settle civil claims |
| $5.5M | American Senior Communities, L.L.C. agreed to pay approximately $5.5M to resolve allegations that it violated the FCA by charging Medicare directly for various therapy services provided to beneficiaries who had been placed on hospice, when those services should have already been covered by the beneficiaries’ Medicare hospice coverage. | August 10, 2022 | U.S. Attorney’s Office Recovers Over $5.5 Million in Civil False Claims Settlement with American Senior Communities |
| $4.2M | The government alleges that DOCS and Sidana submitted false claims to Medicare and Medicaid for immunotherapy services that were not medically necessary, and were not directly supervised by a physician. The allegations also involve claims to Medicare and Medicaid for medically unnecessary annual re-testing of allergy patients. | December 15, 2022 | Connecticut Physician and Urgent Care Practice Pay Over $4.2 Million to Settle False Claims Act Allegations |
| $4.5M | Northern Arizona Healthcare, Flagstaff Medical Center and Health First Foundation agreed to pay a total of $4.5 million to settle allegations that a 2017 payment to FMC under the Medicaid Disproportionate Share Hospital program violated federal law. The relator alleged that a Medicaid DSH Pool 5 payment to FMC in 2017 violated the federal prohibition against non-bona fide provider-related donations. | August 29, 2022 | Northern Arizona Healthcare, Flagstaff Medical Center and Health First Foundation – Northern Arizona Agree to Pay $4.5 Million to Settle False Claims Act Lawsuit |
| $4M | Philips North America LLC agree to pay $4.2 million to settle claims it swapped out key components of a mobile patient monitoring device that it sold to the U.S. military without recertifying the device for airworthiness, allegedly putting top government officials, first responders and the military at risk. | August 31, 2022 | Philips To Pay $4M Over Claims It Skirted Military Testing Rule |
| $2.1M | SHC Home Health Services of Florida, LLC and its related entities (collectively “Signature HomeNow”) paid $2.1 million to the United States government to settle claims of improperly billing the Medicare Program for home health services provided to beneficiaries living in Florida. The complaint alleged that Signature HomeNow knowingly submitted false or fraudulent claims seeking payment from the Medicare Program for home health services to Medicare beneficiaries who: (i) were not homebound; (ii) did not require certain skilled care; (iii) did not have a valid or otherwise appropriate plans of care in place; and/or (iv) did not have appropriate face-to-face encounters needed in order to be appropriately certified to receive home health services. | May 5, 2022 | Home Health Company Operating in Florida Pays $2.1 Million to Resolve False Claims Allegations |
| $2M | Hayat Pharmacy agreed to pay approximately $2M to resolve allegations that it submitted false claims to Medicare and Medicaid in 2019 for two prescription medications and switched Medicaid and Medicare patients from lower cost medications to the iodoquinol-hydrocortisone-aloe cream and Azesco without any medical need and/or without a valid prescription. | January 28, 2022 | Milwaukee Pharmacy Chain to Pay Over $2 Million to Resolve Allegations It Violated the False Claims Act |
| $1.2M | Philips RS North America LLC, formerly known as Respironics, Inc., a nationwide manufacturer of sleep and respiratory durable medical equipment, agreed to pay $1,283,825.40 to settle allegations that it unlawfully induced referrals for its equipment in violation of the False Claims Act and Anti-Kickback Statute. | September 22, 2022 | Sleep and Respiratory Equipment Manufacturer to Pay $1.2 Million to Resolve Allegations of Unlawful Kickbacks |
| $930,000 | Comprehensive Health Services, LLC agreed to pay $930,000 to resolve allegations that it violated the False Claims Act by falsely representing to the State Department and the Air Force that it complied with contract requirements relating to the provision of medical services at State Department and Air Force facilities in Iraq and Afghanistan. The United States alleged that, between 2012 and 2019, CHS failed to disclose to the State Department that it had not consistently stored patients’ medical records on a secure EMR system. | March 8, 2022 | Contractor Pays $930,000 to Settle False Claims Act Allegations Relating to Medical Services Contracts at State Department and Air Force Facilities in Iraq and Afghanistan |
| $800,000 | Dr. Bergman and his medical practice agreed to pay $800,000 to the US and Iowa to resolve allegations that Bergman wrongfully billed Medicare and Medicaid for services rendered by others and billed Medicare for medically unnecessary and unreasonable applications of skin substitute products. | September 7, 2022 | Iowa Plastic Surgeon Agrees to Pay $800,000 to Resolve Allegations of Inappropriate Billing and False Claims |
Examples of the type of fraud that can qualify for a qui tam whistleblower award or bounty include:
A qui tam whistleblower can be eligible for a large recovery. But there are many pitfalls and obstacles to proving liability, and there are unique rules and procedures that govern qui tam whistleblower cases. Therefore, it is critical to retain an experienced False Claims Act whistleblower lawyer to maximize your recovery. This FAQ provides an overview of some of the key aspects of False Claims Act claims.
