False Claim Act Law and Legal Definition

In 1863, in response to frauds that were costing the U.S. Treasury millions of dollars and many lives, Abraham Lincoln urged Congress to pass the False Claims Act to prevent scams against the federal government. The False Claims Act is now used to discourage fraud against the federal government in many areas, including prescription drug purchases, nursing homes, weapons and defense purchases, natural resource contracts, and low-income housing.

Under the 1986 amendments to the False Claims Act, the role of the whistleblower was expanded, and the financial reward to the whistleblower was increased. In addition, the amendments allowed whistleblowers to play an active role in the litigation and to challenge the fairness and adequacy of a government-negotiated settlement. Also, in cases where the whistleblower prevailed, the law required that reasonable attorney's fees be paid.

A claim under the Federal False Claims Act is filed on behalf of the United States, and often referred to as a "qui tam" action. A qui tam suit is a suit brought by an individual on behalf of the United States government seeking to expose and thereby stop the wasting of federal funds. The qui tam relator, often referred to as a whistleblower, if successful in his or her suit, is entitled to a percentage of the funds recouped by the federal government, generally between 15 to 25 % of the recovery. The claim is brought by anyone with knowledge of the fraud, including health care administrators, doctors, nurses and patients. However, a private citizen or company can not file a qui tam action without an attorney. This is because the relator brings his or her case on behalf of the government, and the U.S. government can not be represented in court by a non-attorney.

In order to make a qui tam claim, federal funding must be involved, and the fraud alleged must be substantial and non-frivolous in nature. Anyone who learns credible information that a false or fraudulent claim for federal funds has been submitted or paid is eligible to file a qui tam action, as long as they didn't learn about the fraud in the newspapers, or another public forum.