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WHISTLEBLOWER CONTRIBUTIONS UNDER THE FALSE CLAIMS ACT CANNOT REACH FULL POTENTIAL WITH AN EXPANSIVE APPLICATION OF THE PUBLIC DISCLOSURE BAR

Although Congress clearly authorizes private qui tam relators to continue their cases even if the Department of Justice declines to intervene in the suit, compare 31 U.S.C. 3730(c)(3) with former Tex. Hum. Res. Code Ann. § 36.104(b) (amended 2007)(requiring dismissal if state did not intervene in action); rewards whistleblowers with a higher percentage of the government's recovery if DOJ does not intervene, 31 USC 3730(d)(1), (2); and deliberately amended the False Claims Act in 1986 to eliminate "government knowledge" as a bar to private enforcement actions, see Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 130 S. Ct. 1396, 1407(2010), restrictive interpretations by the courts barring cases where a prior disclosure or lawsuit put the government "on the trail of fraud" continue to severely limit the strong role that private suits could play in protecting the public fisc. For more information about being a qui tam relator and speaking with an attorney, please click here.

How should the courts act under the public disclosure bar of the False Claims Act?

The issue is how strenuously the courts should permit defendants to knock out potential relators under the public disclosure bar of the False Claims Act. [1] Notably, when President Lincoln signed the original version of the FCA, there was virtually no mechanism for the federal government to detect fraud other than the private bar -- even the Department of Justice did not yet exist. Congress enlisted the people's help not merely for information, but also as "private attorneys general," who could commit their own efforts and resources to recover public funds.  The current obsession with determining whether even an obscure or random public disclosure of information might have been available for government scrutiny fails to recognize the salutary role that private citizens can play not only in alerting the government to fraud, but also in prosecuting it and obtaining recompense for the government from the wrongdoers.

As one commentator recently noted: "qui tam does not merely perform an informational role. The beauty of the qui tam provision is that by introducing individual private enforcers into the mix - individuals who will gather information and pursue claims - the FCA will be more effectively enforced because there will be greater apprehension and higher deterrence at lower costs."

NOTE: NECESSARY EVILS: HOW TO STOP WORRYING AND LOVE QUI TAM, 2013 COLUM. BUS. L. REV. 594, 625

While there is certainly an instinctive and understandable reaction that a random citizen shouldn't be able to swoop in and feast on the fruits of a public investigation, which both Congress and the courts remain hyper-vigilant about with their repetitive railings against "parasitic relators" [2], the question remains whether the public interest is better served by having aggressive, entrepreneurial citizens and their lawyers use some obscure, but arguably public, information to make wrongdoers pay up for their fraud.   As often as one might protest that a parasitic interloper shouldn't make off with 15% of the government's recovery, shouldn't we be equally concerned at the overwhelming evidence that our government doesn't adequately fund fraud detection and prosecution? [3] Is it better for government reports to revisit the same subjects time and again, indicating that fraud enforcement is ineffectual, at best [4], or for agile and litigious citizens to propel the cost of fraud above the "cost of doing business" level.

Regardless how one might feel about allowing the law to return to its pre-1943 state - where someone could (although only rarely did) simply step up and mimic the government's allegations in a criminal indictment and walk away with a handsome bounty [5] - it is easy to feel that the pendulum has swung far too high in the direction of insulating corporate wrongdoing from aggressive prosecution.  If fraud is being knowingly committed (which is all that the False Claims Act will prosecute), and if the government is unwilling to fund or staff its detection and enforcement arms at an effective level, then the courts should be less complicit with the wrongdoers in trying to tamp down a whistleblower action in any instance in which some prior public mention of a fraud or possible wrongdoing might have been sufficient to have alerted the government to possible wrongdoing.  Conclusions such as:

  • "set the government on the trail of fraud," United States ex rel. Schumann v. AstraZeneca PLC, 2010 U.S. Dist. LEXIS 109519, at *20-21 (E.D. Pa. Oct. 13, 2010);
  • SCETTF website was more than sufficient to "to set government investigators on the trail of fraud," United States ex rel. Green v. Serv. Contract Educ. and Training Trust Fund, 843 F. Supp. 2d 20, 33 (D.D.C. 2012)
  • "So long as the government is put on notice to the potential presence of fraud, even if the fraud is slightly different than the one alleged in the complaint, the qui tam action is not needed," Dingle v. Bioport Corp., 388 F.3d 209, 214-215 (6th Cir. Mich. 2004)(citing "trail of fraud" standard);
  • "all that is necessary is enough information to "set the government squarely on the trail of the alleged fraud without the assistance of relators," United States ex rel. Fried v. Hudson Indep. Sch. Dist., 2007 U.S. Dist. LEXIS 79845 (E.D. Tex. Oct. 26, 2007)

should not be sufficient to snuff out an otherwise-meritorious FCA lawsuit where the government has not, in fact, embarked down that trail.

