Many companies received funds under The Coronavirus Aid, Relief, and Economic Security (CARES) Act's Paycheck Protection Program (PPP) or under the Economic Injury Disaster Loan program (EIDL). These programs provided federal dollars administered in part by the U.S. Small Business Administration (SBA) and the Department of Treasury (Treasury) to businesses who submitted applications. As a result, the improper procurement, receipt, or use of these funds could lead to complications that an applicant may have never considered, such as qui tam lawsuit.
A whistleblower who wants to recover under the federal False Claims Act, 31 U.S.C. §§ 3729-3733 (FCA) must be able to substantiate his/her claims in a qui tam lawsuit. This typically means the whistleblower needs evidence to support the allegation that his/her employer violated the FCA by submitting a false claim to the federal government. However, FCA cases are not limited to employees and can be brought by any "person" who is the "first to file" a lawsuit and who has actual evidence that the company or individual violated the FCA. This person is known as the "relator." The relator does not have to be personally harmed by the alleged conduct.
There are several steps that go into bringing a qui tam case under the FCA.
First, the whistleblower (relator) needs to hire an attorney to evaluate whether the evidence collected is sufficient to bring a civil lawsuit in the appropriate U.S. District Court – that is, where the fraud occurred. Pertinent evidence includes anything that supports the allegation that a company or individual knowingly submitted a false claim or caused another to submit a false claim for money from the federal government. This "knowingly standard" includes actions taken with "deliberate ignorance" or a "reckless disregard" of the truth of a claim. The whistleblower's belief that a fraud occurred is not enough to cause an attorney to bring a lawsuit. At a minimum, the evidence must show the company or individual's role in the fraudulent procurement of federal funds, the period of time over which the fraud occurred, who had direct knowledge of the fraud, the estimated loss to the government, and whether the fraud is ongoing.
Second, and assuming there is sufficient evidence to bring such a case, the attorney prepares a written complaint, which must be filed under seal. This means all of the records relating to the case are kept confidential and are not available for public inspection. Significantly, the complaint is not served on the defendant, who has no knowledge that any of this is occurring. Copies are provided only to the U.S. Department of Justice (DOJ) and the local United States Attorney. These filings will remain under seal for at least 60 days so the DOJ has time to perform its own investigation into the relator's accusations. Ultimately, the DOJ makes the decision whether the case has sufficient merit for it to intervene. Extensions of time to investigate the case while the complaint remains under seal are routinely extended upon request by the government.
Finally, if the government decides to join the case, it takes over the lawsuit completely and the DOJ is primarily responsible for prosecuting the case. At that point, the defendant is served with the complaint and the lawsuit proceeds as any other federal civil litigation. The relator has the right to continue as a party in the case and may participate in the litigation. However, the government may dismiss or settle the case regardless of the relator's objections.
Should the government choose not to intervene, the relator has the option of proceeding alone, although the case would still be brought on behalf of the U.S., the real party-in-interest. Going down this route is significantly more difficult.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
