False Claims Act Damages and Financial Recoveries

What amount can a False Claims Act whistleblower recover as a reward for bringing a lawsuit?  How does the law determine what the damages are for the United States?

What have been the dollar recoveries in successful cases?

Most successful cases involve recoveries of $1 to $10 million—with a portion of the Government's recovery flowing to the relator. The most successful qui tam cases are a few that have resulted in recoveries for the Government in excess of $1 billion, like the Pfizer $2.3 billion pharmaceutical settlement in 2009. Generally, the most successful cases are those in which the Government intervenes, either as to part or all of the case.  However, from time to time a case that has not benefitted from the Government’s active prosecution can also be financially successful for the Government and the relator, not to mention its deterrent effect on future wrongdoers.

Since the late 1980’s, qui tam actions have increased dramatically and have been effective and successful in combating contractor fraud. Since 1986, qui tam recoveries have exceeded $38 billion, with most of the successes involving fraud in Medicare and military programs.


What does the False Claims Act provide in terms of a financial recovery for the Government?

The Government is entitled to the following under the civil False Claims Act:

  1. A civil penalty of $5,000 to $10,000 per false claim.
  2. Actual Damages.
  3. All costs incurred by the Government to recover damages or penalties.

Additionally, the $5,000 to $10,000 civil penalty provisions now increase with inflation. Currently, the civil penalties are slightly more than the original 1986 provisions of $5,000 to $10,000 per false claim.

Total damages usually exceed $ 1 million in most successful False Claims Act cases that result in money or some other recovery for the Government.

What amount can the relator recover for bringing a qui tam case?

The qui tam relator’s share of the case's recovery is set by statute. If the Government intervenes to conduct the action, a relator receives 15% to 25% of the Government's financial recovery.  If the Government does not conduct the action and the relator is successful, the relator's share is 25% to 30%.

However, if the relator “planned and initiated” the violation, the court may reduce the share to be paid to the relator from any recovery obtained. If the relator is convicted of criminal conduct arising from the relator’s role in the violation, the relator receives nothing.

Where the qui tam action is based upon a "public disclosure" of specific information and the Government proceeds with the action, but the relator did not make the "public disclosure," the court may award any appropriate sum, not to exceed 10% of the recovery.

All of these provisions are found in 31 U.S.C. § 3730(d)(1)-(d)(3).

What money can a False Claims Act whistleblower recover?

The False Claims Act whistleblower can recover a portion of the government’s recovery against the wrongful Government contractor (the “relator’s share”), attorneys fees, and the costs of the litigation. If the whistleblower also suffered retaliation at work because of the whistleblowing or bringing the qui tam lawsuit, double back pay, reinstatement or front pay, attorneys fees, and the costs of the litigation can also be obtained.


Does the whistleblower qui tam relator have attorneys fees and costs paid?

Yes. The False Claims Act requires that the losing defendant pay the successful relator's attorneys fees, costs, expert witness fees, and other expenses.

Is there some dollar amount that a case has to satisfy to bring a False Claims Act case?

Officially, no. Actually, yes, for all practical purposes. The False Claims Act allows for federal courts to take on cases under the False Claims Act without regard to the amount of money at stake. As a practical matter, however, the case will require the time and attention of competent counsel and will likely last for years. Thus, most litigants and their lawyers will not intentionally want to spend substantial time and money on a case involving only a few thousand dollars. The Department of Justice normally will not “intervene” or prosecute qui tam cases involving less than $1 million dollars in loss to the Treasury. So, as a practical matter, most False Claims Act qui tam cases will involve at least $1 million in actual damages and statutory penalties, which are accrued at the rate of $5,000 to $10,000 per false claim.


Is the potential defendant’s financial situation important in deciding whether a case is brought?

The ability of the defendant to pay damages is an important consideration. False Claims Act cases can be long and costly. Most defendants have substantial funds to fight a case. A defendant must be able to pay substantial damages for the fraud committed if a case is ultimately to be financially worthwhile. If a company is bankrupt or nearly so, the Government, the relator, and the lawyers may recover nothing for their efforts, no matter how horrible the wrongdoing.

How are the False Claims Act damages provisions interpreted and applied to determine damages?

In assessing damages, issues often arise as to what constitutes a false claim for purposes of triggering the civil penalty provisions. Some Government contractors have submitted or used thousands of false claims in their dealings with the Government. Also, these contracts often involve millions, if not billions, of dollars. In an employee time card cheating case, for example, tens of thousands of potential false claims exist, each representing a $10,000 civil penalty.

While Medicare cases are particularly likely to involve large numbers of false claims disproportionate to actual damages, the Government prefers to pursue cases where there is "actual damage" to the public purse, not "just penalties" cases. Thus, there are both practical and legal restraints on the number of separate civil penalties that can be recovered successfully.

While very rare, civil penalty provisions, when accompanied by criminal prosecution, could bankrupt some defendants or raise constitutional issues involving the Constitution's double jeopardy clause. These issues are discussed by the Supreme Court in a case entitled United States v. Halper, 490 U.S. 435 (1989).

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