Qui tam

In common law, a writ of qui tam is a writ whereby a private individual who assists a prosecution can receive all or part of any penalty imposed. Its name is an abbreviation of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as [well as] for himself." A more literal translation would be "who as much for [our] lord the king as for himself in this action pursues" or "follows."

The writ fell into disuse in England and Wales following the Common Informers Act 1951 but, as of 2010, remains current in the United States under the False Claims Act, 31 U.S.C. § 3729 et seq., which allows for a private individual, or "whistleblower," with knowledge of past or present fraud committed against the federal government to bring suit on its behalf. There are also qui tam provisions in 18 U.S.C. § 962 regarding arming vessels against friendly nations, 25 U.S.C. § 201 regarding violating Indian protection laws, 46a U.S.C. 723 regarding the removal of undersea treasure from the Florida coast to foreign nations, and 35 U.S.C. § 292 regarding false marking. In February 2011, the qui tam provision regarding false marking was held to be unconstitutional by a U.S. District Court, and in September of that year, the enactment of the Leahy-Smith America Invents Act effectively removed qui tam remedies from § 292.

False Claims Act

Main article: False Claims Act

The False Claims Act (31 U.S.C. §§ 3729–3733, also called the "Lincoln Law") is an American federal law which allows people who are not affiliated with the government to file actions against federal contractors claiming fraud against the government. The act of filing such actions is informally called "whistleblowing." Persons filing under the Act stand to receive a portion (usually about 15-25 percent) of any 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 involved health care, military, or other government spending programs.

The provision 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. 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" of the injury to the government caused by the alleged fraud. The information must not be public knowledge, unless the relator qualifies as an "original source."

The American Civil War (1861–1865) was marked by fraud on all levels in the Union north and the Confederate south. Some say the False Claims Act came about because of bad mules. During the Civil War, unscrupulous early day defense contractors sold the Union Army decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions among other unscrupulous actions. The False Claims Act, passed by Congress on March 2, 1863, was an effort by the government to respond to entrenched fraud 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 False Claims Act provides incentive to relators by granting them between 15% and 25% of any award or settlement amount. In addition, the statute provides an award of the relator's attorneys' fees, making qui tam actions a popular topic for the plaintiff's bar. An individual bringing suit pro se—that is, without the representation of a lawyer—may not bring a qui tam action under the False Claims Act (see, for example, United States ex Rel. Lu v. Ou, 368 F.3d 773 [7th Cir. 2004]).

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 was 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 decide to 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 will get a higher relator's share, about 25% to 30%. It is conventionally thought that the government chooses legal matters it would prosecute because the government would only want to get involved in what it believes are winning cases.

History

Qui tam actions were first used in 13th century England as a way to enforce the King's laws. They existed in the United States in 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. The False Claims Act was passed in 1863 during the U.S. Civil War, but was substantially weakened in 1943 during World War II while the government rushed to sign large military procurement contracts. It was strengthened again in 1986 after a period of military expansion at a time when there were many stories of defense contractor price gouging. Since then, qui tam provisions have helped recover more than $27 billion in taxpayer money.

The practice fell into disrepute in England in the 19th century by which time it was principally used to enforce laws related to Christian Sunday observance. It was brought to an effective end by the Common Informers Act 1951 but, in 2007, there were proposals to introduce legal provision on the U.S. model back to the United Kingdom.

Whistleblowers

'Whistleblower' can mean any person who reveals misconduct by his or her employer or another business or entity. The misconduct may be in the form of breaking the law, committing fraud, or corruption. That type of fraud can be a violation of the False Claims Act, or similar state and local laws. And a whistleblower who exposes fraud on the government can bring a qui tam lawsuit on behalf of the government, and can receive a share of the recovery as his or her reward.

In order for a whistleblower (also known as a "relator" in the context of the FCA) to bring a qui tam action that is based upon publicly-disclosed information, that person must legally qualify as an "original source." See Rockwell International Corp. v. United States.

