Academic journal article Defense Counsel Journal

Qui Tam and the False Claims Act: Criminal Punishment in Civil Disguise: The Qui Tam Provisions of the FCA Are a Serious Threat to American Industry, and They Are Subject to Constitutional Challenges on Several Grounds

Academic journal article Defense Counsel Journal

Qui Tam and the False Claims Act: Criminal Punishment in Civil Disguise: The Qui Tam Provisions of the FCA Are a Serious Threat to American Industry, and They Are Subject to Constitutional Challenges on Several Grounds

Article excerpt

SINCE the 1986 revisions to the federal False Claims Act (FCA), 31 U.S.C. [subsections] 3729-3733, the U.S. Department of Justice reports that more than $10 billion ha been awarded in civil verdicts under the act, and the pace is quickening. Just recently, the August 18 National Law Journal reported that Bayer Pharmaceuticals faced the largest ever Medicare fraud settlement when it agreed to pay $257 million stemming from an FCA suit over failure to report properly the pricing of two drugs, thereby depriving Medicare of rebates. No segment of the business world immune. The FCA is fast becoming a Congressional affront to both the U.S. Constitution and the independence of the executive branch. But as a result of recent FCA holdings by the U.S. Supreme Court and federal courts of appeals, the FCA is now more vulnerable than ever to a multi-faceted constitutional attack.

The False Claims Act and its 1986 amendments are intended as tools to curb fraud against the federal government, particularly the type of gross over-billings submitted by military contractors in the 1980s. (1) The act, first enacted during the Civil War in 1863, had the purpose of tacking exactly this sort of privateering against the Union Army. (2)

In 1863, the federal government had few resources to prosecute such fraud; the Attorney General's Office was in its infancy, and the Department of Justice was not yet formed. (3) The FCA was seen as a way to aid in rooting out false claims by encouraging private suits in exchange for a bounty. Through what is called its qui tam provision, the act is geared to encourage private citizens--in the name of the United States--to spend their own money pursuing those who would defraud the government. (4)

Qui tam, from the Latin qui tam pro domino rege, quam pro se ipso in hac parte sequitur, translates as "who as well for the king as for himself sues in this matter." A remedy brought to the American legal system from English common law, qui tam provisions authorize private individuals, who in an FCA qui tam action are called relators, to sue on the sovereign's or government's behalf and retain a portion of any judgment obtained, with the remainder going to the government.

The 1986 amendments to the FCA made many significant changes, especially to the qui tam provision. These changes have placed the FCA on a collision course with the Constitution. Challenges to the FCA have been upheld, overturned, and have re-arisen under the Article III standing requirements of "cases and controversies" and "injury in fact," and of Article II's "take care" and "appointments" clauses, the double jeopardy and due process clauses of the Fifth Amendment, and the excessive fines clause of the Eighth Amendment. But until now, the FCA miraculously has survived multiple blows. (5)

QUI TAM TODAY

Under the 1986 revisions, the mandatory civil penalties for a false claim against the government were raised to between $5,000 and $10,000 per claim, with the result that under Section 3729(a), were a hospital knowingly to over (or under) bill Medicare for 10 tests by $1 per test, that billing difference of $10 could result in civil fines of between $50,000 and $100,000, plus $30 for the trebled damages. Because of the civil monetary penalties inflation adjustment, the current civil FCA penalties are between $5,500 to $11,000, plus three times the amount of damages the government sustained from the fraud. (6) Rewards to a qui tam relator also were substantially increased by Section 3730(d) to between 15 and 20 percent in which the government intervenes and takes over the prosecution, and 25 to 30 percent in actions in which the government does not intervene. Moreover, an earlier restraint on parasitic actions was tempered, allowing relators to bring suits based on public information as long as they were the "original source" of that information, having volunteered that information to the government prior to filing their actions. …

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