Due to the recent rash of fraud cases when it comes to the Paycheck Protection Program (PPP) funds, as well as crisis funds for small businesses, more and more people have heard of Qui Tam lawsuits.
But what exactly are these lawsuits? What purpose do they serve and how do they work?
Defining Qui Tam actions
Cornell Law School discusses Qui Tam lawsuits. Many of these lawsuits take place in cases that involve the defrauding of the federal government. In essence, the person who brings the complaint forward is the relator. They bring their complaint to the government, which gets considered the real plaintiff in the case.
However, if the government wins the case then the relator receives a portion of the legal award the court grants the government. This form of lawsuit is also called popular action. Relators of a False Claims Act qui tam action could potentially receive up to 30 percent of the award the government gets.
Payment for blowing the whistle
In short, a whistleblower will act on the behalf of a government entity, pointing the finger at a company or business that has made – or is currently making – false claims in order to receive government funding or government payouts.
In recent years, this became a particularly hot button issue as many companies tried to cheat the system, creating employees that do not exist or exaggerating expenses and other business information to falsely qualify for loans.
Qui Tam lawsuits work as a way to ensure that businesses stay honest and that government funds do not end up in the hands of undeserving companies while rewarding workers who do the groundwork by alerting the government.