What types of false claims are prohibited by the False Claims Act? ExpandThe False Claims Act prohibits:
To prevail, a qui tam whistleblower must prove that:
The first-to-file bar prohibits a whistleblower from bringing suit based on a fraud already disclosed through identified public channels, unless the whistleblower is “an original source of the information.” Pursuant to the first-to-file bar, “[w]hen a person brings an action under [the False Claims Act], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). The first-to-file bar encourages prompt filing.
The first-to-file bar underscores the importance of reporting fraud promptly and seeking counsel to evaluate potential claims.
What is the requirement to file a False Claims Act qui tam action under seal? ExpandThe False Claims Act requires that a qui tam action must be filed under seal and remain sealed for at least 60 days. This procedure enables the government to investigate the matter, so that it may decide whether to take over the relator’s action or to instead allow the relator to litigate the action in the government’s place. The purpose of the seal provision is to avoid alerting defendants to a pending federal criminal investigation. State Farm Fire and Cas. Co. v. US, 137 S. Ct. 436 (2016).
Failure to file under seal could potentially jeopardize a relator’s ability to recover a whistleblower bounty, but the False Claims Act does not require automatic dismissal for a seal violation
The “sealing period, in conjunction with the requirement that the government, but not the defendants, be served, was ‘intended to allow the Government an adequate opportunity to fully evaluate the private enforcement suit and determine both if that suit involves matters the Government is already investigating and whether it is in the Government’s interest to intervene and take over the civil action.” United States ex rel. Pilon v. Martin Marietta Corporation, 60 F.3d 995, 998-99 (quoting S. Rep. No. 345, 99th Cong., 2d Sess. 24, reprinted in 1986 U.S.C.C.A.N. 5266, 5289).
A False Claims Act retaliation claim can also be filed under seal (in conjunction with a qui tam action).
To initiate a False Claims Act qui tam action, the relator (whistleblower) must serve a copy of the qui tam complaint along with a “written disclosure of substantially all material evidence and information the [relator] possesses” on the Government. 31 U.S.C. § 3730(b)(2). The complaint remains under seal for at least 60 days, and shall not be served on the defendant. During this 60-day period, the Government is charged with investigating the allegations and “may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal.” 31 U.S.C. §§ 3730(b)(2), (3).
Before the 60-day period (or any extensions obtained) expire, the Government shall either “(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.” 31 U.S.C. § 3730(b)(4).
Are False Claims Act whistleblowers protected against retaliation? ExpandYes: the False Claims Act (“FCA”) protects employees, contractors, and agents who engage in protected activity from retaliation in the form of their being “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment.” 31 U.S.C. § 3730(h)(1).
What is a reverse false claim? ExpandReverse false claims liability arises where an entity or individual avoids the payment of money due to the government, e.g., failing to pay royalties owed to the government for mining on public lands.
Section 3729(a)(1)(G) creates liability for a person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government,” or who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).
To establish reverse false claim liability, a qui tam relator must show:
Reverse FCA liability can be supported by “`proof that the defendant made a false record or statement at a time that the defendant owed to the government an obligation’ . . . to pay money or property.” Chesbrough v. VPA, P.C., 655 F.3d 461, 473 (6th Cir. 2011)).
The term “obligation,” as it is used in the FCA’s reverse false claims provision, expressly includes any “established duty, whether or not fixed, arising from. . . . the retention of any overpayment. 31 U.S.C.A. § 3729(b)(3). By statute, Medicare requires that “[a]n overpayment must be reported and returned” to the program no later than “the date which is 60 days after the date on which the overpayment was identified.” 42 U.S.C. § 1320a-7k(d)(2). CMS has provided the following guidance regarding what it means to have “identified” an overpayment:
A person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.
42 C.F.R. § 401.305(a)(2). Internal audits can provide evidence that a provider knew about overpayments and chose not to return the overpayments to CMS.
What is the statute of limitations for a False Claims Act qui tam action? ExpandThe statute of limitations for a qui tam action is the longer of 1) six years from when the fraud is committed, or 2) three years after the United States knows or should know about the material facts, but not more than 10 years after the violation. Under § 3731(b)(2), the Government may bring an FCA action within up to 10 years of an FCA violation, provided that the suit was commenced within three years of the date that “the official of the United States charged with responsibility to act in the circumstances” knew or reasonably should have known of the facts material to the right of action.
In Cochise Consultancy Inc. v. United States, ex rel. Hunt, the Supreme Court held that both Government-initiated suits under § 3730(a) and relator-initiated suits (qui tam actions) under § 3730(b) are civil actions under section 3730 and therefore the longer limitations period applies in non-intervened qui tam actions.
The relevant “official” whose knowledge triggers the three-year limitations period of § 3731(b)(2) is the Attorney General or his or her designees within the Department of Justice.
The statute of limitations for a False Claims Act whistleblower retaliation case is three years.
What is the public disclosure bar in the False Claims Act? ExpandThe public disclosure bar prohibits a qui tam relator from bringing a False Claims Act lawsuit based on a fraud that has already been disclosed through certain public channels, unless the relator is an “original source” of the information. 31 U.S.C. § 3730(e)(4)(A).
An original source is “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 [suit].” § 3730(e)(4)(B).
