The Law Firm of Piacentile, Stefanowski & Malherbe LLP

The Department of Justice’s Role in Combatting Fraud and How Whistleblowers Can Help

The qui tam statute was enacted by Congress as part of the False Claims Act, codified at 31 U.S.C. § 3729 et seq., to encourage private citizens with knowledge of fraud committed against the federal government to file qui tam actions against such fraudsters so that they may be prosecuted by the United States Department of Justice ("DOJ"). In order to encourage private citizens to bring qui tam actions, Congress created an incentive for whistleblowers called "qui tam" and "treble damages." These are three times more than what was lost by the government as a result of a false claim (this can be many millions of dollars) plus attorney fees and costs which can amount to millions more than what would have been recovered had there not been a whistleblower filing the action under seal with DOJ and then prosecuting it with DOJ's assistance in court through trial. The government can also collect penalties for each False Claims Act violation.

The qui tam statute was originally enacted in 1863 as part of the Civil War era False Claims Act. The False Claims Act was originally enacted by Congress to combat war profiteering during the Civil War. The current qui tam statute has been effective since 1986.

The qui tam statute protects whistleblowers who report fraud against the federal government and allows them to share in any recovery that results from their action with the government. Under their statute, whistleblowers may file qui tam actions under seal with DOJ for up to 60 days while they investigate whether there is a case for them to prosecute against a defendant or defendants who are committing fraud against the federal government. Their period is often referred to as a "qui tam investigation." If DOJ decides not to pursue an action, it may dismiss the case or allow a whistleblower's attorney to take over prosecution of the case filed under seal with DOJ's assistance. If DOJ decides not to pursue an action, then a whistleblower can proceed on their own on behalf of their own personal interest and that of others similarly situated without disclosing their identity through filing a civil complaint under seal without first filing an action with DOJ.

The DOJ's involvement in False Claims Act cases is not limited to the investigation and prosecution of whistleblower cases. The Department of Justice has taken the lead in changing its policies and procedures regarding corporate fraud, especially in the wake of the financial crisis. For example, DOJ has formed a Financial Fraud Enforcement Task Force (FFETF) which seeks to investigate and prosecute fraudulent conduct arising out of the financial crisis. The FFETF is comprised of DOJ lawyers from its Criminal Division, Civil Division, and US Attorneys Offices. It also includes lawyers from other federal agencies including the SEC, IRS, and HUD.

The idea behind this task force is that when different agencies with different expertise work together they can more effectively investigate and prosecute fraud cases. This approach is similar to how the DOJ handled the tobacco litigation back in 1999 – 2005 where it brought a series of lawsuits against tobacco companies under both federal and state laws seeking to recover billions of dollars in health care costs associated with smoking-related illnesses. In addition to using criminal penalties for those who broke the law, this multi-agency approach was very effective in bringing about settlements where tobacco companies agreed not only to pay billions but also agree to curtail their marketing activities by ceasing advertising targeted at youth as well as restricting their marketing activities on the internet.

The DOJ has also adopted new policies and procedures regarding corporate fraud, especially in the financial industry. These include, for example, policies that make it easier for criminal prosecutors to pursue individuals who have committed financial crimes such as insider trading and market manipulation. This is a significant change from the past where prosecutors were more focused on pursuing corporations for their wrongdoing rather than individuals.

The DOJ has also played a role in passing new laws that attempt to curb corporate fraud and abuse. For example, Dodd-Frank Wall Street Reform Act (July 21, 2010) was passed in response to the financial crisis and contains several provisions intended to prevent or mitigate fraud. The Financial Stability Oversight Council (FSOC) was created by section 113 of the Act to monitor risks in financial markets including those posed by large non-bank financial institutions that are not systemically important but whose failure could destabilize other firms or markets. The FSOC is authorized to designate any non-bank financial institution as "systemically important" if it determines that such institution represents a threat to U.S. financial stability due to its size, leverage or complexity or because its failure could create systemic risk due to its activities.

The DOJ has a strong presence in the Southern District of New York. The DOJ works with the SEC, IRS, and other agencies to investigate cases of fraud. The DOJ is also responsible for prosecuting criminal cases. The DOJ uses criminal laws like mail and wire fraud, bank fraud, securities and commodities fraud, telemarketing fraud, health care fraud, and many more to prosecute criminals that commit these crimes. In addition to prosecuting individuals that commit these crimes, the DOJ also prosecutes corporations and business entities that commit these crimes.

The justice system is a complex system that requires complex solutions. The justice system is an intricate system that requires intricate solutions. To combat white-collar crime effectively requires a number of steps to be taken by people in many different capacities within the justice system. White-collar crime can not only hurt individual businesses but it can hurt entire economies as well as our society as a whole. White-collar crime needs to be prosecuted by all means necessary and it needs to be stopped at all costs before it takes over our society completely or cripples us financially in the process.

A qui tam action under seal with DOJ is a powerful tool for whistleblowers to use in fighting fraud against the federal government. If you are aware of such fraud and would like to know more about whether you can file a qui tam action under seal with DOJ or whether you can proceed on your own in court, please contact Whistleblowers International. We are whistleblower attorneys. Dr. Joseph Piacentile has contributed to recovering many billions of dollars for the US government under the False Claims Act.