Federal statute that sets criminal and civil penalties for falsely billing the government, over-representing the amount of a delivered product, or understating an obligation to the government. The False Claims Act may be enforced either by the Justice Department or by private individuals in a qui tam proceeding.
The False Claims Act allows private parties to file qui tam actions alleging that defendants defrauded the federal government. See: 18 U.S.C. § 286, 18 U.S.C. § 287, 31 U.S.C. § 3729 et seq. If the suit succeeds, the private party may receive up to 30% of the government's award. In these suits, the government is the real party in interest, and thus is considered the plaintiff. The private party who initiates the suit is called a relator.
In a qui tam suit under the False Claims Act, the relator first files suit in the federal District Court. The suit is filed under seal, so that only the relator and the government know about it. After the suit is filed, the Department of Justice, in conjunction with the local district attorney, has 60 days to investigate and decide whether to intervene. The government can, and usually does, request an extension.
If the government intervenes, it takes over the case. If the government wins or settles, the relator receives between 15% and 25% of the government's award, depending on the relator’s involvement in the case. If the government does not intervene, the relator may choose to continue on the relator’s own. If the relator wins, the relator may recover up to 30% of the government's award. The court will reduce the relator's award if the relator was involved in improper activities.
For example, if an employee of a defense contractor discovered that the employer was defrauding the government, the employee could file a False Claims Act qui tam suit against the employer. After filing the suit, the Department of Justice, in consultation with the local District Attorney, might choose to intervene. Then, if the employee and plaintiff win, the employee would be entitled to between 15% and 25% of the government's award.
Some False Claim Act relators are entitled to whistleblower protection.
See, e.g., United States ex rel Eisenstein v. City of New York (08-660).
[Last updated in November of 2022 by the Wex Definitions Team]