What is the False Claims Act?

The False Claims Act is a law created to hold persons, including large corporations, liable for defrauding the government.

In addition to the federal False Claims Act law, more than 30 states and a handful of smaller jurisdictions have their own False Claims statutes and laws to prosecute fraud perpetrated against the government. All of these laws, including the federal statute, also protect whistleblowers from retaliation by their employers and allow for potentially significant financial rewards for whistleblowers should their efforts result in a successful enforcement action.

The False Claims Act is a law that includes a unique and critical so-called qui tam provision, which also allows private whistleblowers not affiliated with the government to file suit on its behalf and reap monetary benefits. In fact, of the billions of dollars in successful settlements or rulings annually levied against False Claims Act violators, most of it is typically awarded in cases initiated by qui tam whistleblowers.

WHAT IS THE HISTORY OF THE FALSE CLAIMS ACT?

The False Claims Act has a long history rooted in justice and transparency. The Continental Congress passed the first false claims law in 1778. The false claims law was passed in response to an incident in 1777. Two men came forward alleging that the commander-in-chief of the Continental Navy was corrupt. In retaliation, the commander-in-chief sued the informants for libel. Congress declared it the duty of “all persons in the service of the United States, as well as all others,” to inform the proper authorities of “misconduct, frauds or misdemeanors committed by any officers in the service of these states, which may come to their knowledge.”

Fraud in government contracts was pervasive during the American Civil War. As the Union scrambled to obtain supplies, many corrupt contractors sold the army rancid food, defective guns and ammo and feeble horses and mules. With the majority of men involved with the war effort, there were very few law-enforcement officers to investigate claims. Whistleblowers were needed.

In response, Congress passed the False Claims Act on March 2, 1863. Significant amendment to that law occurred in the late 1980s. In 1986, Congress refortified the False Claims Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government. And in recent years, Congress has made three additional sets of amendments to the False Claims Act all of which help whistleblowers report fraud against the government. Since 1986, qui tam provisions have helped recover more than $27 billion in taxpayer money thanks to whistleblowers.

WHAT TYPES OF FRAUD ARE COVERED UNDER THE FALSE CLAIMS ACT?

In recent years, health care fraud has been by far the most lucrative area of False Claims Act enforcement. Of the $3 billion recovered in fiscal year 2019, $2.6 billion came from matters related to health care, which includes, but is not limited to: pharmaceuticals, medical devices, hospitals, laboratories, physicians, distributors, clinics and others in health care who variously defraud Medicare, Medicaid and other government health programs. This marked the tenth consecutive year that the health care sector yielded judgments and settlements exceeding $2 billion under the provisions laid out by the False Claims Act from whistleblowers’ work.

The types of health care fraud are as broad and varied as the sector itself. False Claims Act cases involving health care fraud often include inflated medical bills, unnecessarily expensive medical procedures justified by misleading diagnoses, kickbacks paid by pharmaceutical companies to physicians and other health providers in return for unfair promotion of a given drug, and off-label promotion of drugs for medical purposes for which they are not approved.

Defense contractor fraud often revolves around massive Department of Defense and NASA contracts and led to the Cold War-era renaissance of the False Claims Act, and is also commonplace, as is information technology fraud and construction fraud. Many of these contracts are made on a regular basis with the government, and often, whistleblowers are the only ones with an eye on the details, and with the ability to report wrongdoing in contracts with the government.

Financial fraud has been a growing area of False Claims Act litigation since the financial crisis. Hagens Berman's team of whistleblower attorneys has a long and successful track record of handling False Claims Act cases for their whistleblower clients. The firm has also achieved great success in the area of financial fraud under the False Claims Act.

Unlike most whistleblower law firms, Hagens Berman has decades of experience in financial fraud litigation and in particular the areas of securities and accounting fraud, which makes it particularly skilled at prosecuting financial crimes that fall under the purview of the False Claims Act.

HAGENS BERMAN’S FALSE CLAIMS ACT VICTORIES

One former False Claims Act whistleblower client worked for LandSafe, Inc., an appraisal company owned by Countrywide Financial and ultimately acquired by Bank of America, from 2004 to 2008. While there, he observed a disregard for Federal Housing Administration (FHA) regulations governing underwriting and home appraisals.

That whistleblower hired Hagens Berman to represent him, alleging that LandSafe, Countrywide and Bank of America participated in a scheme that favored certain friendly appraisers or intimidated them into inflating values of certain homes, in defiance of a federal law requiring appraisers to act neutrally.

The investigation sparked by his whistleblower lawsuit helped the government secure a $1 billion settlement between the U.S. Department of Justice and Bank of America, one of the largest such settlements in history. For his role in exposing this wrongdoing, our client was generously awarded; as was another Bank of America whistleblower client who reporting on mortgage servicing fraud.

In a prominent case involving health care fraud, Hagens Berman represented Dr. Marshall Horwitz, who blew his whistle on the pharmaceutical kingpin Amgen for manipulating scientific data in order to sell two of its drugs for off-label use. This led federal Medicare and state Medicaid programs to spend large amounts of money covering prescriptions for conditions that the drugs, Aranesp and Neulasta, weren't approved to treat. The Department of Justice eventually levied $762 million in civil and criminal penalties against Amgen. Again, our client was generously rewarded for his efforts.

Hagens Berman has also litigated qui tam whistleblower cases against medical-industry powerhouses like Pfizer and Medtronic. And when the government declined to pursue a complex Medicare-fraud case exposed by health care finance expert Anthony Kite against several large hospitals, Hagens Berman litigated the action privately, securing a multimillion-dollar award for Kite.

HAGENS BERMAN REPRESENTS WHISTLEBLOWERS UNDER THE FALSE CLAIMS ACT

Hagens Berman’s team of whistleblower attorneys, led by managing partner Steve Berman and head of whistleblower practice Shayne Stevenson, has successfully represented several whistleblowers under the federal False Claims Act and similar state laws. Unlike most whistleblower practices, which lack the resources, reputation and successful experience to litigate whistleblower claims against some of America's biggest corporations, Hagens Berman has a record of success that includes some of the largest settlements in legal history and protects its whistleblower clients adamantly.

HOW TO BECOME A FALSE CLAIMS ACT WHISTLEBLOWER

If you have knowledge of a False Claims Act violation or would like to discuss becoming a whistleblower and find out more about your legal right and protections, contact our whistleblower team at [email protected] or by filling out the secure form on this page.