Enforcement and Defense of False Claims Act and Similar Whistleblower Actions


By Robert S. Griscti and Jake D. Huxtable

Corporate and individual clients frequently require representation in the False Claims Act (FCA)[1] arena.  Health care and other industries are held to increasingly strict scrutiny by federal and state authorities under this federal statute and its equivalent state laws.

Referred to as “Lincoln’s Law,” the federal False Claims Act originally was signed by President Abraham Lincoln in 1863.  The original legislation was intended to encourage private citizens to expose and heavily penalize corrupt contractors who, for example, provisioned the Union army.  The law was based on British common laws dating back to the fourteenth century, whereby whistleblowers were rewarded for protecting the property of the crown.

The United States Supreme Court has stated that the broad purpose of the FCA is “to protect funds and property of the government from fraudulent claims that might result in financial loss to the United States.”[2]  A false claim may take many forms, the most common being a claim for goods or services not performed or falsely certified (i.e., health care reimbursement claims certifying that services were medically necessary when they were not); or goods or services  provided in violation of statute or regulation[3], such as “Anti-Kickback”[4] and “Stark”[5] laws.

Between 1986 and 2013, nearly $40 billion was recovered for the United States under the FCA, where whistleblowers received over $3 billion in qui tam awards plus attorneys’ fees and costs.  Since 2009 through 2015 in particular, the Justice Department recovered more than $26.7 billion through FCA cases, with more than $16.8 billion of that amount recovered in cases involving fraud against health care programs, such as Medicare, Medicaid, and Tricare.[6]

The government’s revamped emphasis on combatting health care fraud has been apparent in the north central Florida area in investigations that have led to significant monetary civil settlements and/or criminal convictions. For example, this year, the United States Attorney’s Office for the Northern District of Florida convicted a physician of 162 counts of health care fraud after a five-week jury trial in Gainesville.[7]  The University of Florida and Shands Healthcare, also referred to as UF Health, have negotiated resolutions of lengthy civil enforcement actions in recent years.[8]

Whistleblower civil lawsuits are typically brought under the FCA, which allows a private citizen to sue an individual or a business that allegedly is defrauding the government and, if successful, recover funds on the government’s behalf.  A suit filed by an individual on behalf of the government is known as a “qui tam” action, and the person bringing the action is referred to as a “relator” or “whistleblower.”  The qui tam complaint is initially filed under seal for 60 days, during which time the government investigates the allegations in the complaint.[9]  The government will then evaluate the case and determine whether it will intervene and take over the case; or rather, decline to take over the action, in which case the whistleblower can choose to proceed with the action individually.  If the government conducts the action, a relator is to receive not less than 15 percent and no more than 25 percent of the proceeds.[10]  If the government does not conduct the action and the relator is successful in obtaining a recovery, the relator is entitled to receive between 25 percent and 30 percent of the recovery.[11]  The FCA leaves the federal court with discretion to decide what amount is ultimately awarded within these statutory ranges, taking into account the role of the relator in advancing the case to litigation.[12]

The complaint is initially served only upon the Attorney General of the United States, and the United States Attorney in the federal District where the action is filed.  The relator/whistleblower is required to provide a written disclosure statement to the government of material evidence and information the whistleblower possesses.[13]  A whistleblower is not required to have direct and independent knowledge of every element of an FCA violation.  Such knowledge of any essential element is sufficient[14], such as specifying the “who, what, where, when and how” of the alleged fraud[15], including, for example, evidence of the specific invoices that are alleged to constitute the false claims.[16]  Thus, the disclosure statement can set forth an overview of legal theories and facts, a narrative of the facts that the whistleblower possesses, the identities of witnesses, and the locations of documents.  In summary, the disclosure statement is an important document that assists the government in evaluating the allegations of the qui tam complaint and serves as a road map for the government’s ensuing investigation.

Regardless of whether the government intervenes, whistleblowers are protected from employer retaliation, such as being fired for blowing the whistle, under both federal[17] and state[18] law.  Generally, the identities of whistleblowers and the information they provide to the government are neither disclosed to the public nor the defendant during the investigatory stage.[19]  The FCA does not authorize the filing of the disclosure statement with the qui tam complaint nor its being provided to the defendant.  The relator can provide information to the government without fear of that information being used in a retaliatory manner.

