Whistleblower Cases.

"Whistleblower" (Whistle-blower, Whistle blower, Relator) is any person who reveals misconduct by his or her employer or another business or entity. The misconduct may include illegal activity, fraud, or corruption. In the United States, that type of fraud may be a violation of the False Claims Act or similar state and local laws, and a whistleblower who exposes fraud on the government may bring a qui tam (False claims Act, FCA) lawsuit on behalf of the government and receive a share of the money recovered by the government as a reward for bringing that action.

Whistleblower protections have existed in the United States since colonial times, and were embraced by the first U.S. Congress as a way to enforce the laws when the new federal government had virtually no law enforcement officers.

False Claims Act

The American Civil War (1861–1865) was marked by fraud on all levels, especially with Union War Department contracts. Some say the False Claims Act came about because of bad mules. During the Civil War, unscrupulous contractors sold the Union Army, among other things, decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions.

The False Claims Act (31 U.S.C. §§ 3729–3733, also called the "Lincoln Law") is an American federal law that was passed on March 2, 1863 during the American Civil War that allows people who are not affiliated with the government to file actions against federal contractors claiming fraud against the government. The law represented an effort by the government to respond to entrenched fraud in cases where the official Justice Department was reluctant to prosecute fraud cases. Importantly, a reward was offered in what is called the "qui tam" provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery.

The act of filing such actions is informally called "whistleblowing." Persons filing under the Act stand to receive a portion (usually 15-25%) of recovered damages. The Act provides a legal tool to counteract fraudulent billings turned in to the federal government. Claims under the law have been filed by persons with insider knowledge of false claims which have typically involve health care, military, or other government spending programs.

The False Claims Act allows a private person, known as a "relator," to bring a lawsuit on behalf of the United States, where the private detective or other person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States. In order to qualify as a "relator," and bring an action that is based upon publicly disclosed information the person bringing the claim must legally qualify as an "original source."

The relator need not have been personally harmed by the defendant's conduct; instead, the relator is recognized as receiving legal standing to sue by way of a "partial assignment" to the relator of the injury to the government caused by the alleged fraud.  The information may not be public knowledge, unless the relator qualifies as an "original source.”

The False Claims Act provides incentive to relators by granting them 15% - 25% of any award or settlement amount.  In addition, the statute provides an award of the relator's attorneys' fees. An individual bringing suit pro se—that is, without a lawyer—may not bring a qui tam action under the False Claims Act.

Once a relator brings suit on behalf of the government, the Department of Justice, in conjunction with a U.S. Attorney for the district in which the suit is filed, have the option to intervene in the suit. If the government does intervene, it will notify the company or person being sued that a claim has been filed. 

Qui tam actions are filed under seal, which has to be partially lifted by the court to allow this type of disclosure. The seal prohibits the defendant from disclosing even the mere existence of the case to anyone, including its shareholders, a fact which may cause conflicts with the defendant's obligation under Securities & Exchange Commission or stock exchange regulations that require it to disclose lawsuits that could materially affect stock prices. The government may subsequently, without disclosing the identity of the plaintiff or any of the facts, begin taking discovery from the defendant.

If the government does not participate in a qui tam action, the relator may proceed alone without the Department of Justice, though such cases historically have a much lower success rate. Relators who do prevail in such cases may potentially receive a higher relator's share, up to 30%.