by Theodore P Watson, Esq. Qui Tam Lawsuits can ruin a federal contractor’s future and shut companies down if not defended correctly. The Qui Tam defense attorneys at Watson & Associates, LLC aggressively defend small businesses and large DOD contractors doing business with the federal government. The following information provides the basics of a Qui Tam Case involving false claims allegations and 6 things that federal government contractors should be aware of in Qui Tam Lawsuits.
1. The Purpose of the False Claims Act and Qui Tam Case Litigation in Government Contracting
The False Claims Act (FCA) is a federal government law statute under which whistleblowers, also called relators, can report fraud against the government by filing a qui tam lawsuit. Federal False Claims Act and qui tam claim litigation are usually driven by current or former employees who have personal information about the facts and details. This is critical to filing a False Claims Act lawsuit because the government may not have any other means of knowing the information. Hence, the underlying reason for the False Claims Act and Qui Tam regulations – to encourage whistleblowers to inform the government to investigate and act.
The laws create an incentive for Relators to bring lawsuits. In exchange for alerting the government of the alleged fraud, the whistleblower can receive a portion of any financial recovery from the government in a civil case. The Relator’s Qui Tam lawyers have to provide the information in a way that convinces the government that there are in fact fraudulent schemes and violations of procurement law in government contracting cases.
Although whistleblowers and their attorneys both bring critical information and industry experience, having the right Qui Tam defense strategies can make the government’s case more difficult to prove. There are many law firms and attorneys that exclusively file Qui Tam case actions and False Claims Act cases. However, many of those attorneys are former DOJ attorneys and have vast litigation experience but may not have the substantive and deep experience needed with the underlying laws and regulations.
When bringing a Qui Tam claim against a government contractor, a solid defense will more than likely come from a False Claims Act defense or Qui Tam defense attorney that also understands the underlying allegations and procurement rules that govern them. For example, the Relator’s attorney will allege a violation of SBA regulations but may have no detailed experience about SBA small business programs or regulations. This can put the defendant contractor in a better position to fight the case. The same is true for allegations of False Claims Act provisions stemming from Buy American Act violations. See information about False Claims Acts defenses for contractors in litigation.
2. Your Former Employee or Relator, and The Qui Tam Attorney Provide the Government With Details, Details Details
This is what makes the Qui Tam and False Claims Act lawsuits difficult to defend. The lawyers and your former or current employee work with the government to get every single detail there is to help the federal investigators to conduct their investigations and the federal prosecutors file cases or indict in criminal cases.
Nevertheless, a solid defense can be in place if the facts presented by the Relator and the Qui Tam attorney still do not amount to a violation of the underlying laws. A common situation occurs when the federal prosecutor or DOJ attorneys allege that the contractor has violated SBA affiliation regulations, or SDVOSB business control laws.
There are separate courts that litigate these very issues every day. Yet, in many cases, neither the SBA or the agency has conducted an investigation before the charges or brought. Instead, many federal agencies only act when the US attorney’s office comes to the table.
As government contractors, understand and appreciate that having a former or current employee file federal False Claims Act and qui tam litigation becomes a very complex situation if you do not promptly look to defend the case early to develop a solid legal foundation to fight the charges.
3. The Qui Tam False Claims Lawsuit is Filed on Behalf of the Government
The whole idea of a Qui Tam Action is for the whistleblower to file a lawsuit. Unless a lawsuit is filed, there is no Qui Tam Action. Filing a complaint may still cause a government investigation. However, if there is no Qui Tam lawsuit, the relator may not have any ability to collect from the proceeds.
As discussed later, once the case is filed, the Government has to make a decision whether or not to ‘intervene’ and take over.
If the government chooses to intervene, this is good for the Relator and his attorney since they will take a back seat and wait for the results – and a check.
The Qui Tamand false claims provision allowed the Relator to pocket anywhere between 15% and 30 % of the recovery depending on whether or not the government decided to intervene in the case.
Presenting the Information to the Government: The relator/attorney first prepares a disclosure statement to the government. This disclosure provides all the adverse details to the government, evidence, and information in the possession of the whistleblower. This is a requirement of the False Claims Act. The government then decides if the contractor has committed fraud against the government or, more importantly, can a fraud case be proven if the matter had to be litigated.
Contractors should be aware that in a Qui Tam False Claims Act case, the person bringing the lawsuit may have damming evidence such as texts, emails, recordings, and notes that may present what appears to be a bad case at first glance. However, the focus should be on the violation of the enabling statute or regulations. These include the Federal Acquisition Regulations (FAR), the Small Business Act or 8(a) Regulations. Be aware that information provided to the government to support an investigation in a False Claims Act Qui Tam case is confidential and not part of the public record.
Another tip for contractors defending a federal False Claims Act case, is the information provided in the Complaint to the Court is not necessarily the same as the confidential documents provided to the government. This puts the contractor at a great disadvantage.
