A significant number of cases that are brought under the False Claims Act are brought by qui tamrelators (whistleblowers) who bring claims seeking relief on behalf of the Government. The number of whistleblower cases that are filed annually has nearly doubled between 2008 and 2014.
The Government has a right to review and decide whether to intervene in – effectively, take over – False Claims cases cases that are brought by whistleblowers. The Government intervention decision represents a critical stage in any False Claims litigation. The Government has typically intervened in less than 25% of qui tam cases that are filed, but the rapidly growing number of qui tam filings means that the Government is intervening in nearly twice as many cases as it was 7 years ago. The Government intervention decision is particularly important because, while the Government intervenes in less than 1 out of every 4 cases, the Government obtains more than 90% of its total False Claims recoveries from cases that it has commenced or in which it has intervened.
In making its intervention decision, the Government evaluates many factors. Several of the most notable factors are discussed below:
- Credibility of the relator: The relator’s credibility is a critical factor in the Government’s intervention decision. The Government is evaluating the relator’s explanation of purported wrongdoing and deciding whether to allocate its time and resources to pursuing the claims. Accordingly, the Government has to determine whether it finds the relator to be trustworthy and is compelled by the relator’s narrative. The relator may also be a critical witness in the ensuing litigation (particularly where the relator is an insider with first-hand knowledge of the purported wrongdoing), so the relator’s credibility as a testifying witness is important. Considerations such as the relator’s history (i.e. whether the relator is a serial litigator who has brought prior, unsuccessful claims) and whether the relator is motivated by a personal animus may also factor into the analysis.
- Scope and nature of the alleged misconduct: The Government has growing resources for investigating allegations of fraud, but there are still limits to the Government’s resources. The Government’s focus, therefore, is typically on extensive fraud. The Government will carefully consider the nature of the wrongful conduct in determining the merits of intervening. The Government will evaluate whether the alleged conduct is ongoing, whether the alleged conduct is capable of repetition, whether allegations of willful misconduct are alleged, and the incentives of the individuals who are involved in the wrongdoing.
- Allocation of resources: While the Government takes all allegations of fraud seriously, it is forced to evaluate cases to determine how to most effectively allocate its resources. Accordingly, the Government will analyze the scope of the resources that will need to be expended in the litigation, particularly in relation to the potential recovery in the litigation. This determination is made knowing that the whistleblower will be able to pursue the case on the Government’s behalf even if the Government declines intervention.
- The defendant(s): The Government will also consider the identity of the defendant(s). This analysis will focus on many factors, including the size and ability of the defendant(s) to pay any fines that may be assessed, past issues involving the defendant, steps that have taken towards compliance and corrective action, and the possibility of repetition.
- Correspondence with the defendant(s): False Claims cases are filed under seal and there are no assurances that a defendant will even be aware of the existence of such a case while the Government is making its intervention decision. However, on many occasions the defendant does learn of the existence of the case (either directly through a whistleblower who reveals that a case has been filed or through circumstantial indications, such as the Government’s issuance of civil investigative demands or subpoenas). In our experience, when a defendant learns of a claim, it generally makes sense to be proactive in seeking to meet with the Government. The Government is typically receptive to requests for clients to be heard and to present facts and arguments as to why assertions of wrongdoing are false. It is often helpful to provide the Government with an overview of a defendant’s compliance plan, information regarding any internal investigation that has been conducted, and an overview of the facts that demonstrate that the allegations are false. In making such a presentation, it is important that the defendant ensure that it has done its due diligence and is able to be forthright with the Government.
- The likelihood of recovery and the potential recovery: The Government will also evaluate a whistleblower’s allegations to determine both the expected probability of success in the litigation and the potential recovery. The Government has the ability to pick and choose cases to determine those that it sees as most optimal. With that in mind, the Government will prioritize cases that it believes offer a strong probability of success, but are also likely to provide a substantial recovery that will justify the expenditure of Government resources.