Whether the government intervenes or not will likely depend on the information the relator voluntarily provides to the government in its disclosure statement and, when the government chooses to do so, through its own investigatory work product.

Civil Investigative Demands (CIDs) are frequently used to initiate the government’s investigation.  CIDs are judicially enforceable demands for production of documents, written answers to interrogatory questions, and deposition testimony of witnesses, including corporate entities and individuals.  Although CIDs can be served only before a civil or criminal action is instituted by the government, prosecutors can and do use CIDs to determine whether civil enforcement or criminal prosecution is more appropriate.  CIDs may not be used to investigate violations that impose solely criminal penalties.  If this is the case (i.e., where only criminal prosecution is sought), then the government should employ grand jury subpoenas as its investigative tool, rather than the issuance of CIDs.

The government has greater flexibility in requesting the production of information pursuant to CIDs than via criminal grand jury subpoenas, which must pass stricter procedural and constitutional muster.[20]  Unlike subpoenas, the FCA empowers the Justice Department to issue a CID where there exists “reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation.”[21]  Further, a CID can require the recipient to produce documents, as well as answer written interrogatories or give oral testimony under oath.

Until recently, only the Attorney General could authorize the issuance of a CID.  But with the passage of the Federal Enforcement and Recovery Act in 2009, the Assistant Attorney General for Department of Justice’s Civil Division and also individual U.S. Attorneys all now have the power to issue CIDs.[22]  This expansion of authority within the DOJ has coincided with changes in CID authority among the states.  For example, state attorneys in Florida have been granted the authority to issue CIDs after the Attorney General has consented in writing.[23]

Corporations are “legal persons,” capable of suing and being sued, and capable of committing crimes.  For purposes of the FCA, the conduct of a corporation’s employees and agents acting within the scope of their employment is imputed on the corporation.  A person or company does not violate the FCA by simply submitting a false claim to the government.  An FCA violation requires a person or entity to have submitted, or caused the submission of, the false claim with “knowledge” of its falsity.  According to the FCA, knowledge of false information is defined as (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard of the truth or falsity of the information.[24]

Knowing conduct under the FCA therefore includes the “ostrich type situation where an individual has ‘buried his head in the sand’ and failed to make simple inquiries which would alert him that false claims [were] being submitted.”[25]  In the health care arena, reckless disregard can be shown when a physician fails to ensure that bills sent for government reimbursement are accurate.[26]  For example, a doctor was found guilty of “knowingly” filing false claims when he gave complete control of the billings to a person with no prior experience with medical billing, and failed to inquire into what codes were being used by that person to bill for his services.[27]   Thus, those doing business with the government have an obligation to take reasonable steps to ensure that claims submitted are in fact correct, rather than simply assuming so.

Congress and state legislatures have universally come to recognize that whistleblowers serve a crucial role, and are utilizing them in civil and criminal enforcement actions to combat fraud committed against the government.  Corporate entities and individuals must be cognizant of these laws and should consult with counsel for assistance in understanding and effectively using – or defending against – such investigations and litigation.

About the Authors

Robert Griscti and Jake Huxtable have recently joined the business litigation team at the Gainesville law firm of Salter Feiber, P.A. as a partner and associate, respectively.  They practice in white collar law, criminal and civil defense, government investigations, regulatory compliance, asset forfeiture, and professional licensing.

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Find Mr. Griscti’s profile here.                                   Find Mr. Huxtable’s profile here.

