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Whistleblowing Part II: The Pros and Cons Of Filing A False Claims Act

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The federal False Claims Act, a.k.a. the “Lincoln Law,” was enacted by Congress in 1863. The purpose of the Act was to prevent, and provide legal recourse for fraud during the Civil War. At the time, war-profiteers were exploiting the armies of the North and the South. Selling faulty weaponry, rancid rations, and sick and decrepit horses and mules.

The Lincoln Law set forth a provision that allowed the whistleblower to receive a reward known as (pdf) “Qui Tam.” In 1986 the False Claims Act was amended, a new provision increased the qui tam plaintiff’s reward to 15-30% per false claim. For example, the whistleblowers in the recent Cephalon drug case split $46.4 million four ways. Quite a payday by any standard, even on Wall Street!

A liable defendant will be imposed with treble damages and civil fines of $5,000 to $10,000 per false claim. All elements of a claim under the False Claims Act are held up to a preponderance of the evidence standard. Simply put, whether the defendant more likely than not submitted false claims.

Blowing the whistle on your employer is not something that is easy to do, nor should it be taken lightly. Jeffrey Wigand, arguably the most famous whistleblower, endured harassment and death threats for exposing the Big Tobacco practice of “impact boosting.” Ultimately, Jeffrey got his story out on 60 Minutes and in the film The Insider.

Although it is a tough to blow the whistle on an employer, the False Claims Act provides the necessary amount of compensation for taking such a difficult step. It is good to know that, in this case, the government is on your side.