4. Contractors May Never Know About False Claims Qui Tam Lawsuits Being Filed Until Too Late
As stated earlier, Qui Tam lawsuits alleging false claims or fraud against the government are filed on behalf of the United States Government. Federal government contractors will have a mountain to overcome if they do not have defense lawyers that are also government contracts lawyers. The reason for this is that once the Government intervenes or takes over the Qui Tam case, it comes down to the details and a decision as to whether procurement fraud has been committed and if the law that governs the allegations has been violated. By the time government investigators knock on the contractor’s door
When the False Claims Act lawsuits are filed, they are filed under seal in federal court. This is not good news for the contractor because only the court and the government are aware of the lawsuit. This means that if a current employee is the Relator, that person may be at work every day without the employer having any idea. See How to Defend a Qui Tam Lawsuit Involving Government Contracts?
The cases a filed under seal to give the government the ability to investigate the allegations in secrecy and to have the advantage of the element of surprise.
Government fraud investigations can take a long time. It is not unusual for an investigation to take two to three years. The Relator’s attorney may have to request extensions from the court to keep the case under seal.
5. What Exposure of Liability Does the Contractor Have in a Qui Tam False Claims Act Lawsuit?
There is no doubt that false claims statutes are designed to punish government contractors for having defrauded the government. If the case is a criminal false claims case, then there may be jail time involved in addition to restitution. There can be both civil and criminal cases going at the same time for contractors to defend. Contractors should also be aware that any false statements made to the government, even during investigations, could be tacked on as additional violations that warrant additional penalties.
Therefore, having a viable False Claims Act defense attorney that understands underlying procurement law can be extremely helpful when defending your case(s).
In a Qui Tam lawsuit, and in addition to any settlement or rulings during litigation, or paying times the amount (treble) for government losses, the contractor may be liable for the responsible for the Relator’s attorney’s fees over and beyond any contingency fees to the Relator.
6. Should You Settle or Go to Trial in a Qui Tam Case?
Every case has a different set of facts. Deciding whether to settle or litigate a Qui Tam False Claims Act case is a difficult decision to make for a federal contractor. It is solely the decision of the contractor/ defendant. At the end of the day, the strength and weakness of the government’s case and or the strength and weakness of any defenses you have, also contribute to the ultimate decision whether to settle or not.
Without a deep understanding of the underlying substantive law that drives the allegations, a government’s case going to trial could be risky. It is important to know that the government has to first prove that the underlying regulation(s) were violated (Buy American Act or SBA small business regulations etc.) before invoking the False Claims Act. There are always risks on both the DOJ’s side and the Defendant contractor. This is yet another reason why having the right Qui Tam False Claims Act defense attorney on your team can make the difference.
Other Important Points About Federal False Claims Act and Qui Tam Litigation
What are False Claims Act Civil Penalties?
When large businesses or small government contractors violate the False Claims Act, they can be liable for three times the dollar amount that the government is defrauded and civil penalties of $10,781 to $21,563 for each false claim. The relator or qui tam plaintiff can recover between 15 – 30 percent of the total recovery that the government gets regardless of whether the case is settled or went to trial. The Whistleblower cannot recover damages unless he or she files a Qui Tam claim.
What actions are Most Likely Violations of the False Claims Act in Qui Tam Cases?
Not all alleged actions violate the law under Qui Tam False Claims Act cases. The following are but a few of the common violations.
- Overcharging the government
- Fraudulently applying for or bidding on federal government contracts;
- Submitting a false application for a government benefit, money or property;
- Submitting claims for payment or improper invoices payment for goods or services that do not conform to the contract;
- Submitting payment of invoices for goods or services that are defective or of lesser quality than were contracted for;
- Submitting a claim that falsely certifies that the contractor has complied with procurement law, contract terms, or procurement regulations
Qui Tam Attorneys Fees
In addition to a share of the recovery, the Relator, the statutory guidelines provide for whistleblowers to recover Qui Tam lawsuit attorneys fees, costs, and expenses. It is the whistleblower that can request fees under the False Claims Act. It is the Whistleblower that has the right to request attorney fees. A government contracting firm can end up paying out quite a bit of settlement costs. Regardless of if your company and the agency (DOJ) settle the case, you may still have to deal with the attorney fee and negotiations.
Statutes of Limitations – What is the Filing Deadline for a Qui Tam Case?
Under the False Claims Act, a Qui Tam case must be filed within the latter of the following two time periods: 6 years from the date that the violation occurred; or 3 years after the government knew or should have known about the violation. In no situation can a lawsuit be filed later than ten years after the violation occurred.
Call the False Claims Act Qui Tam Defense Attorneys at Watson & Associates, LLC
If you are involved in a False Claims or procurement fraud lawsuit or Federal Government contract fraud investigation, call Watson & Associates, LLC’s False Claims Act Qui Tam Defense lawyers. We offer a free and confidential consultation. Call us Toll-Free at 1.866.601.5518.