Examples

• In April 2012, Alliant Techsystems Inc. agreed to resolve $36,967,160 settlement to resolve allegations that ATK sold dangerous and defective illumination flares to the Army and the Air Force. According to the government's allegations, from 2000 to 2006, ATK delivered LUU-2 and LUU-19 illuminating para-flares to the Defense Department. These flares, which burn in excess of 3,000 degrees Fahrenheit for over five minutes, are used for nighttime combat, covert and search and rescue operations and have been used extensively by American forces in Iraq and Afghanistan in the global war on terror. The government alleged that the flares delivered by ATK were incapable of withstanding a 10-foot drop test without exploding or igniting, as required by specifications, and that ATK was aware of this when it submitted claims for payment.
• In April 2012, AmMed Direct LLC has agreed to pay the United States and the state of Tennessee $18 million plus interest to settle allegations that it submitted false claims to Medicare and Tennessee Medicaid. The United States and Tennessee alleged that, from September 2008 through January 2010, the Antioch, Tenn.-based company submitted false claims to Medicare and TennCare for diabetes testing supplies, vacuum erection devices and heating pads. Prior to learning of the United States' and Tennessee's investigation, AmMed disclosed to the Medicare Administrative Contractors its failure to refund monies for returned supplies and began paying the refunds to Medicare and TennCare.
• In March 2012, LifeWatch Services Inc. has agreed to pay the United States $18.5 million to resolve allegations that the company submitted false claims to federal health care programs, the Justice Department announced today. The settlement resolves two lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act. The two complaints allege that LifeWatch improperly billed Medicare for ambulatory cardiac telemetry (ACT) services. ACT services are a form of cardiac event monitoring that use cell phone technology to record cardiac events in real time without patient intervention. Traditional event monitoring requires the patient to press a button when he or she notices a cardiac event to record the cardiac rhythms. Medicare reimbursed ACT services at between $750 and $1200 and traditional event monitoring services at roughly $250 during the relevant time period.
• In November 2010, Special Agents from the Defense Criminal Investigative Service (DCIS) worked jointly with the U.S. Army Criminal Investigation Command, Major Procurement Fraud Unit on an investigation of Samir Itani. The Texas businessman has agreed to pay $15 million to settle federal allegations that he and his company cheated the government by selling old and potentially dangerous food to the U.S. military to supply combat troops serving in Iraq and elsewhere. Prosecutors had alleged that Samir Mahmoud Itani and his company American Grocers Ltd. profited from the Middle East conflict by ripping off taxpayers and shortchanging U.S. soldiers in the mess hall. According to the government, Itani's firm bought deeply discounted products whose freshness dates had expired or were nearing expiration. His workers then altered those dates and resold those supplies to the government for hefty markups, prosecutors alleged.
• In August 2009, The Boeing Company will pay the United States $25 million to resolve allegations that the company performed defective work on the entire KC-10 Extender fleet, the Justice Department announced today. The KC-10 Extender is a mainstay of the Air Force’s aerial refueling fleet in the Iraq and Afghanistan war theaters. The lawsuit alleged that Boeing defectively installed insulation blanket kits in KC-10 aircraft while performing depot maintenance at the Boeing Aerospace Support Center in San Antonio, Texas.
• In April 2009, The Justice Department said Thursday that the Northrop Grumman Corporation had agreed to pay $325 million to settle a lawsuit over defective satellite parts in the largest settlement ever by a defense company in a case brought under a federal whistleblower law. The lawsuit was brought by a scientist, Robert Ferro, and joined by federal authorities. It contended that TRW Inc. tried to stop Mr. Ferro, who worked for a subcontractor, from disclosing his finding about faulty electronic components on military and intelligence-gathering satellites. TRW was later acquired by Northrop Grumman.

Main article: Pfizer

• In September 2009, a former Pfizer Inc. sales representative, John Kopchinski, was awarded $51.5 million for his role as a whistleblower in the investigation of Pfizer's marketing practices of Bextra. Pfizer pled guilty to various civil and criminal charges and paid in total $2.3 billion to the government. The case netted the largest criminal fine ever imposed in the United States for any matter, $1.195 billion, and the largest civil fraud settlement against any pharmaceutical company. Qui tam "relators" are not eligible to receive shares of criminal fines. The $102 million that was distributed between the six whistleblowers was calculated from the fines paid in the civil settlement. Kopchinski's allegations were the basis for the majority of Pfizer's assessed civil fine, hence the size of his share relative to the other whistleblowers. Kopchinski and his attorneys filed the False Claims Act complaint in 2004 and alleged Pfizer systemically violated the federal Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b) and the off-label marketing provision within the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§301-97. The qui tam provisions of the False Claims Act were triggered by the reimbursement for Bextra through Federal and State government programs, including but not limited to Medicare and Medicaid.

• A hospital group based in McAllen, Texas, has agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006, by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group. McAllen Hospitals L.P., d/b/a/ South Texas Health System, is a subsidiary of Universal Health Services Inc., a company based in Pennsylvania that owns hospitals and other health care centers around the country.

• In April 2009, the aerospace and defense technology company, Northrop Grumman, settled a lawsuit brought by a whistleblower and the US government alleging that the company sold faulty electronic equipment to the government for military satellites. The $325 million settlement remains the largest ever paid by a defense contractor in a qui tam case. Under the False Claims Act, which requires the government to award whistleblowers 15-25% of recoveries, the whistleblower Robert Ferro received $48.7 million for his participation in the case.

False patent marking

It is an offense under 35 U.S.C. § 292 (the "False Marking Statute") to falsely mark goods as "Patented." Before the enactment of the America Invents Act, any person could sue for breach, and the penalty of up to $500 was shared between the government and the person suing. Frequently, patentees fail to remove patent markings from their products following the expiration date of their patents and continue to mark goods sold after that date as patented. This behavior was largely overlooked until a court held that a separate penalty was due for each such article sold. This inspired a host of similar lawsuits.

In 2011, the United States District Court for the Northern District of Ohio held that the False Marking Statute was unconstitutional. Judge Dan Aaron Polster determined that it violated the Take Care Clause of Article II of the Constitution, because it represented "a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice".

The America Invents Act made significant changes to false marking laws, which affected all pending and future false marking actions:

• Only the U.S. government can now sue for the civil penalty authorized in § 292.
• Private entities can still sue, but only for compensatory damages. These plaintiffs must prove actual competitive injury from the false marking.
• It is no longer a violation to mark a product with an expired patent, as long as that patent once covered the product.

See also

• Private attorney general
• Parens patriae

Bibliography

• For a history of qui tam actions, see "Vermont Agency of Natural Resources v. United States ex. rel. Stevens (98-1828) 529 U.S. 765 (2000)". Supreme Court collection. Cornell University Law School. Retrieved 2008-03-13.

External links

• Bad Mules: A Primer on the Federal False Claims Act
• Department of Justice Presentation on the University of Washington Overbilling Case