The public disclosure bar asks whether the relator’s allegations are “substantially similar” to publicly available information. United States ex rel. Davis v. District of Columbia, 679 F.3d 832, 836 (D.C. Cir. 2012). “Where a public disclosure has occurred, [the government] is already in a position to vindicate society’s interests, and a qui tam action would serve no purpose.” United States ex rel. Feingold v. AdminaStar Federal, Inc., 324 F.3d 492, 495 (7th Cir. 2003).
But the public disclosure bar does not dictate that a relator must “possess direct and independent knowledge of all of the vital ingredients to a fraudulent transaction.” United States ex rel. Springfield Terminal Railway Co. v. Quinn, 14 F.3d 645, 656 (D.C. Cir. 1994). Rather, “direct and independent knowledge of any essential element of the underlying fraud transaction” is sufficient to give the relator original-source status under the Act. Id. at 657.
In Springfield Terminal, the D.C. Circuit set forth specific criteria to evaluate whether the public disclosures bars a qui tam action:
A September 2018 Third Circuit decision in Pharamerica clarifies that the FCA’s public disclosure bar is not triggered when a relator relies upon non-public information to make sense of publicly available information, where the public information – standing alone – could not have reasonably or plausibly supported an inference that the fraud was in fact occurring. Similarly, the D.C. Circuit has held that the public disclosure bar is not triggered where the relator “supplied the missing link between the public information and the alleged fraud” by “rel[ying] on nonpublic information to interpret each [publicly disclosed] contract,” and where “[w]ithout [relator’s] nonpublic sources . . . there was insufficient [public] information to conclude” that the defendant actually engaged in the alleged fraud. United States ex rel. Shea v. Cellco P’ship, 863 F.3d 923, 935 (D.C. Cir. 2017).
Courts in the Fifth Circuit apply a three-part test to determine whether the public disclosure bar applies, asking: “(1) whether there has been a `public disclosure’ of allegations or transactions, (2) whether the qui tam action is `based upon’ such publicly disclosed allegations, and (3) if so, whether the relator is the `original source’ of the information.” U.S. ex rel. Reagan v. E. Tex. Med. Ctr. Reg’l Healthcare Sys., 384 F.3d 168, 173 (5th Cir. 2004) (quotations omitted). The Court is not required to rigidly follow the three steps. U.S. ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011). Indeed, the Fifth Circuit has recognized that “combining the first two steps can be useful, because it allows the scope of the relators’ action in step two to define the `allegations or transactions’ that must be publicly disclosed in step one.” Id.; see also U.S. ex rel. Fried v. W. Indep. Sch. Dist., 527 F.3d 439, 442 (5th Cir. 2008) (combining the first two steps).
What is the original source exception to the public disclosure bar? ExpandThe public disclosure bar prohibits a relator from bringing a False Claims Act lawsuit based on a fraud that has already been disclosed through certain public channels, unless the relator is an “original source” of the information. 31 U.S.C. § 3730(e)(4)(A).
An “original source” is “an individual who either (1) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntary provided the information to the Government before filing an action.” § 3730(e)(4)(B).
If you have original information about fraud, it is important to retain counsel promptly. For example, if a government investigator interviews you before you have voluntarily come forward to disclose the fraud, your disclosure to the investigator will likely not qualify for any whistleblower award. See City of Chicago ex rel. Rosenberg v. Redflex Traffic Systems, 884 F.3d 798, 805 (7th Cir. 2018), citing United States ex rel. Paranich v. Sorgnard, 396 F.3d 326 (3d Cir. 2005) (voluntary requirement of federal False Claims Act “is designed to reward those who come forward with useful information and not those who provide information in response to a governmental inquiry”); Barth v. Ridgedale Electric, Inc., 44 F.3d 699, 704 (8th Cir. 1994) (qui tam relator did not “voluntarily provide” information to the government where government began its investigation first and investigator initiated interview with relator; “rewarding [relator] for merely complying with the government’s investigation is outside the intent of the Act.”)
What is materiality under the False Claims Act? ExpandThe False Claims Act (FCA) defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). In United States ex rel. Escobar v. Universal Health Servs., Inc., the Supreme Court held that FCA liability can attach for violating statutory or regulatory requirements, whether or not those requirements were designated in the statute or regulation as conditions of payment.
In particular, the Escobar Court held that “liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory or contractual requirement. In these circumstances, liability may attach if the omission renders those representations misleading.” 136 S. Ct. 1989, 1995 (2016). A Fifth Circuit decision summarizes the core holding of Escobar:
A violation is material if a reasonable person “would attach importance to [it] in determining his choice of action in the transaction” or “if the defendant knew or had reason to know that the recipient of the representation attaches importance to the specific matter `in determining his choice of action,’ even though a reasonable person would not.”
United States ex rel. Lemon v. Nurses To Go, Inc., 924 F.3d 155, 163 (5th Cir. 2019) (quoting Escobar I, 136 S. Ct. at 2002-03 (alteration in original) (quoting Restatement (Second) of Torts § 538 (1976))).
In Escobar, the Court articulated the following factors governing the materiality analysis, with no one factor being necessarily dispositive:
