Secrecy is not often associated with fairness in the American system of justice. One law that requires secrecy is the False Claims Act, which encourages and rewards private citizens who bring actions against those whom they believe have defrauded the government. Because these cases must be filed under seal, the defendant remains blind to the allegations until a government investigation is well underway. Even before the government is notified of alleged fraudulent behavior, the whistleblower or “qui tam relator” can obtain documentation and information necessary to investigate and file suit without going through a formal discovery process. Whistleblowers and their attorneys may even use a “ringer” to obtain evidence and avoid alerting a contractor of the potential suit.
Enacted during the Civil War, the False Claims Act serves the same laudable purpose today as it did in 1863—to prevent government contractors from defrauding the federal government. False Claims Act violations occur when an individual knowingly submits fraudulent claims to the federal government or knowingly causes someone else to make fraudulent claims to the federal government. See 31 U.S.C. § 3729(a). Violations can result in penalties of up to $11,000 per violation and three times the amount of damages incurred by the government. A Justice Department primer on the False Claims Act is available here [pdf].
One of the Act’s most important sections, the qui tam provision allows a private citizen to sue a contractor on behalf of the government. It provides a strong incentive to do so. A successful qui tam relator can recover up to 30% of the amount recovered in court or through settlement, as well as the attorney's fees incurred to bring the action. Not surprisingly, plaintiff’s attorneys are ready and willing to advise whistleblowers about the special procedures and precautions to take when filing these claims.
The False Claims Act requires whistleblowers to file suit under seal, notifying only the government. This process effectively allows the government to investigate the claims without the defendant’s knowledge. This means that a government contractor will likely be unaware of the allegations against it until the government finishes its investigation and obtains an order to serve the complaint. The whistleblower notifies the government of the alleged false claims by serving the government a disclosure statement. The whistleblower then files suit in court under seal and serves the government with the pleadings. A sixty-day investigatory phase follows in which the government determines whether to intervene and take over prosecution of the case. The 60-day investigation period is often extended up to a year or longer without the contractor's knowledge.
It's important to recognize that the lengthy investigation period does not always give the government an insurmountable lead. Many contractors have good defenses to allegations by qui tam relators. As discussed elsewhere in the Contractor's Perspective, qui tam actions are often dismissed because the alleged wrongful acts do not violate the False Claims Act. Statistically speaking, qui tam recoveries from government contractors represent a small portion of the government’s total False Claims Act recoveries and a small percentage of the overall dollars spent on contracts.