What if someone blows the whistle but it makes no sound?
The federal False Claims Act (“FCA”) traces its history back to the Civil War, a time at which unscrupulous vendors sold defective goods such as blankets and boots to the Union army. The result was to adopt legislation, the FCA, both penalizing the filing of false claims and, via amendments, incentivizing private citizens to commence civil cases under its “qui tam” provision, the reward being a healthy bounty, typically in the range of 15% to 30% of what the government collects.
As the FCA developed over time, it now impacts a wide range of equally unscrupulous behavior in a wide range of government contracting, including the filing of fictitious and overstated claims for health care services under federal health care programs.
You’re probably familiar with the fact that damages under the FCA are trebled. And, you might be familiar with the fact that, in addition to damages, significant penalties apply, from close to $14,000 per claim at a minimum to close to $28,000 at the maximum.
And just to make sure that you read that right, some criminally clever physician who fakes 643 claims, taking in $476 each from Medicare, for a total of $306,068, faces damages of three times that, or $918,204 plus a potential penalty of from approximately $9 million to over $18 million.
As a result, you can see how FCA whistleblowing has become, well, substantially more than a cottage industry.
Importantly, it’s not just whistleblowers and whistleblower lawyers who made a killing, it’s the government as well.
That’s because the incentives for whistleblowers under the FCA shift of much of the legwork and litigation from the government to private parties. Whistleblower actions result in the majority of FCA recovery every year. And, we’re talking more than a billion dollars a year in federal government recovery – in 2023 it totaled over $2.3 billion.
But, if a recent ruling by a federal District Court from the Middle District of Florida gains traction upon appeal, that gravy train might come to a screeching halt. Let me explain, with the caveat that I’m going to tell you just what you need to know–this isn’t a law review article on the ruling.
The Zafirov Case
Over five years ago, Clarissa Zafirov, M.D. filed a whistleblower lawsuit against her then employer, Florida Medical Associates, LLC and several other parties, alleging that they violated the FCA by misrepresenting patients’ medical conditions to Medicare.
Pursuant to the FCA, the government had the right to intervene, that is, to take over the case. However, they chose not to, and Dr. Zafirov continued to prosecute on behalf of the United States government, that is, until the defendants filed a motion to dismiss the action on the grounds that the qui tam provision, the whistleblower provision, of the FCA violates the U.S. Constitution.
What the defendants did was pick up on the reasoning of a dissenting opinion in a 2023 U.S. Supreme Court Case in which Justice Clarence Thomas questioned whether the FCA whistleblower provision was constitutional.
Following that line of thought, the defendants in the Zafirov case argued, and for the first time ever, a court found, that the whistleblower provision is indeed unconstitutional. The District Court ruled that Article II of the Constitution, the Appointments Clause, requires that legal action on behalf of the government be brought by certain appointed individuals referred to as “officers of the United States”, that a whistleblower under the FCA is not such an officer (although the whistleblower acts as such in prosecuting the case), and that Congress can’t authorize a whistleblower to wield executive branch authority.
Because, as I mentioned, this is the first District Court to rule in this fashion, we can consider it certain that the case will be appealed.
For now, in general, a whistleblower’s whistle still makes sound when it’s blown. Whether or not that will remain the case is yet to be seen, I mean, heard.
Until then, you would be best to assume that the FCA still incentivizes whistleblowers and permits them to prosecute actions and collect bounties. At a minimum, that means that you shouldn’t do anything to create whistleblowers within your organization or within the ranks of service businesses and consultants that support your business.
View all compliance-related complaints as potentially valid. Investigate them. And make sure to let the person complaining know that you are taking the complaint seriously. Don’t retaliate against him or her.
Will this completely prevent the employee or even the partner from becoming a whistleblower or from calling the feds? No.
But it won’t be feeding upset until it turns into anger. And, it won’t be creating pretty good evidence that your group or business doesn’t care about compliance, magnifying the downside when the poop hits the fan.