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<b><I>Escobar's</I></b> Effect on False Claims Act <b><I>Qui Tam</I></b> Actions

By Danielle Corcione, Daniel Wenner, Robert Marasco and Jennifer Mitchell

The False Claims Act (FCA or Act) can be a real punch in the gut for businesses on the wrong side of an FCA claim. The Act, codified at 31 U.S.C. §§ 3729-3733, is designed to prevent private companies contracting with the government from knowingly submitting false or fraudulent claims for their services. The Act allows actions to be filed against the alleged wrongdoers in federal district court, and provides an incentive for whistleblowers to come forward and make such claims. These qui tam plaintiffs must be the “original source” of the information about the false claims, pursuant to 31 U.S.C. § 3730(e)(4), and are rewarded by receiving a percentage of the ultimate payout, calculated based on whether the federal government decides to intervene in the action, pursuant to § 3130(d).

All qui tam complaints are filed under seal and forwarded to the district's U.S. Attorney's Office to provide an opportunity (60 days, which can be extended) for the government to decide whether to intervene. If the government does intervene, the qui tam plaintiff is eligible to receive from 15% to 25% of any recovery; if the government does not intervene, the qui tam plaintiff can receive from 25% to 30% of it. And, either way, the defendant might have to pay a civil penalty of between $10,957 and $21,916 for each false claim and up to treble the amount of the government's damages — and these amounts are increasing each year. All told, this can add up to a quite a pretty penny.

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