[1]  See 31 U.S.C. § 3729.
[2]  See Rainwater v. United States, 356 U.S. 590, 592 (1958).
[3]  See James B. Helmer, Jr., False Claims Act: Whistleblower Litigation 117 (6th ed. 2012).
[4]  See 42 U.S.C. § 1320a-7b (which prohibits the exchange, or offer to exchange, of anything of value in an effort to induce or reward the referral of federal health care program benefits).
[5]  See 42 U.S.C. § 1395nn (which prohibits physician referrals of designated health services for Medicare and Medicaid patients if the physician, or an immediate family member, has a financial relationship with that entity).
[6] See Department of Justice Press Release, 21st Century Oncology To Pay $19.75 Million To Settle Alleged False Claims For Unnecessary Laboratory Tests, December 18, 2015, available at http://www.justice.gov/usao-mdfl/pr/21st-century-oncology-pay-1975-million-settle-alleged-false-claims-unnecessary.
[7]  See Department of Justice Press Release, Gainesville Physician Convicted of 162 Counts of Health Care Fraud, May 3, 2016, available at https://www.justice.gov/usao-ndfl/pr/gainesville-physician-convicted-162-counts-health-care-fraud.
[8] See United States of America and the State of Florida ex rel. Terry L. Meyers v. Shands Healthcare et al., Civil Action No. 3:08-cv-441-J-16HTS (M.D. Fla. 2008) (Shands paid $26 million to settle allegations for submitting false reimbursement claims to the Medicare, Medicaid, and TRICARE programs), settlement agreement available at http://www.thehealthlawfirm.com/uploads/Shands%20Hospital%20Settlement.PDF; see also Department of Justice, University of Florida Agrees to Pay $19.875 Million to Settle False Claims Act Allegations, November 20, 2015, available at https://www.justice.gov/opa/pr/university-florida-agrees-pay-19875-million-settle-false-claims-act-allegations and Department of Justice, United States Settles False Claims Act Allegations Against Multiple Jacksonville Hospitals And An Ambulance Company For $7.5 Million, May 8, 2015, available at https://www.justice.gov/usao-mdfl/pr/united-states-settles-false-claims-act-allegations-against-multiple-jacksonville.
[9]  See Department of Justice, The False Claims Act: A Primer, April 22, 2011, available at https://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf.
[10] See 31 U.S.C. § 3730(d)(1).
[11] See 31 U.S.C. § 3730(d)(2).
[12] See 31 U.S.C. § 3730(d)(3).
[13] See 31 U.S.C. § 3730(b)(1).
[14] See United States ex rel. Springfield Term. Ry. Co. v. Quinn, 14 F.3d 645, 656-57 (D.C. Cir. 1994).
[15] See United States ex rel. Karvelas v. Melrose-Wakefield Hospital, 360 F.3d 220, 232 (1st. Cir. 2004).
[16] See United States ex rel. Clausen v. Laboratory Corp. of America, 290 F.3d. 1301 (11th Cir. 2002).
[17] See 31 U.S.C. § 3730(h) (“Any employee who is discharged, demoted, suspended, threatened, [or] harassed . . . by his or her employer because of lawful acts done by the employee on behalf of the employer . . . including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section [FCA], shall be entitled to all relief necessary to make the employee whole.”)
[18] See Fla. Stat. Ann. § 112.3187 (which protects public employees); Fla. Stat. Ann. § 448.102 (which protects private sector employees).
[19] See United States ex rel. Purcell v. MWI Corp., 209 F.R.D. 21, 24-27 (D.D.C. 2002) (the whistleblower’s disclosure statement is a confidential document covered by the joint prosecutorial privilege); see also United States ex rel. Taxpayers Against Fraud v. Litton Sys., No. CV 88-2276 (C.D. Cal. 1990) (unpublished decision denying disclosure, finding that the disclosure was protected by the work product doctrine and the attorney-client privilege).
[20] The Fourth Amendment of the U.S. Constitution provides, “[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
[21] 31 U.S.C. § 3733(a)(1) (emphasis added).
[22] See Geoff Murphy, Civil Investigative Demands Part I: What Are They and Why Do I Care, Prime: Government Contracting Law Blog, January 5, 2015, available at http://www.primewatchgovernmentcontracting.com/civil-investigative-demands-partone/.
[23] See Fla. Stat. § 542.28(1).
[24] See, supra, § 3729(b)(1).
[25] S. Rep. No. 99-345, at 21 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5286 (reproduced in Appendix 2.E) (internal quotations added).
[26] See United States v. Krizek, 111 F.3d 934, 942 (D.C. Cir. 1997); United States v. Stevens, 605 F. Supp. 2d 863, 869 (W.D. Ky. 2008).
[27] Id.