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Whistleblowers: Incentives, Disincentives, and Protection Strategies by Frederick D. Lipman

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Chapter Eight

The False Claims Act: Qui Tam Cases

THE FALSE CLAIMS ACT1 (Act) is a U.S. federal law that permits people who are not affiliated with the government to file actions against federal contractors, claiming fraud against the government. The Act provides a reward or bounty (usually 15 to 25 percent, but it can reach as high as 30 percent) of any recovered damages. The Act protects against fraudulent billings turned in to the federal government. Claims under the Act are filed by persons with insider knowledge of false claims, which typically have involved healthcare, military, or other government spending programs.2

During the American Civil War (1861–1865), fraud was rampant in both the Union North and the Confederate South. Some argue that the False Claims Act came about because of bad mules. During the war, unscrupulous contractors sold the Union Army decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions, among other fraudulent actions.3 The Act was passed by Congress on March 2, 1863, in an effort by the United States to respond to these fraudulent practices in obtaining payments from the U.S. government. A bounty was offered in what is called the qui tam provision, which permits individuals to sue on behalf of the government and be paid a percentage of the recovery.

It should be noted that private qui tam actions are not permitted under the Dodd-Frank Act for violations of federal securities laws or under the whistleblower ...

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