Meaning and Definition of Qui Tam
Qui tam is defined as writ that allows a private individual who provided assistance in a prosecution case to receive all or part of the penalty imposed on the accused. The Qui Tam writ has its origins from the Common Informers Act of 1951 formulated for both England and Wales to be used by the king in common law matters and actions. The Act had a qui tam writ provision that stated that “[he] who sues in this matter for the king as well as for himself” which was the first qui tam writ to be enacted. The Act was incorporated in the US constitution under the False Claims Act, 31 U.S.C 3729 et seq (Doyle, 2009)
Qui Tam’s actions are the detailed analysis of the Civil False Claims statutes that outline the litigation procedures that will be used in the case. The qui tam actions also involve establishing the merits of a claim by determining what amount will be allocated to the plaintiff of the case. After the plaintiff has filed a qui tam action, the case is put under seal which can be only be lifted by the federal court and the US government once investigations into the fraud case are complete.
The seal is meant to restrict the defendant from disclosing any information about the case to anyone to prevent a conflict with the defendant and the Securities and Exchange Commission regulation. This regulation requires that the defendant; whether a private individual or a company should disclose information about the case that might affect the stock prices and the stock market (Doyle, 2009).
History of Qui Tam Writs
The earliest example of a qui tam provision was the 695 declaration made by King Wihtred of Kent in the 13th century that stated that “If a freeman works during a forbidden time like on the Sabbath day, he shall forfeit he heals fang, and the man who informs against him shall have half the fine, and the profits arising from the labor.” (Doyle, 2009, p.2). After this provision, qui tam statutes became a common feature of England laws between the 14th and 16th centuries.
These laws were however viewed to bring unwanted consequences. For example, there was an increase in the number of bounty hunters who exploited weaknesses in the system to arrest people who had been identified to be fraudsters in England. They also exploited the systems that would dictate the amount of the reward that they would receive for handing in the fraudsters (Doyle, 2009).
Other problems that arose with the qui tam laws were threats to sue suspected fraudsters which at times amounted to blackmailing. Litigation cases were brought up so the relator would be able to settle for a certain sum of money received from the damages paid by the defendant. Such relators were referred to as vexatious relators, turbidum hominum genus (class of unruly men) or promoters who blackmailed people suspected of fraud so that a litigation case could be brought against them. The practice however came into disuse in the 19th century with the writs mostly being used for Christian Sunday observance. The Act was brought to an official end by the Common Informers Act of 1951 (Doyle, 2009).
The False Claims Act came about in the US during the American Civil War of 1861 to 1865 that saw a lot of fraud committed against the US government. Fraudulent activities were committed in the form of defense contractors selling decrepit horses, rifles, and ammunition to the Union Army for use in the war. The Act was passed on March 2 1863 by the US Congress to respond to the increasing cases of fraud and unscrupulous actions by these defense contractors. The False Claims Act however became weakened because of the large procurement contracts the US government signed during World War II. The Act was however strengthened again in 1986 after the US military faced expansion activities that saw defense contractors being put on a task over fraudulent machinery and artillery (Sturycz, 2009).
The False Claims Act and Related Federal Statutes
The False Claims Act also referred to as the Lincoln Law is an American Federal Law formulated by the US congress to provide people with little or no affiliation to the US government an opportunity to file qui tam actions against people they suspect to have defrauded the government an act referred to as whistleblowing. People who file an action against the defrauders stand to receive a portion of damages that have been recovered from the accused. The amount of compensation given to the whistleblower is usually 15 to 25 percent of the damages. The False Claims Act is therefore seen as a legal tool or framework that can be used to counteract any fraudulent activities that have been directed at the federal government (Sturycz, 2009).
The False Claims Act private individuals to bring a lawsuit on behalf of the United States by presenting evidence and information that implicates the accused of knowingly submitting fraudulent claims or false information against the US government. The whistleblower does not necessarily have to come under any harm by the defendant for him/her to provide the information. This private individual is instead viewed as people who have received a legal standing that will enable them to sue through the partial assignment of the injury that has been inflicted on the government through the alleged fraud (Sturycz, 2009). The qui tam provision in the False Claims Act states:
“A reward to the informer who comes into court and betrays his coconspirator, if he is such; but it is not confined to that class. Even the district attorney, who is required to be vigilant in the prosecution of such cases, may also be the informer, and entitle himself to one half the forfeiture under the qui tam clause and to one-half of the double damages which may be recovered against the person committing the act.” (2009, p.5).
