by Neil V. Getnick
Published in the New York Law Journal, October 16, 1992
In 1986, THE United Stated Congress enacted legislation to empower and protect whistleblowers with knowledge of fraud committed against the United States government. This new legal framework, known as the False Claims Act Amendments of 1986, bolstered existing law dating back to 1863 which had been successively weakened in the intervening years. In short, the 1986 “Qui Tam”1 legislation empowered individuals who had discovered someone defrauding the government to sue the defrauding party in the name of the United States and, if successful, to share in the recovery. Congressional hearings held in the spring of 1992 documented the outstanding success of the statute. The Department of Justice reported, “The qui tam amendments have in general worked extremely well in bringing some good, new cases to our attention.”2 A private attorney testifying at the hearings reported that settlement negotiations in two of his firm’s current cases alone produced offers totaling nearly $100 million (which offers the Government rejected as being inadequate). These results are consistent with Department of Justice statistics showing that recoveries from qui tam lawsuits increased 300 percent in 1991 alone.3 One of the issues raised at these hearings and the subject of proposed legislation4 is whether a government employee should continue to be allowed to bring suit under the False Claims Act where the employee learned of the information underlying the action during the course of employment. The question thus raised is how to reconcile the False Claims Act’s purpose of encouraging those with knowledge of fraud to come forward with the broader concerns about the roles and obligations of government employees.
To satisfy these broader concerns, government employees should not be provided with a unique position to race to the courthouse with the government itself, nor to interfere with government investigations, nor to elevate an interest in personal financial gain over the interests of the government. Preservation of the right of government employees to otherwise pursue qui tam actions, however, is crucial where government employees are unable to elicit action from their superiors upon clear evidence of fraud.
Based upon the testimony offered at the recent Congressional hearings a new and streamlined approach has been devised in the form of proposed legislation to obtain the benefits of government employee access under the statute while preventing potential abuses.
Under this approach, a government employee would be required to first disclose to a superior the material evidence relating to the alleged fraud. Furthermore, the employee would be required to notify the appropriate Inspector General or the United States Attorney General of this disclosure. The government would then be afforded a 12-month period to file suit on its own accord to seek, by in camera motion, an extension of up to an additional 12 months to take such action. If, and only if, the government elected not to file such suit within the allotted time period, would the government employee be permitted to file a qui tam lawsuit.5
Even then, further protection would attach given that pursuant to the current statute, a qui tam lawsuit must be filed under seal with the government being afforded a minimum of a 60-day period to react. The purpose of the seal requirement is “to allow the government an adequate opportunity to fully evaluate the private enforcement suit and determine both if that suit involves matters that the government is already investigating and whether it is in the government’s interest to intervene and take over the civil action.”
Additionally, the seal was intended to guard against premature disclosures of sensitive criminal investigations.6 Furthermore, for “good cause shown,” the government may move the court for extensions of time during which the complaint will remain under seal and the government may decide whether to intervene or decline to intervene in the action.7
The existing protection within the current statutory framework coupled with the enhancement provided by the proposed approach outlined above successfully resolves the question of how to retain the benefits of permitting government employees to file under the statute while addressing potential concerns about their appropriate roles and obligations.
In March 1992, companion legislation was introduced in the New York State Senate and Assembly supporting the enactment of a New York State False Claims Act based on the federal model.8 Such a translation of the federal legislation to a state jurisdiction has already been successfully implemented in California.9 The same rationale supporting a Federal False Claims Act applies to the proposed New York State legislation. Likewise the enhanced approach outlined above applying to government employees is applicable to the state legislation as well.
An amendment to the Federal False Claims Act enacting appropriate procedural safeguards but allowing government employees to continue to be allowed to file qui tam lawsuits is the best and most balanced approach continuing to protect our citizenry from fraud directed against the federal government. Enactment of the proposed New York State False Claims Act legislation with the enhanced approach outlined above applying to government employees would benefit us by offering a powerful and tested vehicle for fighting fraud against out state government as well.