Curiously, although Congress recently granted discretion to the Department of Justice to waive the public disclosure bar, knowledgeable observers have seen only ONE instance of this happening in the three years since the statutory amendment. [6] See Order dated August 12, 2013, Mazza v. Miami-Dade County and Miami-Dade Transit Department, Case No. 10-24546-CIV-Hoeveler (S.D. Fla.) If DOJ would focus more intensely on the corporate wrongdoing that is going unaddressed, and the missed opportunities for deterring fraudulent activity going forward, it would embrace the assistance of an alert and informed citizenry.  DOJ should concentrate more effort on quickly and efficiently reviewing sealed relator cases and permitting those with likely merit to move forward without a significant ongoing pull of government resources, even if there might arguably have been some prior disclosure of the fraud.

Contact Us to Learn More

If you have discovered evidence of government fraud, contact an experienced False Claims Act attorney before blowing the whistle. You may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys of Berger & Montague are nationally recognized experts in Whistleblower/Qui Tam actions with over a decade of experience pursuing these complex fraud cases. For more information or to schedule your confidential consultation, use the form on this page or call us at 1-800-424-6690.

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For further reading:
Berger & Montague Whistleblowers, False Claims Act & Qui Tam Blog
Life of a Qui Tam Lawsuit and Why You Want the Government to Intervene
Our Law Firm's Approach To Whistleblower Cases
What Whistleblower Clients Can Expect From Our Lawyers

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[1] 31 U.S.C. 3730(e)(4)(A):  "The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media …."

[2] From the legislative history of the 1986 amendments and since, the term "parasitic relator" has been a staple of discussions of the public disclosure bar of the FCA.  E.g.,    Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 130 S. Ct. 1396, 1407, 176 L. Ed. 2d 225 (2010)( FCA public disclosure bar is designed to "strike a balance between encouraging private persons to root out fraud and stifling parasitic lawsuits"); U. S. ex rel. Reagan v. E. Tex. Med. Ctr. Reg'l Healthcare Sys., 384 F.3d 168, 174 (5th Cir. 2004)("promot[e] private citizen involvement in exposing fraud against the government and …  prevent[] parasitic suits by opportunistic late-comers who add nothing to the exposure of fraud");
United State ex rel. Williams v. C. Martin Co., 2013 U.S. Dist. LEXIS 120210 (E.D. La. Aug. 23, 2013)("discourage opportunistic plaintiffs from filing parasitic lawsuits that merely feed off previous disclosures of fraud").

[3] See, e.g., "Health Policy Brief: Eliminating Fraud and Abuse," Health Affairs, July 31, 2011,  http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=72 ("resource-strapped federal prosecutors have adopted an unofficial threshold that requires that alleged crimes be worth at least $500,000 and be clear cut enough to make conviction a near certainty before they will take up a case");  GAO, MEDICARE, Important Steps Have Been Taken, but More Could Be Done to Deter Fraud, Statement of Kathleen King, Director, Health Care, GAO-12-671T, (April 24, 2012,); GAO, Medicare: CMS's Program Safeguards Did Not Deter Growth in Spending for Power Wheelchairs; GAO-05-43 (Washington, D.C.: Nov. 17, 2004); Medicare: More Effective Screening and Stronger Enrollment Standards Needed for Medical Equipment Suppliers, GAO-05-656 (Washington, D.C.: Sept. 22, 2005); Medicare: Improvements Needed to Address Improper Payments for Medical Equipment and Supplies, GAO-07-59 (Washington, D.C.: Jan. 31, 2007); and Medicare: Improvements Needed to Address Improper Payments in Home Health, GAO-09-185 (Washington, D.C.: Feb. 27, 2009).

[4] In but one small  example, Medicare has been battling against claims submitted with provider identification numbers of deceased physicians for more than a decade since the problem was earlier reported.  Compare HHS/OIG, Medical Equipment and Supply Claims with Invalid or Inactive Physician Numbers, November 2001, at p2 (CMS responding to OIG investigation by directing its claims processors to reject claims with deceased physician id's) with United States Senate, Permanent Subcommittee on Investigations, Medicare Vulnerabilities:  Payments for Claims Tied to Deceased Doctors, Staff Report, July 9, 2008  (between 2,000 - 2,900 deceased physicians still had active numbers in 2007; approximately 500,000 claims paid on deceased physicians' ids continuing through 2007); States Seek Medicare Data to Keep Fraudulent Providers Out of Medicaid, June 21, 2012 (reporting on  "the glaring problem of dead doctors who still manage to charge us for care they provide to patients alive and dead."),    http://www.pewstates.org/projects/stateline/headlines/states-seek-medicare-data-to-keep-fraudulent-providers-out-of-medicaid-85899400064.

[5] See United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S. Ct. 379, 87 L. Ed. 443 (1943).

[6] This was the subject of discussion at the recent Taxpayers Against Fraud Education Fund conference, attended by many prominent members of the relators' bar and a number of government prosecutors as well.