False claims actions date back to the 13th and 14th centuries when the police and government did not maintain law and order. Instead, the government enlisted the public to police wrongdoing on behalf of the king.
Enlistment came via monetary incentive: turn in the wrongdoers, get paid a reward.
A whistleblower case is often called a “qui tam,” short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur.” Rough translation: He who brings an action for the king as well as for himself.
Today someone who files a qui tam case, called a “relator,” is said to be “doing well while doing good.”
1863: The original Lincoln Law
President Abraham Lincoln pushed the first federal whistleblower statute through Congress during the Civil War. The False Claims Act, which came to be called “Lincoln’s Law,’’ gave individuals cash incentive to report fraud against the Union.
Dishonest government contractors were particularly successful during the war. One reportedly said, “You can sell anything to the government, at almost any price you’ve got the guts to ask.’’
Contractors delivered crates that were supposed to contain muskets filled with only sawdust. They sold decrepit horses to the cavalry. They provided shoes that were nothing but glued together with wood chips, and uniforms that fell apart in the first rain.
The word “shoddy’’ was actually “first used with reference to those who made fortunes by army contracts at the time of the Civil War,’’ according to The Oxford English Dictionary, “it being alleged that the clothing supplied by the contractors consisted largely of shoddy.’’
Before Congress passed the False Claims Act in 1863, only government officials could sue contractors said to be defrauding the government. The new law gave private citizens the right too. The government could assess double damages, plus a $2,000 fine for each false claim submitted by the wrongdoer. The whistleblower’s reward: 50% of whatever the government recovered.
1943: Rise of the lobbyists, decline of the law
World War II blew open the door to fraud by military contractors.
Greedy people wanting to profit from the False Claims Act came forward with no inside information, essentially repackaging criminal indictments into civil suits. Citing such “parasitic lawsuits,’’ lobbyists persuaded Congress to close the loophole. In the process, it crippled the law.
The 1943 changes reduced the Relator’s share from 50% to as little as zero and barred qui tam lawsuits “whenever it shall be made to appear that such suit was based upon evidence or information in the possession” of the government. The False Claims Act thus fell into disuse.
1986: Those $640 toilet seats
In 1980, the Department of Justice reported that fraud constituted as much as 10% of the federal budget. In 1981, the General Accounting Office estimated the government was losing tens of billions of dollars to undetected fraud.
However, what riled the public and spurred Congress to act were reports that the military paid $435 each for claw hammers, $640 each for toilet seats, and $7,600 each for coffee makers.
The False Claims Act pendulum swung back as Congress restored teeth to the law by extending the statute of limitations. Congress also eased the burden of proof to find defendants liable who acted with “deliberate ignorance” or “reckless disregard.” Congress further added whistleblower protections to keep companies from retaliating against employees who came forward.
The government even bumped the whistleblower’s reward back up to as much as 30%. And Congress loosened the ban against bringing cases about which the government possessed information. The revised act made companies that lose liable for triple damages, plus they have to pay the whistleblower attorney’s fees and costs.
The False Claims Act was back.
Today: Back to Lincoln
Almost 150 years since President Lincoln got Congress to act against “shoddy,’’ the government and private whistleblowers use False Claims Act cases to combat fraud in Medicare and Medicaid, housing programs, defense contracting, and other areas.
Congress continues to tweak the law. The 2009 Fraud Enforcement and Recovery Act overruled judicial decisions that had limited False Claim Actions. The 2010 Patient Protection and Affordable Care Act gave the Department of Justice more discretion over whether to bar a qui tam based on publicly disclosed information.
Each year the United States obtains billions in settlements and judgments from civil cases involving false or fraudulent claims against the government.
The massive recoveries are justification for a president who considered those who line their pockets while putting soldiers in harm’s way to be the lowest of the low. The Congressional House Committee under Lincoln echoed his sentiments, declaring:
“Worse than traitors in arms are the men who pretend loyalty to the flag, feast and fatten on the misfortunes of the nation while patriotic blood is crimsoning the plains of the south and their countrymen are moldering in the dust.”
Our experienced whistleblower attorneys can help you determine if you’ve observed a False Claims Act violation, guide you through blowing the whistle in a manner calculated to protect your career, and fight for your rights if your employer retaliates.