The False Claims Act and Qui Tam Whistleblower Rights

The False Claims Act is the federal government's primary tool against fraud. It lets a private citizen, called a relator or whistleblower, sue on the government's behalf when a person or company knowingly bills a federal program for something false, and share in whatever the government recovers.

That whistleblower provision, known as qui tam, is what gives the law its teeth. A relator who brings a successful case recovers 15% to 30% of what the government collects, while the defendant pays treble (triple) damages plus a penalty of $14,308 to $28,619 for every false claim.

The Act reaches fraud against any federal program: Medicare and Medicaid billing, defense and procurement contracts, research grants, and more.

If you have inside knowledge of fraud against a government program, call (888) 713-6653 for a free, confidential review of your potential claim.

Beginning of False Claims Act (Lincoln Law)

• The False Claims Act was enacted by Congress on March 2nd, 1863 (12 Stat. 696). Commonly known as the “Lincoln Law” because of the history. During the Civil War people were defrauding the Union Army through dishonest business dealings (U.S.C. §§ 3729 - 3733).
• The FCA became a powerful tool because of a “Qui-Tam” provision that awarded “whistleblowers” for protecting the Union Army from these unscrupulous people.
• The FCA allows the Federal Government to administer severe civil penalties on those responsible for defrauding the government.

Expansion of FCA (Important Changes)

• The FCA was primarily used against defense contractors until amendments expanded it 1986. By 2008, those “amendments have led the Government to recover over $20 billion...of which $12.6 billion has been the result of qui tam actions” (GOV)
• In the 1990s Act started being applied to healthcare fraud. Recovery of fraud against Medicaid/Medicare increased.
• Rewards for the whistleblowers responsible for disclosing the fraudulent also increased. In 2009 the FCA was amended again by the Fraud Enforcement and Recovery Act (FERA). This has significant impact on healthcare providers and expanded the “reverse false claims” provision.

Major importance to U.S. and State Governments

• The False Claims Act is of major importance because it empowers private citizens to report fraud and take civil action on behalf of the Government. These private individuals (whistleblowers/relators) have insider's knowledge and are incentivized to come forward and expose abuse with financial bounties. They are in the best position to report violations and expose fraud perpetrated upon govt. spending. This enables State and Federal agencies to recover billions of dollars in losses obtained through illegal activities. In turn the Federal Government rewards and protects the whistleblowers for their lawful and civic duty.

Violations of the False Claims Act are most commonly encountered in the healthcare industry (including drug companies, hospitals, pharmacies, laboratories, and physicians). It is also used for civil remedy to redress government contract abuses and procurement related spending. This section will quickly outline what is considered a violation of the Federal False Claims Act.

To summarize, False Claims Act violations require two things. First, the false claim needs to be perpetrated against a Federal, State or Government agency. Secondly, the culprit needs to knowingly attempt to defraud the government. Once these are proven severe civil penalties will be enforced.

Two requirements decide most cases. The false statement must be material, meaning it was capable of influencing the government's decision to pay; in Universal Health Services v. Escobar (2016) the Supreme Court made materiality a real hurdle, not a technicality. And the defendant must have acted knowingly: in United States ex rel. Schutte v. SuperValu (2023) the Court held that what matters is what the defendant actually believed at the time, not whether a different reading of an ambiguous rule could later be called reasonable.

After enough of these cases, you learn the "knowing" element is rarely a smoking-gun email. It's the pattern: the same false code, billed the same way, thousands of times, long after someone in the building flagged it.

What Healthcare Fraud Looks Like

The Anti-Kickback Statute and the False Claims Act

One of the most important connections in healthcare fraud: since the Affordable Care Act in 2010, a claim that results from a violation of the Anti-Kickback Statute is automatically a false claim under the False Claims Act. A kickback, paying for referrals, does not just carry its own criminal penalty. Every Medicare or Medicaid claim tainted by that kickback becomes an FCA violation carrying treble damages and per-claim penalties.

When FCA violations occur the people or businesses responsible are held accountable by the Federal Government. There are two penalties and these are costly. The two penalties are fines per violation and a multiplier of damages.

The Cost of Violating the Law

Fines per Violation

• Responsible parties incur a civil penalty for each false claim, an amount the Department of Justice adjusts for inflation every year.
• For violations assessed in 2026, that penalty runs from $14,308 to $28,619 per claim, on top of treble damages.^[1]

Multiplier of Damages

• The defendant will be fined three times (3x) the total amount the government is defrauded.

False Claims Act - Largest Fines

• 2012 - Glaxosmithkline, LLC paid $1.5 billion in FCA recovery. Part of a settlement fine for promoting drugs for non-FDA approved use, making false claims and misleading statements about the safety of drugs and paying kickbacks to Doctors. Relators (Whistleblowers) received $131 million for their portion of the settlement.
• 2009 - Pfizer, Inc paid $692 million (including interest) in Federal recoverables under the FCA. This was part of a settlement for illegally marketing drug brands that caused federal healthcare programs like Medicare and Medicaid to charge for medications not covered. Whistleblowers received $106 million for their part of the settlement.

The Federal Government penalizes corporations for violating the False Claims Act. These fines are significant, and whistleblowers share in the settlement. For a closer look at how the per-claim penalty and treble-damages math actually adds up, see our breakdown of False Claims Act penalties.

This section will review that FCA lawsuits are not always filed by the Federal Government.

The False Claims Act has a “Qui-Tam” provision allowing private individuals to sue on the Government’s behalf.

Who can file FCA Claims?

Any entity or person can file a claim under the False Claims Act. Three factors plaintiffs should know before filing a claim.