The enacted False Claims Act statutes prohibited fraud cases from being committed against the government which included cases such as embezzlement of government funds, conspiring against the government, presenting forged or false signatures for document verification and making false government claims or oaths. This provision was formulated to deal with both American citizens and military personnel who presented fraud cases against the government. Civilian offenders caught to have defrauded the US government would face a sentence of one to five years of imprisonment or an alternative fine of $1,000 to $5,000. They also faced civil liability in an amount that was deemed double the cost of damages that were incurred by the US government (Doyle, 2009).
The False Claims Act identifies the people who are liable for fraud damages to be those who violate federal prohibitions with regard to fraud cases. The US federal law understands the term people or person to include corporations, companies, societies, partnerships and associations. The Act has been designed to allow private individuals to sue on behalf of the government with the qui tam action being brought in the name of the United States.
The private individual or relator is not allowed by federal law to use information that is public in the official litigation proceedings unless the individual or relator is the original source of the information. The Act has a provision that prevents a second relator from bringing a similar qui tam action to the court. The False Claims Act also states that a member of the armed forces cannot bring any action against a member who is based in the defendant’s service (Doyle, 2009).
Related Federal Statutes
The United States Supreme Court identified four contemporary federal qui tam statutes that would be used in qui tam litigation cases. These federal statutes were the False Claims Act, two Indian protection laws that came from the case of Vermont Agency of Natural Resources v. United States ex. rel. Stevens, and the Patent Act. One of the Indian protection statutes, 25 U.S.C. 81, has undergone some amendments that will no longer authorize qui tam actions. The federal statute that is commonly used is the False Claims Act (Doyle, 2009).
The US Congress has enacted several statutes other than the four federal statutes that have provisions for qui tam actions. For example, the US Supreme Court observed in the case of United States ex. rel. Marcus v. Hess that” the statutes providing a reward for the informers do not specifically authorize or forbid the informant/whistleblower to institute an action for him to sue the defendant.” (2009, p.4). The observation from this case encouraged environmentalists to bring up qui tam actions based on realtor reward provisions that were instituted in the Rivers and Harbors Act.
The lower state courts were however not receptive to these suggestions and have refused to recognize the authority that is brought about by a qui tam action under the River Act. The Supreme Court however suggested qui tam actions in Vermont Agency of Natural Resources v. United States ex. rel. Stevens by citing the existing qui tam statutes as well as two more qui tam silent informer reward statutes. The federal courts in the district and state level however continued to maintain that the US Congress was charged with the role of creating explicit qui tam statutes (Doyle, 2009).
Process of the Qui Tam Actions
The first stage in filing a qui tam suit is preparing a disclosure statement by the relator or whistleblower. Section 3430 (b) (2) states that a relator should provide the US government with a written disclosure that contains evidence and information of the lawsuit. The main purpose of preparing a disclosure statement is to provide the government with enough information on the fraud case so that it can decide whether it wants to take part in the lawsuit or allow the relator to proceed with the law suit alone (Androphy, 2010).
The consensus on what should be contained in a disclosure statement is usually varied and limited. Some federal courts stipulate that the document should only cite the relevant facts of the qui tam suit while others observe that the disclosure statement should contain information about the relater’s theories on the fraud case. Since the government is usually bombarded with many qui tam cases, there is the possibility that a case might be rejected if it lacks measurable support. The relator is therefore advised to make sure that the information contained in the disclosure is thorough and accurate. Relators are also advised to file their statements as soon as possible (Androphy, 2010).
After the disclosure statement has been filed, the government orders an investigation into the relator’s claims after which a suit is filed in the federal court 11 under two jurisdictional bars which are the first to file bar 12 and the public disclosure bar 13. The seal is meant to restrict access to information of the filed lawsuit until the government completes its investigation which might take 6 months or two years. Also within the 60 days, the Department of Justice (DOJ) has the opportunity to investigate the relator’s claims by going through the evidential material and information that was presented in the law suit. The department can decide to join the case, settle the action before a formal investigation is conducted or dismiss the qui tam action (Androphy, 2010).
