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False Claims Acts: Should They Be Sealed?

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Running head: FALSE CLAIMS ACTS: 1
SHOULD THEY BE SEALED?

False Claims Acts: Should they be sealed?
Becky L. Garcia

Abstract

Throughout history the United States Government has been responsible for massive expenditures for government operations involving taxpayer dollars. Unfortunately, with all the different organizations and transactions transpiring, there have become endless opportunities for fraud or deceptive practices. The government enacted the False Claims Act for help in controlling the deceptive practices and additionally giving them a viable tool to expose the fraudulent acts. The False Claims Act allows a whistleblower or “qui tam” to come forward and help aide the government with the massive ongoing fraud that is enacted everyday against the government. A much needed provision that helps ‘seal’ and protects the whistleblowers identity was added into the FCA. The protection by sealing the name when a claim is enacted by a whistleblower is important because it allows the whistleblower to help the government with the pursuit of fraud while protecting the whistleblower from backlash from their employee or organization.

There are many organizations within the Government that spend an enormous amount of taxpayer dollars. From within these organizations fraud and deceptive practices are found, and sometimes are a regular practice in everyday expenditures. The Government cannot stop or find all of the illegal practices going on within, but for the ones that can be identified there is the False Claims Act (FCA) for a whistleblower or “qui tam” to come forward and report the deception.
The whistleblower under the FCA has been vital and important for the government in recouping and uncovering massive taxpayer dollars that have been lost. One of the main concerns throughout the years has been the protection of the identity and retaliation of the whistleblower. One action within the FCA that has been a large discussion topic and even challenged, is the sealing of the claims. The decision, reasoning, and rationale for the sealing of the claims are very important for the whistleblower and should not be considered unconstitutional but rather a constitutional right of protection and anonymity.
1) What is the False Claims Act?
The government was having many problems as far back as the Civil War with fraud and abuse by companies or government contractors selling supplies to the Union Army. Many millions of dollars were being swindled out of the government from supplies: like moth-eaten blankets, unhealthy horses, or boxes of sawdust that were supposed to be guns. The government needed help with all the fraud taken place with these government purchases. The help came by way of Congress enacting and passing into law in 1863, with President Abraham Lincoln being a strong supporter, the False Claims Act (FCA). FCA was also referred to or known as the “Lincoln Law,” since Lincoln was President at the time.
The FCA included the important provision of “qui tam,” which “allowed private citizens to sue, on the government’s behalf, companies and individuals that were defrauding the government” (“History of,” 2007). The Latin phrase of “qui tam” is the first two words in a long Latin phrase that is interpreted as “Who sues on behalf of the King as well as for himself” (Qui Tam, 2012). This act was very important and vital in allowing the private citizen to help with the federal officials in combating the fraud.
The penalties assessed when FCA was first enacted, entailed the individuals that committed the fraud to pay twice the damages and also a $2,000 fine was imposed for every false claim. The reward the citizens got for turning a case or claim in was fifty percent of the damages recovered by the government.
The FCA primarily continued through the years with minor changes until 1943, and the Congress made provisions. The provisions started with changing the fifty percent received by the private citizen or whistleblower, thus reducing the claims reported. Additionally, a change was made with the FCA stating that if the government already had information or evidence of the fraud, it would prohibit a qui tam lawsuit. With just these changes or amendments to the FCA, the claims almost ceased to exist.
The FCA was not looked at again until over forty years later, when in the 1980’s more rampant rumors or reports of fraud from contractors against the government. Much of the reports were during the Cold War and the defense spending. Numerous reports were made that the government was paying outrageous amounts for equipment or services, like over $400 for a hammer. These reports were cause for investigations, and leading the government to revise the FCA, again encouraging whistle blowers to come forward and help the government combat the fraud. The FCA was reformed in 1986 allowing the whistle blower to receive 15 to 30 percent of what the government recovers and attorney fees, while the persons committing the fraud would be liable for three times the damages incurred to the government and a penalty of $5,000 or $10,000. Another important FCA provision added in 1986 was the “seal” provision. The provision mandated that when a whistleblower would file a complaint it would be sealed without revealing the name or party of the complaint, and remained sealed for 60 days.
The sealing period allows the government to look into and investigate the claim and after the time has expired, the government can decide whether to get involved and the seal can be lifted. If more time is needed and reasoning for why it should remain sealed for further investigation, the seal can remain after the 60 day specified time period.
2) Importance of the False Claims Act.
As stated, the government is involved in numerous expenditures that involve millions and billions of taxpayer dollars, and from early on there have been many that have tried to fraudulently obtain these dollars. The importance of the FCA and why it was enacted is to help provide the tool, handshake, or means to identify and stop the deceptive practices.
As the history of the FCA has shown us, it is very important to have some tool to help intervene on the unethical acts committed from the expenditures the government depends on, to sustain its operations. Starting from the Civil War and its supply issues, to today’s largest government issues of healthcare fraud, the FCA and the whistle blower are vital in the process of helping to identify and recover the taxpayer dollars that are being swindled.
Today, the FCA helps in protecting the public from unsafe actions. The healthcare industry and the fraud taking place is particular upsetting, since substandard care can come from the actions. The FCA can help and protect “patients form substandard care, unsafe medical equipment, potentially harmful drugs, and paying more for the services” are just a few areas that could be affected (“What You Should,” n.d.). The defense and defective military equipment is another example of unsafe actions that could cost or sacrifice life. All too important is the whistleblower or “qui tam” claim needed in identifying the deceptive actions.
The amount of taxpayer dollars that is lost each year from fraud is unclear, and as reported by the Department of Justice and the United States General Accounting Office (GAO) it is believed to have been up to ten percent of the federal budget. Additionally, they also believe up to $200 million cases of fraud were not even detected back in 1981.
Of course, there is no actual known amount of federal dollars being swindled, but estimates have been said to be in the billions from GAO and Department of Justice.
3) Why FCA for whistleblowers should stay sealed. The FCA has allowed whistleblowers to expose many types of unethical practices, such as: Medicare and Medicaid fraud, illegal marketing of pharmaceutical drugs not FDA approved, nursing home substandard care, insurance fraud, and lender fraud, just to name a few (“What You Should,” n.d.). The fraud taking place ranges from; billing of work not done, delivery of supplies that were less than what was actually paid for, charging for supplies or services not rendered, overcharging, kickback payments and the list is endless. The penalties and fines could be enormous and very damaging to a business or person.
The whistleblower is playing a key role in helping to expose or uncover the acts, but in doing so, they are opening the door for backlash or retaliation from the business or person that would be harmed. The FCA knows that the help is drastically needed, and that the whistleblower is taking a huge risk, including losing his or her job. Additionally, once the claim is initiated the investigation could and would probably branch into all areas of the practice and broaden the scope of exposure and discovery that may involve and lead to other people or practices that the whistleblower was not fully aware of. The identity of the whistleblower from the onset of the claim could be very risky. A “company could overreact by imposing excessive compliance requirements across the board, multiplying company red tape and unrealistically raising compliance expectations for all employees” (Richardson, 2011).
The FCA has understood the problems associated with the whistleblower coming forward and enacted the sealing of the identity from the onset of a claim. The action of sealing and concealing the identification of a person is very crucial and important because it helps alleviate some of the pressures and provides some security for the whistleblower. Helping the government save billions of fraudulent dollars from being lost should be an honorable act, and not having to worry about backlash coming from those who are committing the wrongful acts.
There have been complaints lodged against the seal provision, 31 U.S.C. § 3730(b)(2)–(3) of the FCA, by the American Civil Liberties Union, OMB Watch and Government Accountability Project, complaining that the seal provision violates the “First Amendment right of access to judicial proceedings, violated the First Amendment by gagging qui tam relators from speaking about their qui tam complaints, and infringed on a court’s inherent authority to decide on a case-by-case basis whether a particular qui tam complaint should be sealed and thereby violated the separation of powers” (Meyerowitz, 2011). The case was dismissed by the judge stating that “public interests are served when the government finishes its investigation and lifts the seal so the case can be adjudicated openly. Until then, the public interest is not served by tipping off the subjects of that investigation so they might have an opportunity to hamper it by destroying evidence” (Renner, 2009).
The whistleblower ‘seal’ provision is contested and divides many, but the importance of getting to the bottom of the taxpayers’ dollars that are being fraudulently taken, should warrant protecting any backlash from happening to those that are willing to step forward.
A whistleblower is taking a chance and ultimately does not know what will happen at the end of an investigation. The consequences he or she may face during or after the claim could have lasting ramifications, and be life changing. Therefore, the act should be a constitutional right that the government should help protect, by sealing any claim from the onset. The sealing will help ensure a proper investigation is conducted without disruptive or unwarranted acts from happening to the whistleblower.

