COMBATING FRAUD UNDER THE FALSE CLAIMS ACT: NOT PROTECTING AGAINST POST-EMPLOYMENT RETALIATION IS A SELF-DEFEATING POLICY DECISION.

• Author: Flores, Alejandro, Jr.

1. INTRODUCTION: THE STRUGGLE AGAINST FRAUD

   Every year, fraudulent activity against the United States government costs taxpayers billions of dollars. (1) The majority of these losses result from acts of fraud against federal health care programs like Medicare and Medicaid, and to a lesser extent, from matters involving contracts with the government for the purchase of goods and services. (2) However, the United States Department of Justice ("DOJ") fights back to regain lost taxpayer dollars by taking action under the False Claims Act ("FCA"), which imposes liability on such types of government fraud. (3) Since 1986, actions taken by the DOJ resulted in the recovery of over $64 billion in settlements and judgments in cases involving fraud and false claims. (4) In fiscal year 2020 alone, the DOJ recovered over $2.2 billion, and saw even more success in the prior year when it recovered over $3 billion. (5) The DOJ does not achieve such victories and recover billions of dollars stolen from taxpayers all on its own--whistleblowers lead the charge and prove to be vital to the Department's success. (6)

   Under the FCA, any private individual or whistleblower may sue other individuals and corporations for perpetrating fraud against the government. (7) The role these private suits played in combating fraud compounded with every passing year, and in fact, the number of cases filed in a single year peaked in 2020. (8) Often times, at the cost of great sacrifices, these suits are brought by brave employees against their employers on behalf of the government. (9) To encourage employees to actually utilize this statute, the FCA contains an anti-retaliation provision that provides relief to employees when their employers retaliate against them for exposing fraudulent activity. (10) Nonetheless, a pressing issue lies with whether the anti-retaliation provision's protections extend to former employees. (11) Since November 6, 2018, only the Tenth Circuit Court of Appeals addressed this issue in Potts v. Ctr. for Excellence in Higher Educ., Inc. (12) The Tenth Circuit held the FCA's anti-retaliation provision only extended protections to employees who were current employees at the time of retaliation. (13) However, on March 31, 2021, the Sixth Circuit Court of Appeals reached an opposite conclusion in United States ex rel. Felten v. William Beaumont Hosp. when it held that the term "employee" under the FCA provided anti-retaliation protections to victims of post-employment retaliation. (14)

   This Comment addresses the Sixth Circuit's decision to interpret the term "employee" more broadly than the Tenth Circuit and the effect it has on FCA claims across the nation. (15) Part II provides background on the history of the FCA, its anti-retaliation provision, and the legislative intent supporting the provision. (16) Part II also explains how individuals who learn of fraudulent conduct can bring claims under the FCA, as well as the types of protections the FCA provides to whistleblowers. (17) Further, Part II explains how the Tenth and Sixth Circuits reached opposite conclusions on whether the term "employee" under the FCA was broad enough to provide protections to former employees. (18) Next, Part III addresses the United States Supreme Court's analysis when it interpreted the term "employee" in the anti-retaliation provision of Title VII, which was the basis upon which the Sixth Circuit interpreted the term "employee" in its own analysis. (19) Part III also explores how a narrow interpretation of the term "employee" undermines the purpose of the FCA when former employees are excluded from receiving the same protections. (20) Finally, Part III illustrates how a narrow interpretation of the term "employee" perpetuates and exacerbates the gross injustices that result from employer retaliation. (21)

   Part IV proposes a legislative and judicial solution to the circuit split. (22) Congress should revisit the FCA, and make a statutory amendment that clarifies the definition of the term "employee" to include protections for former employees. (23) Alternatively, if Congress is unable to reach a consensus to amend the FCA, the United States Supreme Court should grant certiorari on appeal and apply the same reasoning used when it held that an "employee" in Title VII'S anti-retaliation provision includes former employees--thus, the Supreme Court should similarly hold that the FCA's anti-retaliation provision extends protection to former employees. (24)

