A January 10th memo released by the Department of Justice states that attorneys should consider dismissing “meritless” and “parasitic” whistleblower cases filed under the False Claims Act (FCA). The FCA allows citizens to sue on the government’s behalf, should they report evidence of waste, fraud, or abuse of taxpayer dollars. Whistleblowers (called “relators” in this context), who file qui tam lawsuits under the FCA, are eligible to receive monetary rewards from the funds recovered.
This new position marks a significant change in thinking about the FCA, and could potentially depress whistleblower cases.
According to a DOJ press release, $3.7 billion in FCA settlements and judgements were recovered in 2017. $3.4 billion of the recovered monies can be attributed to whistleblower-initiated cases, and $392 million were given as rewards to relators. There are now around 600 new whistleblower cases annually.
The memo outlines seven reasons that an attorney might decide to dismiss an FCA case. These include: if the case is based on “frivolous” allegations or unsound legal theory; duplicative cases; if it interferes with an agency’s policies or programs; to protect the Department’s litigation priorities; to safeguard classified information; if the opportunity cost is too high; or if the relator’s actions frustrate government investigation.
The memo also notes that the list is not exhaustive.
“This is a troubling sign and an indication of misplaced priorities,” says Stephen M. Kohn, Executive Director of the National Whistleblower Center. “The DOJ needs to spend more resources investigating and enforcing the law, not helping companies obtain dismissals of potentially valid cases.”
Although the memo points out some important considerations when deciding whether or not to litigate FCA cases, the subtext of the document is concerning. The more FCA cases are dismissed, the greater the chilling effect on qui tam relators. It is ultimately corporations that will reap benefits from this legal environment.
The U.S. Chamber Institute for Legal Reform’s statement that FCA is a “lucrative money machine” for lawyers and relators frames the narrative in a way that is problematic. It assumes rather cynically that the motives of whistleblower lawyers and relators is to pump money out of the government’s recovered funds, mirroring the DOJ’s language of “parasitic” lawsuits.
This view fails to recognize the enormous bravery of those who decide to blow the whistle, the sacrifices they make in stepping forward, and the integral role the FCA plays as a check on corporate power in America. It is a law that encourages transparency, good governance, and combats corruption. Putting a broad and blanket screening process on FCA cases will only serve to make rooting out fraud more difficult.
We must also remember that the real “parasitic” actors in these scenarios are the government contractors defrauding the government. The individual blowing the whistle is acting selflessly, not greedily.
Rewards are a crucial element of whistleblower law, working both as an incentive for those with information to come forward, and as compensation for the great sacrifices a relator makes. The FCA is one of the most powerful legal tools at our disposal for uncovering corporate fraud, and whistleblowers should continue to be encouraged and empowered. America has become one of the most successful countries at tracking and stopping fraud precisely because of the whistleblower rewards and protections in place.
A chilling effect on qui tam lawsuits is not a win for U.S. citizens or the government—only corporate interests.
