Qui Tam 2017 Year In Review

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The Year in Whistleblower Reward Law has Been Tricky, but Exciting.

The United States just released statistics on total recoveries for fiscal 2017, showing that the government continues to reap rewards from the False Claims Act. It obtained $3.7 billion from these cases. Most importantly $3.4 billion was recovered from cases filed by individuals under the qui tam provisions as opposed to government action without whistleblowers.   So, to put it crudely, more than 90% of fraud recoveries under this law came about as a result of whistleblower action. As always, whistleblowers are indispensable people when it comes to uncovering fraud.  To that extent 2017 was noteworthy for being relatively in line with previous years.

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The vast majority of recoveries involved health care fraud or about $2.4 billion, with mortgage and procurement fraud also providing major recoveries.  This all still seems relatively low to me, at least compared to the size of the federal budget. Interestingly enough fewer cases were filed this year than last year.

I am not sure if this is a trend, but only 674 qui tam actions were filed in 2017, as opposed to 706 the previous year.  This may be only a temporary and relatively small dip, but this number hardly gives any credence to the defense bar myth that disgruntled employees are out there filing almost any kind of grievance as a False Claims Act case. Such numbers of around 700 cases filed, show that False Claims Act lawyers are being careful and only filing cases with a higher chance of success.

The year ended on a tricky note for whistleblowers. Unfortunately, the big New Tax Bill, which was supposed to include important legislation to protect IRS whistleblowers, had that language removed in conference committee at the very last minute.  At issue is an important principle not only of tax whistleblower rewards, but all whistleblower reward law.

The government has often fought to keep rewards to whistleblowers from extending to disgorgements as a result of criminal prosecutions despite the False Claims Act Statute’s alternative remedy provisions.

The IRS is now contesting the idea of paying a whistleblower from funds collected as a result of whistleblower information under criminal prosecution and there is a case pending in the D.C. Circuit which may decide the issue in the coming months.

Here’s hoping the Courts see that while there should be a monetary incentive for whistleblowers to come forward, there should not be a monetary incentive for the government to seek criminal, as opposed to civil, penalties in any action.

That decision is the government’s to make, but it should not affect the whistleblower that comes forward in good faith. Any decision, which potentially divides whistleblowers and the agencies with which the whistleblower should have every incentive to cooperate fully, is not helpful to fight fraud.

This is to say nothing of the basic idea that if the information leading to any recovery came from a whistleblower, then that whistleblower should be rewarded for providing the information.

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Recent trends worth watching for those interested in new areas of False Claims liability include the uptick in customs enforcement cases. Perhaps the most eagerly attended seminar at the Taxpayers Against Fraud Annual seminar, a seminar, which continues to inspire hope in all False Claims Act lawyers, was the one on Customs enforcement.

False Claims Act lawyers have had difficulty bringing cases under the so called “reverse” false Claims Provisions, but customs duties have been established as an “obligation” clearly owed to the United States when bringing goods into the country.

Therefore, avoiding paying such duties can be the subject of a case now. With billions of dollars of goods flowing across the U.S. borders every day, such duties can make for large cases.

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Of course, I have to take this opportunity to thank Robert J. Palombo for filing his case against PAE.  Bob worked long and hard to try to make a point about how people hired to work in difficult jobs in dangerous overseas posts, should be screened properly.  He was justly rewarded with a settlement in his case.

The U.S. Attorney’s office in the District of Columbia showed that the system can work to protect all our interests and I’m deeply grateful to them.

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