• Evidence - Plaintiffs need evidence of fraud committed against the Government to pursue a claim under FCA.
• First to File - Taking quick action is important. The FCA has a “first to file” clause. Only one lawsuit can be filed under the FCA based on the same evidence or related action based on the facts. After that only the Government can intervene on behalf of the plaintiff.
• Legal Representation - Any person or entity considering action under the False Claims Act should receive counsel from a qualified FCA attorney. Because these cases can produce substantial recoveries, qualified lawyers typically take them on contingency, with no upfront cost to the whistleblower.

Can a Second False Claim be filed against a company?

• Possibly. FCA Cases follow the first-to-file rule. This rule is specific to “related actions based on the facts”. Companies doing business with the Government can be involved in multiple transactions which can have a variety of contexts. While the defendant has a pending FCA case it may be based on different circumstances. Consulting a lawyer is important in cases of this type.

Two more rules that can end a case early

• The public-disclosure bar: A case built on fraud that is already public, in the news, a government report, or another lawsuit, can be thrown out unless you are an "original source" with independent, first-hand knowledge.
• Government dismissal: Even after a relator files, the Department of Justice can move to dismiss the case. In United States ex rel. Polansky v. Executive Health Resources (2023), the Supreme Court confirmed the government holds that authority once it has joined the case.

What is Qui Tam?

• A writ of Qui-Tam is when a private individual who aids in the prosecution of a defendant can receive all or some of the monetary fines and penalties imposed.

Anyone can file an FCA claim. The plaintiff needs to file first and have evidence of fraud perpetrated against the government. A lawyer who specializes in the False Claims Act should be consulted, and these cases are typically handled on contingency. A properly handled FCA claim can result in rewards for the whistleblower who is responsible for the qui-tam action.

Rewards for whistleblowers are clearly outlined in the False Claims Act. To qualify for a relator bounty you must file a qui-tam lawsuit. Simply informing the government of fraud is not enough. Once the case is settled the Government awards a percentage of the recovered funds to the plaintiff. This reward is 15%-30% of the recovery.

Rewards with Government Assistance

• The Federal Government has the right to intervene in FCA Claims cases. They will provide assistance or even take-over the case. This does not revoke the plaintiffs right to an award for originally filing the lawsuit. However, it has good and bad repercussions.
  • The Good: The Government typically only gets involved in large cases or cases it believes it can win. Also, the Government is on your side which brings an enormous amount of resources to the case.
  • The Bad: The False Claims Act diminishes the total percentage of the awarded recovery. The plaintiff receives 15%-25%.

Rewards without Government Assistance

• If the Federal Government does not intervene in an False Claims Act case the rewards for the plaintiff are higher.
• A plaintiff will receive no less than 25% of the amount recovered by the Government and no more than 30% of the recovered amount.

Additional Reimbursements

• Regardless of whether or not the Government intervenes, plaintiffs in a winning case will be entitled to additional reimbursements.
  • Reasonable expenses incurred during the case
  • Legal fees and costs.

Defendant Pays

• The FCA stipulates that all awards and additional reimbursements will be paid by the defendant.

Plaintiffs filing “qui-tam” actions against wrongdoers under the False Claims Act are rewarded between 15%-30% of the recovered settlement.^[2] Proper legal representation in a Qui-Tam suit case is highly recommended.

When someone calls we ask whether the fraud can be proven. The reward is real, the bounty matters. But it's the byproduct of a case built right, not the reason to bring one.

Whistleblower Retaliation Protection (Section 3730(h))

The False Claims Act also protects the people who report fraud. Under 31 U.S.C. 3730(h), an employer that fires, demotes, harasses, or otherwise retaliates against a whistleblower for protected activity is liable for reinstatement, double back pay, and special damages. Proving retaliation is a separate case from the underlying fraud, and it adds to the employer's exposure.

Filing a False Claims Act lawsuit requires specific procedures. Whistleblower’s must follow these procedures correctly or risk dismissal of the claim. Reviewing the steps for filing qui-tam FCA lawsuit is highly recommended.

Where to file FCA Claims?

• Relators (whistleblowers) must file FCA complaints under seal in United States District court.
• A copy of the complaint must also be filed with the US District Attorney and with the office of the Attorney General of the United States.

What is needed in the complaint?

• An official written statement of allegations against the defendant.
• An accounting of all physical and material evidence supporting the plaintiff's accusations.

What does filing under seal mean?

• By filing “under seal” means no one is aware the case has been filed against the defendant. Not even the defendant.

The first thing we tell a nervous caller is that the case starts in secret. It's filed under seal, the employer doesn't know, and you have time to decide how far to take it before your name is ever attached.

How long can it be sealed?

• The Government has 60 days to review the claim and investigate the relator's accusations. The Government can prolong its investigations. This can cause the case to remain sealed for months or years. Prolonged sealed cases are not subject to the Statute of Limitations because the case has been filed within the necessary time limit.

Unsealing and Informing

• Once the US Attorney and Federal Government are ready to proceed they will notify the plaintiff before unsealing the case and making it public. The Federal Government will also inform the plaintiff of their role in the prosecution of the case.

A number of States have begun adopting and codifying the Federal False Claims Act to fit their needs. This is because of the tremendous success of the FCA providing civil remedy to redress fraud against the Federal Government. 32 States now have their own version of the False Claims Act.

Following the model of the federal legislation, statutes provide incentives to persons who alert the government of fraudulent actions. These new FCA enactments allow whistleblowers who file a qui tam claim on behalf of the State a percentage of the recovery received by local and State government following action. In addition, municipalities have begun enacting their own false claims acts to fight abuses on the municipal level.