References
History of the law (2007) Phillips & Cohen LLP. Retrieved from http://www.all-about-qui- tam.org/fca_history.shtml
Meyerowitz, S. (2011, Mar 3). FCA’s ‘Seal’ Provisions Survive Constitutional Challenge. Financial Fraud
Law. Retrieved from http://www.financialfraudlaw.com/lawblog/fca%E2%80%99s-%E2%80%98seal%E2%80%99-provisions-survive-constitutional-challenge/2137
Qui Tam (2012) The ‘Lectric Las Library’s Lexicon. Retrieved from http://www.lectlaw.com/def2/q069.htm
Reasons for the False Claims Act (2012) Nolan & Auerbach, P.A. Retrieved from http://www.whistleblowerfirm.com/about-the-law/reasons-for-the-false-claims-act/
Renner, R. (2009, Aug 22). ACLU loses challenge to FCA seals. Whistleblower Protection Blog. Retrieved from http://www.whistleblowersblog.org/2009/08/articles/whistleblowers-tax-fraud/aclu-loses-challenge-to-fca-seals/
Richardson, E. (2011, Apr 11). So You Want to Become a Whistleblower? 5 Things to Consider Before
Doing So. Corporate Compliance Insights. Retrieved from http://www.corporatecomplianceinsights.com/so-you-want-to-become-a-whistleblower-5-things-to-consider-before-doing-so/
What You Should Know About the False Claims Act (n.d.) Bifferato LLC. Retrieved from http://www.quitamlaw.info/what-you-should-know-about-the-false-claims-act/

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