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A False Claims Act Relator Can Take Many Forms, Bob Thomas Explains

February 28, 2022

This past Friday, WLC Co-Founder Bob Thomas participated in a panel discussion of three False Claims Act practitioners on “The Modern Relator.”  The panel was part of the Federal Bar Association 2022 Qui Tam Conference.

Three panelists and a moderator discussed the variety of ways whistleblowers present themselves in qui tam litigation, from the traditional (individual insiders) to the non-traditional (partnerships, corporate entities, and even competitors).

Most people following whistleblower issues tend to think, understandably, that whistleblowers pursuing False Claims Act (“FCA”) qui tam cases are corporate insiders (or former insiders) with direct and relevant information of the misconduct alleged.  This is, without doubt, the paradigm example of an FCA whistleblower, and the FCA does in fact contain clear preferences for people with inside information and direct exposure to the issues to be examined.

But given the success of the FCA in recovering stolen dollars from the government since the statute was amended in 1986, it was inevitable that other people would try to participate in these potentially lucrative anti-fraud efforts in which a whistleblower (or “relator” under the FCA) stands to receive between 15 and 30 percent of whatever the government recovers.  The panel discussed three False Claims Act relators in particular:  the “data miners,” relators grouping together and filing in corporate form to maintain anonymity, and competitors.

The Data Miner as False Claims Act Relator

Unlike corporate insiders, data miners essentially are people looking through public or private databases for patterns of information that might be consistent with fraud.  Since, for example, the Medicare claims database became more public a few years ago, investigators and qui tam practitioners sometimes review such databases for patterns of fraud.  As the panel made clear, however, it is ill-advised to file an FCA action based solely on patterns of data.  First, if the data is public, the relator in such an instance would not be telling the government anything new, anything the government did not already know or should know, giving rise to a “public disclosure” defense.  More fundamentally, without further analysis, such a claim based solely on patterns of data leaves too many blanks still to be filled in.

Under Fed. R. Civ. P. 9(b), FCA claims of fraud must be “pled with particularity,” alleging the who, what, where, why, and when of the fraud.

Under Fed. R. Civ. P. 9(b), FCA claims of fraud must be “pled with particularity,” alleging the who, what, where, why, and when of the fraud.  Patterns of data are leads worthy of possible future investigation; they are not enough to explain the problem to busy prosecutors.  Simply dumping a pattern of interesting leads on the government and asking them to figure it out is not a smart way to proceed.  That said, if paired with industry expertise or even small bits of information offering insight to the alleged scheme, the data can be a very powerful tool in the whistleblower’s toolkit.

The Anonymous Relator

A second unusual type of False Claims Act relator seen with greater frequency is the relator who wishes to remain anonymous, at least in the public record.  Unlike whistleblowers in the SEC or CFTC programs, where one can remain anonymous even to the investigators and lawyers for the government, in FCA cases the relator is actually the lead plaintiff in the action and is statutorily required to tell the government everything he/she knows about the matter, including his/her identity.  Although the relator might be described in the complaint under seal as a John/Jane Doe, in the disclosure statement given to the government and in subsequent interviews there will be full transparency of the relator’s identity.  Thus the John/Jane Doe pleadings are properly seen as a means of preventing retaliation against the relator should the pleadings be unsealed by the Court or inadvertently released into the public domain before the government’s intervention decision (yes, that does happen sometimes).

Similarly, when more than one relator comes forward at the same time to relator’s counsel, they have on occasion decided to form an entity such as a partnership or corporation to act as the False Claims Act relator.  This is plainly allowed by the statute, but again, there will be full transparency in all dealings with the government as to who is behind the corporate entity for purposes of exchange of information, assessment of witness credibility, and the like.  The primary advantage of this arrangement is the same as John/Jane Doe pleadings:  it makes retaliation against relators more difficult by adding some degree of mystery to their identity should the complaint fall into the wrong hands.

The Corporate Competitor as False Claims Act Relator

Finally, there is the phenomenon of the corporate competitor.  As demonstrated in the Whistleblower Law Collaborative’s groundbreaking case against Mylan Labs, there is nothing in the FCA prohibiting a company with a competing product from pursuing an action as a False Claims Act relator.  So long as the allegations are grounded in fact, these cases can be very successful.  After all, a business is often keeping close tabs on its competitors–and knows the industry.  They can therefore provide valuable information to the government.

Just as a competitor could file an anti-trust claim against a competitor, the FCA is simply another tool in the legal toolbox to consider.  Many general counsels think of the FCA mostly in defensive terms:  how can we avoid being sued by a whistleblower? or how can we defeat this FCA claim against us?   What the WLC’s success in the $465 million settlement against Mylan Labs shows, however, is that the offensive use of the FCA should be in the company general counsel’s toolbox as well.  This may be an unusual posture for corporate counsel, and they need to be reminded that the government is the real party in interest and so the litigation is not fully within the company’s control.  But still, doesn’t it make sense to have more tools in the toolbox?