Qui Tam Is More Than Just a Funny Latin Phrase: The Basics of Qui Tam Litigation
By: NICOLE M. MOEN
January 2005
Suppose a company is a medical service provider. The company has been providing services without complaint and submitting the appropriate Medicare forms to the government for reimbursement. Everything appears to be in order – until the company is served with a subpoena from the United States government that calls for thousands of company records related to Medicare and provides notice that the company is being investigated for violations of the False Claims Act.
What happened?
What happened is that the company became the latest target of an increasingly used weapon in the federal government’s arsenal of regulation – the False Claims Act and its qui tam (pronounced kwee tam) provision.
This anti-fraud statute was enacted by Congress during the Civil War to stop unscrupulous contractors from charging the Union army for supplies they never delivered. In its present form, the False Claims Act prohibits submission of a “false claim” to the government for payment. The company in this example was targeted because a whistleblower alleged that the company billed Medicare for services it did not provide.
The qui tam provision of the False Claims Act lets anyone with knowledge of potential violations stand in the shoes of the federal government and sue the company for defrauding the government. Often, the whistleblower, called a qui tam “relator,” is a former employee of the targeted company. When he or she brings suit under the False Claims Act, the case is filed under seal, which is why the company in this example does not yet know the identity of the relator, and why it received a subpoena, as opposed to a complaint.
While the case is under seal, the government has the first opportunity to investigate the company and look for violations of the False Claims Act – hence the document demand. The company must respond to the subpoena (this can be a lengthy and expensive process), and at the end of the investigation the case is unsealed. At that time the government decides if it wants to “intervene.”
If the government decides to intervene, it will litigate the case as it does any other. If, however, the government declines to intervene – either because its investigation shows no wrongdoing or because the improper billing is not significant enough to warrant its attention – then the qui tam relator still has the option to continue litigating the case himself or herself.
One might wonder why the qui tam relator would choose to continue litigating, a time-consuming and expensive prospect, without the government’s help. The answer lies in the award provisions of the False Claims Act, which essentially turn anyone with knowledge of a company’s billing practices into a potential bounty hunter. The False Claims Act rewards the qui tam relator with 15 to 25 percent of any proceeds of the lawsuit, plus attorneys’ fees.
These proceeds can be substantial. If a company is found to have submitted a false claim, it may be liable for triple damages and penalties up to $10,000 per claim – each invoice submitted to the government potentially could be considered a separate claim. If a company provides many services and submits many invoices to the government, then even a small percentage of false invoices can lead to astronomical damages and penalties – and a generous reward for the qui tam relator.
If you have additional questions or believe your company might be the subject of a qui tam complaint, you should retain a lawyer.