2. BACKGROUND: A HISTORY OF THE FALSE CLAIMS ACT AND ITS ANTI-RETALIATION PROVISION

   1. 1863: LINCOLN'S FALSE CLAIMS ACT

      During the American Civil War, rampant fraud by Union defense contractors became a serious issue because they supplied many of the goods and services for the war effort. (25) In response to this issue, on March 2, 1863, President Lincoln signed the False Claims Act ("FCA") into law as a measure to protect the government in its Civil War defense contracts. (26) At the time of its passing, the FCA allowed any private individual (the "relator") to bring suit on behalf of the government in a qui tam action. (27) The FCA imposed civil--and criminal--liability on anyone who was found to knowingly submit a false claim to the government. (28) The penalties for defrauding the government were quite harsh and allowed the government to recover from the defendant: (1) a two-thousand dollar fine; (2) double the amount of damages sustained by the government as a result of the fraud; (3) the cost of litigation; and (4) either the defendant's sentencing between one and five years, or an additional fine between one and five-thousand dollars. (29) To incentivize individuals to bring qui tam actions, the FCA entitled a relator to receive one-half of the total awarded judgment in the event that a qui tam action successfully found a defendant to be guilty of fraud. (30)

   2. 1943: CONGRESS RENDERS THE QUI TAM PROVISION USELESS

      After cracking down on fraud during the Civil War, the FCA once again stood on the forefront against fraud during the Second World War. (31) During this period, the United States significantly increased government spending, and naturally, contractors found many opportunities to defraud the government. (32) However, this increased government spending not only presented an opportunity for fraudulent contractors, but also an opportunity for private plaintiffs to turn a profit under the FCA. (33)

      The FCA did not impose any limitations on how or when private individuals could file a qui tam suit at the time of its signing. (34) Eventually, opportunists took notice and schemed to take advantage of the FCA. (35) As a result, opportunists launched a slew of qui tam suits based on allegations made in already settled and adjudicated criminal indictments by the government. (36) Contrary to the wishes of the United States Department of Justice, one of these opportunists had their qui tam suit heard before the United States Supreme Court in United States ex rel. Marcus v Hess (21) In Marcus, the respondents, electrical contractors, already pled nolo contendere for defrauding the government during a Public Works Administration project and paid the resulting fine of $54,000 before the qui tam suit's initiation. (38) In its opinion, the United States Supreme Court explained that the FCA allowed private individuals to file qui tam actions without restrictions on where information of fraud was acquired--even when the information's source is a public record stating the allegation was previously adjudicated. (39) Remarkably, the Court upheld a $315,000 judgment against the respondents--in addition to the prior $54,000 fine. (40)

      In response to the decision, in 1943, Congress amended the FCA to bar individuals from filing a qui tam suit relying on information that the government already obtained, known as the "government knowledge bar." (41) The 1943 amendments also authorized the government to take full control of filed suits and reduced the maximum judgment award the relator could recover from fifty percent, down to twenty five percent or less. (42) The amendments not only reduced any monetary incentives for filing qui tam suits but also barred an individual from filing suit even if the government took no action nor investigated allegations of fraud. (43) As a result of these changes, the number of qui tam filings dwindled significantly, with only six to ten cases filed per year between 1943 and 1986. (44)

   3. 1986: CONGRESS RESURRECTS THE FALSE CLAIMS ACT

      By the 1980s, the federal budget grew to exceed an unprecedented $567 billion, Congress could no longer ignore the ineffectiveness of the FCA considering the widespread evidence of fraudulent activity. (45) In 1978, a report by the General Accounting Office (now the U.S. Government Accountability Office) concluded that the number, variety, and value of federal programs created virtually limitless opportunities to defraud the government. (46) Exploitation occurred all across the United States Government, stealing millions of dollars through grants, contracts, and federal assistance through false claims for benefits and services, delivering of substandard goods, and bribery of public officials. (47)

      In 1986, Congress responded to the growing threat of fraud against the government by once again introducing amendments to the FCA. (48) In a report on the 1986 amendments, the Senate Judiciary Committee ("the Committee") claimed the only way to combat "sophisticated and widespread fraud" is through the "coordinated effort of both the Government and the citizenry...." (49) To encourage individuals to come forward with information pertaining to fraudulent activities, the proposed amendments increased incentives for relators to file qui tam suits and directly addressed the flaws of the 1943 Amendments by permitting fraud allegations relying on publicly disclosed information if the relator is the "original source of the information." (50) Finally, to...