Legal Definitions - False Claims Act

The False Claims Act is a federal law that punishes individuals or companies who falsely bill the government, overstate the amount of a delivered product, or understate an obligation to the government. It allows private individuals to file lawsuits, called qui tam actions, against those who defraud the government.

For example, if an employee of a defense contractor discovers that their employer is defrauding the government, they can file a qui tam suit against the employer. If the suit is successful, the employee may receive up to 30% of the government's award.

The False Claims Act is enforced by either the Justice Department or private individuals. If the government intervenes in a qui tam suit, it takes over the case. If the government wins or settles, the relator (the person who initiated the suit) receives between 15% and 25% of the government's award. If the government does not intervene, the relator may choose to continue on their own. If the relator wins, they may recover up to 30% of the government's award.

Some False Claims Act relators are entitled to whistleblower protection, which means they cannot be fired or retaliated against for reporting fraud.