Both the United States and California have False Claims Acts, which allow employees to file actions on behalf of the government against employers who submit claims for payment that are false. In a recent example of the substantial payments that such lawsuits can lead to, a former Countrywide employee is set to receive $14.5 million based on his allegations that Countrywide inflated appraisals on government-insured loans. In what circumstances may such actions (also called qui tam actions) be brought?
The federal provisions, found in 31 U.S.C. sections 3729 through 3732, allow a private person to file an action in federal court on behalf of the United States against anyone who has presented a fraudulent claim for payment or approval. The action must remain under seal for 60 days, during which time the United States decides whether to take over the prosecution of the action, or to allow the private individual to pursue the claim. The statute provides for recovery of a civil penalty of $5,000 to $10,000 plus three times the actual damages, and reasonable attorney’s fees and expenses. If the government prosecutes the action, the private individual receives up to 25 percent of the recovery. If the private person litigates the case alone, he or she receives up to 30 percent. The statute also bars retaliation against any employee who participates in a qui tam action.
The California provisions are similar. Under California Government Code section 12650 through 12656, a private person may file an action for false claims presented to the State or any political subdivision of the state. The action remains under seal for 60 days, to allow the appropriate government entity to take over the prosecution of the action. The remedies are similar.
Following are some examples of qui tam actions, which illustrate the broad range of activities encompassed by the statutes: