The seal protects the Government’s investigation, the Defendant’s privacy, and the whistleblower’s employment.
The False Claims Act requires that every new case be filed under seal. Pursuant to 31 U.S.C. § 3730(b)(2):
“The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders…. The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal ….”
The first rule of filing a False Claims Act lawsuit is that you don’t talk about filing a False Claims Act lawsuit.
Breaching the seal—even inadvertently— can result in severe sanctions and possibly dismissal of your case. But why does this rule exist? What is the purpose of sealing your qui tam case?
Read on to learn why from False Claims Act attorneys.
The Four Purposes of the FCA’s Seal Provision
According to the Fourth Circuit, the False Claims Act’s seal provision serves several purposes:
“(1) to permit the United States to determine whether it already was investigating the fraud allegations (either criminally or civilly); (2) to permit the United States to investigate the allegations to decide whether to intervene; (3) to prevent an alleged fraudster from being tipped off about an investigation; and, (4) to protect the reputation of a defendant in that the defendant is named in a fraud action brought in the name of the United States, but the United States has not yet decided whether to intervene.”
The Seal Maintains the Integrity of the Government’s Investigation
To a layperson, the first purpose may seem nonsensical—why would the government need time to determine whether it is already investigating a fraud?
But this is not a simple task considering there are 94 United States Attorneys’ Offices, the Department of Justice, and various agencies, any of whom might be looking at a specific defendant.
It takes a considerable amount of coordination for these entities to communicate with one another about whether an investigation is already ongoing.
The second reason is the most prominent and oft-cited: it enables the government to consider whether it wishes to intervene prior to the defendant’s learning of the litigation.
Of course, the statute does not limit the government to the initial sixty days, and unless it is clear that the case should be declined, it will always take an extension (and often many extensions) to conduct a thorough investigation.
One might ask why couldn’t the United States conduct this investigation in discovery, out in the open, like most lawsuits?
That brings us to the third and fourth reasons. For one, the seal period enables the government to conduct an investigation without tipping off the alleged wrongdoers, who could then falsify or shred documents or talk to potential witnesses about their testimony.
As fraud against the government is a serious accusation, one being brought by a whistleblower who may not have access to the documents necessary to prove their case, this opportunity to conduct an investigation without being thrown into litigation is important to protecting the government’s interests.
The Seal Protects Defendants from Erroneous Accusations
The seal is also important to protecting a defendant’s interests for similar reasons.
Even when the case is brought by a well-meaning whistleblower, they may not have all of the facts. Before a defendant is “outed” as committing fraud, the government can look into the facts and advise a whistleblower if they are missing vital information.
For example, an employee may think a defense contractor is cutting corners because they are skipping parts of the contract and not realize that the government gave them express permission to do so.
It is better for the government to conduct this investigation under seal so that the defendant’s reputation suffers no harm during the investigation.
The Seal Helps Whistleblowers Retain Employment
The seal also benefits many relators, especially current employees. Often, our clients come to us wanting to quit rather than work for fraudsters, but it can take time to find a new job.
Because of the seal, we are often able to advise them to file the case—getting it in front of the government as soon as possible and avoiding potential first-to-file issues—and they can job hunt while the case is under seal.
Few whistleblowers would file these cases if it meant being terminated and unable to find new employment.
While we advise our whistleblowers not to actively investigate once a case is under seal, they may obtain new information during the course of the sealed investigation that will help the government.
For example, if a defendant receives a subpoena for certain records and starts to shred those documents, it is helpful that they don’t know to hide these illicit acts from the whistleblower.
Or, if the government gets a warrant that permits the whistleblower to wear a wire, they may have recordings of important meetings or the defendant’s response to learning they are under investigation.
None of this would happen if the relator were immediately outed as a whistleblower.
The Seal is a Necessary Component of Every False Claims Act Case
Make sure that you retain an experienced whistleblower attorney who understands the importance of the seal and how to handle the seal when issues come up that require disclosure of your lawsuit.
Contact Bracker & Marcus LLC today for a free evaluation.