What is the False Claims Act?

The False Claims Act, 31 U.S.C. § 3729-3733, is a powerful and special law. It gives individuals the right to fight fraud committed against the government and obtain a reward when they prevail. Under the False Claims Act, individuals have the right not only to report fraud and also to sue on behalf of the government in federal court. The ability to sue on behalf of someone else, especially on behalf of the government, is a very unusual right.

In almost every other kind of lawsuit, someone who files a case has to show how he or she personally was victimized or damaged by the defendant. While an individual can also sue for personal retaliation under this law, what really counts, what creates the biggest cases, is the special right to sue for damages because of fraud committed against the government. When a plaintiff prevails in a False Claims Act case, either in Court or in a settlement, he or she gets a share of whatever the government recovers.

Even within the narrow spectrum of the laws that reward whistleblowers, most laws do not allow an individual to sue on behalf of the government. The Dodd-Frank Act created two new whistleblower offices and they are very valuable additions to law. It is now possible to file a matter with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) and obtain a reward. Both of these offices also provide strong protections for whistleblowers. Both of these laws are valuable tools, which should be used by whistleblowers to file appropriate cases of securities fraud. They have their own unusual provisions, which even allow the whistleblower to file a case anonymously.

About False Claims Act

Indeed, these are great new tools for whistleblowers, but they do not include the right of an individual to go before a court file a suit on behalf of the government. There is also an IRS whistleblower law that provides a reward when information leads to a collection involving tax fraud. Still, under the IRS whistleblower law, a whistleblower files with the IRS – not in court. Since the False Claims Act does not allow anyone to file an action regarding tax fraud, filing with the IRS is the way whistleblowers must report such allegations.

There are also many states, which have effectively copied the federal law and adopted their own False Claims Acts. Such laws generally allow for a suit to be filed in state court. For instance, it is possible to sue in Massachusetts State Court for fraud committed against Massachusetts.