The history of qui tam law

March 1, 2004

Pharmaceutical Representative

How qui tam law came into being.

Qui tam actions have been used as far back as the 13th century in England, where they were popular as a way for private citizens to gain access to royal courts. In the United States, qui tam actions have been around since 1776, although they were seldom used until 1986. In 1863, during the Civil War, congressional hearings disclosed widespread instances of military contractor fraud that included defective products, substitution of inferior material and illegal price-gouging of the Union Army. At the urging of Abraham Lincoln, Congress enacted the Civil False Claims Act, including the qui tam provision, as a weapon to fight procurement fraud. This law has also been known as the Lincoln Law and the Informer’s Act.

The False Claims Act, as enacted in 1863, was designed to entice whistle-blowers to come forward by offering them a share of the money recovered. Even though this act was enacted to combat military contractor fraud, it was applicable to all government contractors, federal programs and any other instances involving the use of federal revenue.

Between 1863 and 1986, very few people took advantage of the law, primarily because of many difficult obstacles built into the act that whistle-blowers had to overcome in order to be successful and many judicial rulings making it difficult to enforce the law. Also, a problem for anyone who desired to file a lawsuit under the 1863 act was the provision that all relators (which is what qui tam plaintiffs are called) had to bear all the costs of the lawsuit and the government could take over the suit at any time, at its discretion. However, if a relator was successful, the 1863 act allowed him or her to recover a maximum of 50% of any amount recovered.

In 1943, Congress amended the act so that if the government had prior knowledge of the allegations, the relator had no jurisdiction over the lawsuit, even if the relator had independent and direct knowledge of the allegations. Also, the 1943 amendments reduced the award to the relator from 50% to a maximum of 25% if the government did not take over the case, and a maximum of 10% if it did.

In 1986, again as a result of serious concern over rampant procurement fraud, inadequate efforts of regular law enforcement to control the fraud, and the obstacles making it difficult for whistle-blowers to bring qui tam actions, Congress passed amendments to the act increasing the whistle-blower's share of the recovery to a maximum of 30%, increasing the powers of relators in bringing qui tam lawsuits, and increasing the damages and penalties that can be imposed on defendants. Important to relators, the 1986 amendment provides that even if the government joins the lawsuit and has primary responsibility for prosecuting the action, the relator shall have the right to continue as a party to the action. Also, prior government knowledge of the allegations does not automatically prevent a relator from filing a qui tam action.

As a result of the 1986 amendments, qui tam actions have increased dramatically and have been the most effective and successful means of combating procurement and program fraud. Since 1986, qui tam recoveries have exceeded $1 billion, with most of the successes involving fraud in defense and healthcare programs.

Source: www.quitam.com, The Bauman & Rasor Group Inc.

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