If the US government decides to join the lawsuit, the role of prosecuting the defendant will change from the relator to the government thereby reducing the role of the whistleblower. Government intervention will see the relator participating in the litigation proceedings by following procedures outlined by the government and the federal court. For example the court might limit the number of witnesses used by the relator and the length of their testimonies as well as the cross examination. The court might also limit the length of the witnesses testimonies as well as the cross examination. Such conditions are used on a discretionary basis and they are usually imposed by the federal court when the relator’s participation has been determined to be irrelevant to the government’s prosecution (Androphy, 2010).
The government’s intervention in the case should not limit the relator’s participation in the preliminary investigation and also the litigation case. The federal court provides 15 to 25 percent of the relator’s settlement fee if even the whistleblower did not participate in the court proceedings.
The government has been known to participate in 18 percent of all qui tam cases that have been filed in the federal courts. In the event the government declines to join or intervene in the lawsuit, it sends a declination letter to the relator through the Department of Justice. The letter outlines the duties of the relator during the lawsuit proceedings. Once investigations into the fraud case have been completed by the government, the seal is lifted which allows the relator to serve the defendant of the litigation case within 120 days (Androphy, 2010).
The cases that are filed in the federal court system are required to follow section 3729 of the federal law. The subsections in section 3729 include (a) (1) and (2) which state that the fraud claim has to be presented by the defendant of the case or a third party who has been caused by the defendant to submit the claim. The second subsection requires that the claim made by the plaintiff or relator has to be made knowingly and it has to be a fraudulent or false claim (Androphy, 2010).
Types of Qui Tam
Qui tam actions can take various forms which include healthcare qui tams, off label qui tams, false certifications and government loans. The healthcare qui tam covers the provision of best price which encompasses the lowest price that the drug manufacturer offers to any purchaser of the drug be they a private individual, the government or a company.
However, such schemes at times are a major source of fraud as drug manufacturers look for buyers who will purchase the drugs at high quantities and at a high price bringing about a situation of inaccurate drug pricing which is viewed to be a price violation. The federal law and the U.S. government requires drug manufacturers to pay price rebates that will ensure the drugs are sold at a low price to Medicaid programs that have been established for the state level (Androphy, 2010).
Off label qui tam actions involve fraud cases that have been brought against drug companies that attempt to expand their business by selling off-label drugs. If a Medicare or Medicaid program pays for these off-label usages without approval from the Federal Food and Drug Administration (FDA), a fraud claim might arise. The FDA has the main role of approving drugs for a particular use in healthcare institutions and Medicare programs in the United States. If the drug manufacturer promotes the drug to be used in a way other than what was approved by the FDA, then they are viewed to be committing fraud. Seeking damages for fraud claims on off-label drug usage is usually difficult unless the off-label is being used for a medical condition or it is approved by the FDA (Androphy, 2010).
False certification qui tam law suits arise when a claimant is said to have submitted fraudulent documents or certifications to the US government after which they claim to have followed federal statutes and regulations in filing these documents. The certifications submitted by the claimant can either be implied or express. The false certification cannot lead to a qui tam writ or action if the government had knowledge of the falsified certification and continued making payments to the person who falsified the information (Androphy, 2010).
Benefits and Pitfalls of Qui Tam Actions
The benefits of Qui Tam actions are that they encourage people who have knowledge on fraudulent activities being committed by others to launch a formal complaint against them. The qui tam laws also help protect the government from being defrauded or being involved in fraudulent deals. The whistleblower or relator is usually rewarded for blowing the whistle on the fraudsters by receiving a certain percentage of the settlement fee after the court has ruled on the qui tam case (Androphy, 2010). In terms of pitfalls of qui tam actions, the aspect of public disclosure has presented a huge challenge for lawyers who participate in qui tam litigation cases.
The public disclosure provision was formulated by the jurisdictional bar of the US congress. The provision required the relator to reveal all the evidential material and information that was contained in the lawsuit to the public. The challenge of dealing with public disclosure arises because of the various procedures by circuit courts that are used to deal with public disclosure qui tam cases. The various circuit courts in the US have varied opinions and systems on how to deal with public disclosure. To counter this pitfall, the federal court has come up with provisions that limit the types of public disclosures that are made in civil or criminal court proceedings (Androphy, 2010).
References
Androphy, J.M. (2010). Federal qui tam litigation: the government’s watchdog. Web.
Doyle, C. (2009). Qui tam: the False Claims Act and Related Federal Statutes. Web.
Sturycz, N.D. (2009). The King and I? : An examination of the interest of qui tamrelators represent and the implications for future False Claims Act Litigation. Web.