By Green, Derek D.
News Media and the Law , Vol. 35, No. 1
Whistleblower suits may remain sealed for months, even years
Each year, the U.S. Department of Justice announces sizable recoveries to the federal treasury through False Claims Act settlements and judgments. Government watchdog groups generally applaud the False Claims Act as a good-government measure that helps to protect the public coffers from fraud and abuse.
But these same groups are split on the role of secrecy in whistleblower lawsuits under the act, which remain under seal for months and sometimes years. Some groups want to change that practice.
The False Claims Act allows the federal government to recover monies from contractors who have knowingly submitted a false or fraudulent request for government funds. The act was first passed in the wake of reported government contract abuses during the Civil War. In recent years, most reported highvalue cases have revolved around health care, although military contracting cases remain prevalent, too.
The latest annual recoveries under the act are substantial and continue to increase: $3 billion for the fiscal year 2010, $2.4 billion for 2009 and $1.34 billion in 2008. AU told, the government recently estimated that it had recovered nearly $29 billion since Congress revised the False Claims Act in 1986. Some oversight groups think those recovery numbers are actually much higher.
The federal government can (and does) bring False Claims Act cases. But the majority of False Claims Act complaints are not initially filed by the federal government, but by private individuals who bring actions on behalf of the government. Such private actions are called qui tarn cases. By statute, the government then has the option of intervening in the cases or declining to get involved. In practice, the government ultimately declines to intervene in the majority of cases.
There is a significant monetary incentive for private parties to bring qui tarn cases. The law allows a private party to keep up to 25 percent of any amount the government recovers through the action, if the government accepts the case and assumes primary responsibility to litigate. If the government declines to intervene in the case, a private plaintiff is entitled to up to 30 percent of an award. Awards to qui tarn plaintiffs total more than $3.2 billion since 1986, according to the Department of Justice.
Congress made significant modifications to the False Claims Act in 1986 in light of evidence suggesting that fraud against the government was steadily growing. One change was to mandate that qui tarn claims be automatically placed under seal for 60 days, with no notice of the actions served on the defending parties until the court orders it.
During this 60-day sealing period, the law directs the government to review the private plaintiff's evidence and evaluate whether to accept or decline to get involved in the case. But a provision in the False Claims Act also provides the government with the option of asking the court for an extension of the seal period in order to continue with its investigation. Courts can grant an extension "for good cause shown." In fact, most qui tarn cases are sealed far longer than 60 days.
A recent federal district court opinion pointed to the 1986 legislative history of the False Claims Act to explain the purpose of the sealing provisions. At the time, the Department of Justice told Congress that the public filing of false claims allegations "could potentially 'tip off investigation targets" of criminal inquiries.
The Senate Judiciary Committee expressed some doubt that such interference would occur frequently, but also recognized the need for some coordination. Hence, the 60-day sealing period. The Senate report stated that the sealing period was "intended to allow the Government an adequate opportunity to fully evaluate the private enforcement suit and determine both if that suit involves matters the Government is already investigating and whether it is in the Government's interest to intervene and take over the civil action. …