Exposing fraud against the government was and still is considered a patriotic duty. As early as the Revolutionary War, citizens were urged to come forward. As incentive, in 1778, the Continental Congress passed the very first whistleblower law in the United States, which stated:

“It is the duty of all persons in the service of the United States . . . to give the earliest information to Congress or other proper authority of any misconduct, frauds or misdemeanors committed by any officers or persons in the service of these states, which may come to their knowledge.”

Civil War and Cardboard Boots

Later, when the Civil War broke out and military spending increased, new opportunities evolved for fraudsters to cheat the government – or worse, to take advantage of soldiers who put their lives on the line. Some government contractors sold the military cardboard boots, sawdust for gunpowder, decrepit horses, and rotted ships repainted to look new. And they would overcharge for these products that were not only useless, but potentially put soldiers at risk.

When word of this misconduct reached President Lincoln, he called on Congress to pass the first False Claims Act or, as it was known then, the “Informer’s Act” or “Lincoln’s Law.”

The Act prohibited anyone from knowingly committing or agreeing to commit fraud against the U.S. government and outlined civil and criminal punishments for perpetrators. Additionally, it allowed the whistleblower to reap 50% of any monetary rewards the government obtained as a result of their information.

1943 False Claims Amendments Slash Incentives

What eventually transpired was that individuals began to file qui tam claims even if the government already had knowledge of the information. This sometimes resulted in the government paying out on the same claim more than once. In 1943, Congress amended qui tam laws that reduced in two ways the incentive to blow the whistle:

  • It prohibited filing qui tam claims based on evidence the government already had, even if the government was not investigating, and even if the whistleblower was the only source of the government’s knowledge.
  • It reduced the whistleblower’s reward to as low as 10%, with a 25% ceiling. Further, no minimum whistleblower award was guaranteed, even for cases about which the government had no prior information.

$600 Toilet Seats Encourage Stronger FCA Amendments

These two changes severely disincentivized whistleblowers from reporting fraud – until the 1980s when defense spending increased, and some defense contractors began to significantly overcharge the government. Media reports of $600 toilet seats, $37 screws, and even a $7,622 coffee maker flourished.

Congress wanted federal employees to speak up without fear of retaliation if they saw or were aware of fraud, misconduct, or other wrongdoing by federal officials, employees, contractors, or grantees. Yet many were reluctant for fear of losing their jobs.

In response, Congress again revised the False Claims Act in 1986 by giving it more tooth to encourage whistleblowers to come forward. Led by Senator Chuck Grassley, these new amendments increased whistleblower incentives on successful cases to recover 15% to 30% of the government’s recovery. And their attorneys were guaranteed payment of their regular hourly fees by the defendant.

Even more amendments were enacted in 2009 and 2010, which further helped clarify qui tam provisions and incentivize whistleblowers.

Today’s Federal False Claims Act

Today’s federal False Claims Act affords the whistleblower (or “relator” in a qui tam suit) to receive from 15% to 30% of what the government recovers. It also states that any employee who is discharged, demoted, harassed, or discriminated against because they filed a whistleblower/qui tam claim is entitled to be “made whole.” This includes but is not limited to:

  • Reinstatement to the same seniority employment status
  • Up to twice the amount of their back pay, plus interest
  • Compensation for any special damages including litigation costs and reasonable attorney’s fees

In a 2018 Congressional speech, Senator Grassley reaffirmed the significance of the whistleblower through the False Claims Act, as the chief government weapon to help deter fraud against the American taxpayer, stating:

“The False Claims Act is the most effective tool the government has. It has brought in $56 to $57 billion since its enactment in 1986.”

Rooting Out Today’s Fraud

Whistleblowers are indeed critical in the effort to root out fraud. In fact, more than 80% of False Claims Act cases the Department of Justice (DOJ) pursues are initiated by whistleblowers. In 2018, the DOJ recovered more than $2.8 billion for civil fraud and false claims cases, of which whistleblowers received more than $301 million in reward money for their efforts.

According to TAF, half of all successful cases settle for under $2 million, and the average whistleblower award in a $2 million case is $320,000 if there is one whistleblower.

NC Whistleblower/Qui Tam Attorneys. Let’s Talk.

Whistleblowers have confided that it is not easy to come forward despite federal protections and the potential for significant rewards.

If you suspect fraud against the federal or state government, let’s talk. We are here to help put you at ease as we try to help you determine – confidentially and discreetly – if you should move forward with a whistleblower/qui tam claim. We appreciate the struggle you may be facing. That is why we have a You-First policy in place. We will try to help protect you regardless of your involvement.

Contact us or call 1-844-520-2889.

If we decide to take your case and you don’t get a reward for reporting fraud, you owe us nothing.

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