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New Math in Whistleblower Suits

Rob Falk

A recent District Court of Pennsylvania decision may change the math of whistleblower law suits.  Under the federal False Claims Act, an individual with knowledge of fraudulent claims can file a law suit on behalf of the government and receive anywhere between 15 and 25 percent of the government's recovery.  Given that the False Claims Act authorizes damages of up to three times the claims submitted plus $11,000 per claim, the damages can be hefty.  (Note, the theoretically highest penalties available are almost never awarded). 

Recently, in United States ex rel. Nudelman v.International Rehabilitation Associates Inc., E.D. Pa., No. 00-1837, a "whistleblower" asked that the percentage award be based not only on the value of the false claims submitted, but also include the cost of the corporate integrity agreement ("CIA") used to monitor the provider after the settlement.  The dollars involved were significant.   The amount of the claims at issue:  $1.65 million.  The estimated cost of implementing the CIA:  $1.5 million.  In this case, the whistleblower was using the additional cost as a way to argue that the "bounty" fee should be doubled.

The district court held for the whistleblower and allowed the relator's take to be based on both the value of the claims and the cost of the CIA.  If this decision is allowed to stand, it would provide further motivation for corporate insiders to file whistleblower suits.  It would also give them a stake in having more punitive and costly corporate integrity agreements.  Has this court overstepped its bounds?  This decision will certainly be controversial. 

Greenbranch Publishing