When an individual or business commits a fraud on the government, the government has the right to sue that individual or business to recover civil damages (and potentially other penalties). The United States has both statutory (e.g., the False Claims Act, 31 U.S.C. §§ 3729-3733) and common law rights of action arising from fraud against the government and from the corruption of its officials. However, under certain circumstances, private citizens are authorized to file lawsuits on behalf of the government. The False Claims Act, 31 U.S.C. § 3729 et seq. authorizes citizens to bring, as “private Attorneys General,” lawsuits on behalf of the United States alleging frauds upon the government. These lawsuits are called qui tam actions. The private citizen plaintiff in such a lawsuit is often referred to as the “relator.” A relator can share in any money recovered. If a qui tam action is successful, the relator also is entitled to legal fees and other expenses of the action from the defendant.
The relator must do the following to initiate a qui tam suit: (1) file a civil complaint under seal with the court (the defendant is not served at this time); and (2) serve a copy of the complaint and a “written disclosure of substantially all material evidence and information” possessed by the relator on both the Attorney General and the United States Attorney (USA) pursuant to Rule 4 of the Federal Rules of Civil Procedure. The Commercial Litigation Branch of the Department of Justice will coordinate with the various federal agencies to determine if the allegations relate to a pending criminal investigation and prepare a prompt response. The government must then decide whether to take over the case as its own. If it does not notify the court that it is taking over the case, the relator litigates the case.
The government has 60 days from the date service is completed and the statement of material evidence is submitted, whichever is later, to notify the court of its decision. The government, for good cause, may ask for additional time. After the expiration of the 60 days (or longer if an extension is granted), the case is unsealed and the defendant is served with the complaint.
Based on the information and recommendations provided by the relevant agency and the USAO and Department of Justice staff review, a decision whether to enter the case and take it over or to decline to do so will be made. After that decision is made, the Commercial Litigation Branch will coordinate as necessary with the USAO to ensure proper handling of the qui tam litigation and to ensure that it does not interfere with ongoing criminal investigations or prosecutions
If the government intervenes in the qui tam action it has the primary responsibility for prosecuting the action. § 3730(c)(1). It can dismiss the action, even over the objection of the relator, so long as the court gives the relator an opportunity for a hearing (§ 3730(c)(2)(A)) and it can settle the action even if the relator objects so long as the relator is given a hearing and the court determines that the settlement is fair. § 3730(c)(2)(B). If a relator seeks to settle or dismiss a qui tam action, it must obtain the consent of the government. § 3730(b)(1). When the case is proceeding, the government (§ 3730(c)(2)(C)) and the defendant (§ 3730(c)(2)(D)) can ask the court to limit the relator’s participation in the litigation.
In many cases involving allegations of fraud against the government, a defendant is faced with parallel civil and criminal investigations and proceedings. Cases pursued criminally are analyzed for civil potential. Criminal disposition by plea bargain typically does not waive or release the government’s civil interests. The Federal Bureau of Investigation has been directed to furnish both the Fraud Section of the Criminal Division and the Commercial Litigation Branch of the Civil Division with copies of all reports in all matters involving fraud against the government, or bribery or conflict of interest involving a public employee. Other federal investigative agencies are required to forward similar reports of investigation to the Branch Director or appropriate United States Attorney.
This coordination the civil and criminal proceedings presents some risk to the government because discovery rules are much more liberal in civil cases. The liberal discovery of civil cases is also a risk to the defendant as the defendant. In a criminal proceeding the defendant can invoke his or her Fifth Amendment privilege and refuse testify. In a civil proceeding a defendant must weigh the consequences of whether to testify in the civil proceeding. The availability of protective orders and stays is an important consideration for both sides.
It is the policy of the Department of Justice to coordinate jointly the investigation of criminal and civil actions. When a civil and criminal investigation coexist, the Government’s policy is to obtain documents by methods other than grand jury subpoenas. Inspector General subpoenas are an alternative to grand jury subpoenas in those cases where an Inspector General has determined that such usage is appropriate.
The Commercial Litigation Branch and the United States Attorneys offices have significant latitude in counseling agencies to withhold payment of claims presented by any subject known to have engaged in fraudulent conduct. Agencies also withhold pay and retirement benefits to Federal employees because of evidence of wrongdoing.