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Tilting the Scales Business Issues with a Legal Slant

“Whistleblower” Lawsuits

Posted in Employment & Labor, Legal Risk Management

What is Qui TamTatt L. Tale was beside himself.  His company FreshLike Grocers was the largest supplier of food sold and shipped to U.S. troops in the Middle East during the Iraq war.  One day, Tatt caught his boss Kot “Red” Handid changing the “use-by” labels on the food it was supplying.  Freshlike Grocers did nothing to stop Red from continuing to falsify the food labeling and in fact seemed to be encouraging it.  Finding no other way to stop this grievous practice, Tatt blew the whistle to the U.S. government.  Following a lengthy trial, the U.S. Department of Justice announced that FreshLike Grocers, Inc. agreed to pay $13.2 million to settle Tatt’s “whistleblower” lawsuit.  Tatt’s take?  Between $1.9 to $4 million.

Qui Tam or “Whistleblower” Lawsuits.  During the Civil War, President Lincoln signed the “Informer’s Act” to incentivize private individuals to help curb a rash of fraud against the United States Army. Sometime referred to as “Lincoln’s Law”, the original False Claims Act focused on fraud committed by government contractors.  Violators then and today were subject to civil and criminal penalties for damages, today tripled plus civil penalties from $5,000 to $10,000 per false claim. 

A private person with information that the defendant knowingly submitted or caused the submission of false claims can “bring a case on behalf of our lord the King, as well as for himself” – a “qui tam” action. If the “whistleblower” (known as a “relator” in the lawsuit) complies with very strict statutory requirements, they can receive between 15% to 30% of the total recovery.  Not a bad tip for Tatt!

Since 1863, Lincoln’s Law has been significantly expanded.  Today, anyone who receives government funds can be subject to the False Claims Act. More recent “whistleblower” lawsuits allege false claims were filed by culpable third parties against the government: for mortgage fraud, for insurance fraud for pressuring engineers to blame hurricane storm damage on flood water instead of wind, for failure to comply with federal student financial aid requirements, for programs run through the Federal Government, for Medicaid and Medicare fraud by nursing home operators,  for illegal inducements to hospitals by a rural ambulance provider, for federally reinsured crop insurance payments, and for waste disposal environmental violations, among others.

Tilting the Scales in Your Favor. If you or your company receive payments under a government contract or statute, make sure that the statutory or contractual requirements are being satisfied. If you are employed by a company that receives government funding and refuses to comply with its obligations, possibly creating criminal liability for you, you may want to consult us or someone else who has handled these types of cases.