'Qui Tam' or 'False Claims Act' Legislation

'Qui Tam' or 'False Claims' laws are a type of legislation that enables a whistleblower to sue a contractor on behalf of the govenment to recover the illicit proceeds of a fraudulent claim. If the lawsuit is successful, the whistleblower receives part of the court-awarded settlement.

This approach, pioneered in the USA, dates back to the Civil War when the Union Army was plagued by faulty rifles and ailing donkeys supplied by unscrupulous military contractors. Although it can only be applied to certain situations, it is considered by far the most effective form of whistleblower law.

The False Claims Act has for example become a major tool for fighting fraud in the pharmaceutical industry. Suits brought under this act led to $6.3 billion in settlement payments to the U.S. government related to fraudulent marketing of drugs between 2001 and 2009, according to a New England Journal of Medicine study in May. Whistle-blowers received an average $3 million in these cases.

Often referred to as 'bounty' or 'incentive' systems, there are some common misconceptions about these laws.

Research has shown, unexpectedly, that the financial incentives on offer are usually not a factor in the decision to blow the whistle. Most of the whistleblowers who were awarded millions in the pharmaceutical cases did not even know that such laws existed until well into the process. They had already put their careers at risk by trying to expose the frauds through normal channels, and it was only when they found themselves failing – facing cover-up and reprisals – that they started searching for help and found out about these laws.

The key reason for the success of these laws is that they give whistleblowers the legal tools and the resources (expert lawers working on a contingency basis) to take on a fraudulent contractor and prove their case – rather than having to rely on some third party to do this, such as a regulatory agency or law enforcement.

Although many law practices have been drawn to this field in recent years, the pioneer and leading centre of expertise in this field is the National Whistleblower Centre, founded by Stephen Kohn, who is also the author of the book Concepts and Procedures in Whistleblower Law.