Whistleblowers and the False Claims Act
February 12, 2026
The False Claims Act (FCA) is one of the federal government’s most powerful tools for combating fraud. For organizations that contract with the federal government or participate in federally funded programs, understanding the FCA landscape and implementing robust compliance measures is essential to mitigating legal and financial risk.
The FCA permits private individuals with knowledge of fraud to file qui tam lawsuits on behalf of the government. If the suit is successful, the whistleblower or “relator” may receive between 15 and 30 percent of the government’s recovery. This enormous financial incentive has made whistleblowers the primary source of FCA cases, with qui tam actions accounting for the majority of FCA recoveries in recent years.
The False Claims Act, codified at 31 U.S.C. §§ 3729–3733, imposes civil liability on any person or entity that knowingly submits, or causes to be submitted, false or fraudulent claims for payment to the federal government. The statute also prohibits making false statements material to a false claim, conspiring to violate the FCA, and improperly retaining government overpayments.
Penalties under the FCA are substantial. Defendants face treble damages—three times the government’s actual loss—plus civil fines that can quickly add up. These penalties, combined with the reputational harm and operational disruption that accompany FCA litigation, make compliance a critical priority.
Responding to Whistleblower Complaints
The FCA’s anti-retaliation provision, 31 U.S.C. § 3730(h), protects employees who investigate, report, or otherwise take action in furtherance of an FCA case. Recent amendments and judicial interpretations have broadened the scope of protected activity, making retaliation claims easier to establish. Organizations must exercise caution when taking any adverse action against an employee who has raised concerns about potential fraud or compliance issues, as such actions may give rise to independent liability under the FCA’s anti-retaliation provisions.
Initial Assessment and Investigation
Upon learning of a potential whistleblower complaint—whether through service of a qui tam complaint, a government subpoena, or an internal report—organizations should act promptly to assess the situation. Key initial steps include assembling a response team that includes legal counsel experienced in FCA matters, implementing a litigation hold to preserve potentially relevant documents, and conducting a preliminary factual investigation to understand the scope and merit of the allegations.
It is essential that any internal investigation be conducted under the direction of legal counsel to preserve attorney-client privilege and work product protections. Organizations should avoid taking any actions that could be perceived as retaliatory against the complainant or any employees who cooperated with the whistleblower.
Engaging with the Government
In qui tam cases, the complaint is initially filed under seal, giving the government time to investigate and decide whether to intervene. During this period, organizations may have opportunities to present their perspective to the government through meetings or written submissions. Counsel should carefully consider whether and how to engage with the government, as these communications can significantly influence the government’s intervention decision and the trajectory of the case.
If the government declines to intervene, the relator may proceed with the litigation independently. While declined cases statistically result in lower recoveries, they should not be dismissed as unimportant; relators and their counsel may still pursue aggressive litigation strategies, and the organization will bear the costs of defense regardless of the outcome.
Settlement Considerations
Organizations should carefully evaluate the costs and benefits of early resolution versus protracted litigation. Factors to consider include the strength of the government’s or relator’s evidence, the potential exposure if the case proceeds to judgment, the availability of defenses such as lack of materiality or scienter, and the non-monetary consequences of settlement, including potential exclusion from federal programs and reputational damage.
Strategies for Preventing FCA Liability
Establishing a Robust Compliance Program
The most effective defense against FCA liability is a comprehensive compliance program that prevents fraudulent conduct before it occurs and identifies potential issues early. An effective compliance program should include written policies and procedures, regular training for employees on FCA requirements and the organization’s compliance expectations, clear channels for reporting potential compliance concerns without fear of retaliation, and ongoing monitoring and auditing of high-risk activities.
The Department of Justice and the Department of Health and Human Services Office of Inspector General have published guidance on the elements of an effective compliance program. Organizations should consult this guidance and consider engaging outside counsel or compliance consultants to assess and strengthen their programs.
Conducting Regular Audits and Self-Assessments
Proactive auditing can identify billing errors, regulatory noncompliance, and other issues before they escalate into FCA liability. Organizations should conduct regular internal audits of their claims submission processes, contractual compliance, and adherence to applicable regulations. When audits reveal potential problems, organizations should take prompt corrective action and consider whether voluntary disclosure to the government is appropriate.
Voluntary Disclosure and Cooperation
The DOJ has repeatedly emphasized the benefits of voluntary self-disclosure and cooperation in FCA matters. Organizations that discover potential FCA violations should carefully consider whether to make a voluntary disclosure, as doing so may result in reduced penalties, more favorable settlement terms, and an enhanced reputation with enforcement authorities. The decision to disclose involves complex legal and strategic considerations and should be made in consultation with experienced counsel.
Fostering a Culture of Compliance
Organizations should strive to create a culture in which ethical conduct and compliance are valued at all levels. Leadership should model compliant behavior and communicate that the organization takes its legal and ethical obligations seriously.
Conclusion
The False Claims Act presents significant risks for organizations that do business with the federal government, but these risks can be managed through proactive compliance efforts and a thoughtful approach to responding to whistleblower complaints. When whistleblower complaints arise, prompt action, careful investigation, and strategic engagement with the government can help achieve the best possible outcome.
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