Government Contracts: When It Comes to Qui Tam Cases, It’s Time to Buckle Your Seat Belt

If your company receives any funding from the federal government, you’d better buckle your seat belt. You may be in for a very bumpy—and costly— litigation ride.

According to Jason Crawford, a Crowell & Moring partner with a focus on the False Claims Act, “Whistleblower complaints filed under the FCA, known as qui tam actions, are numerous now and likely to keep increasing. Any company that receives federal funding is vulnerable to these complaints. Settlements can run into the hundreds of millions of dollars.”

Crawford cites several factors driving the growth of qui tam filings.

• Money: The biggest driver, not surprisingly, is money. The FCA allows for private-party whistleblowers (known as relators) to file complaints in the name of the United States in actions alleging fraud against the federal government. Qui tam complaints are filed under seal so that the Department of Justice can investigate the allegations and decide whether to join the suit by intervening. The FCA provides for treble damages, and the relator receives between 15 and 30 percent of the recovery, depending on whether the DOJ intervenes.
  
  This can add up to serious dollars for defendants and whistleblowers alike. In 2022, for example, a large pharmaceutical company agreed to pay the government and several states a total of nearly $1 billion. The whistleblower received a staggering one-third of that total.
• Technology: Recent advances in data gathering and analysis have enabled relators’ counsel to analyze huge volumes of data (e.g., for Medicare claims and pandemic relief funds, which are publicly available). Their goal is to find patterns and anomalies that might identify FCA violations.
• Awareness: The general public is much more familiar with the idea of whistleblowers than in the past, as cases have received widespread publicity through social media and other channels. Huge settlements and payouts such as in the pharma case are rare, but they provide a tantalizing example of the rewards that a successful qui tam complaint might generate.

Follow the money

To get a sense of where qui tam complaints are going, Crawford says, “Follow the money and look to areas of high federal spending because that is where FCA enforcement is most likely to occur.” With the current high levels of military aid, Crawford expects that Department of Defense contracts will remain an area of high focus.

More cases are coming from newer directions as well. These notably include the $1.2 trillion Infrastructure Investment and Jobs Act and the multiple federal pandemic relief programs. Crawford says that enforcement of the latter has barely begun and that Congress has extended the statute of limitations on pandemic-related claims from six years to 10.