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Amendments to the False Claims Act: Who is an Original Source in 2010

These cases suggest that in order in order to be considered to have materially added to information that has been publically disclosed the False Claims Act relator must have substantial new information. This new information cannot consist of small details or interpretation of facts, but must consist of new facts concerning practices and bad acts beyond claims that have been publically disclosed and more than just variations in practices that are already known. The information must also be information the Government could not be expected to know based on a reasonable investigation of publically disclosed conduct. Please read below to learn about who is eligible as an original source as a Qui Tam Relator and Whistleblower. (For more information, please call (215) 875-5712 or click here for a free case analysis.)

Courts have acknowledged that pre-2010 cases remain instructive as to whether a complaint's allegations and the disclosed materials are substantially the same. See Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 829 n.1 (7th Cir. 2013) ("The current version of 31 U.S.C. § 3730(e)(4), which went into effect on March 23, 2010, expressly incorporates the substantially similar standard previously used by our circuit and most other circuits under the prior version of the statute."). A few cases have interpreted the amended statute.

In United States ex rel. Osheroff v. Humana, Inc: False Claim Act Relator's Claim about Medical Clinics

In United States ex rel. Osheroff v. Humana, Inc.,  No. 10-24486, 2012 WL 4479072 (S.D. Fla. Sept. 28, 2012) the court considered relator's claims that medical clinics and health insurance companies had conspired to induce patients to enroll in Medicare Advantage Plans by offering improper benefits in violation of federal anti-kickback laws.   The relator alleged that his investigation revealed a number of additional facts that would exclude the clinics and insurers conduct from various safe harbors in the federal healthcare laws.    Defendants' argued that the all the information that relator based his claims on was publically disclosed in news articles, websites, and previous litigation.  After a lengthy discussion, the court concluded that the information was publically disclosed and relator's claims were based upon this publically disclosed information.  Id. at *10. Read further here about the False Claims Act law.

Is the Qui Tam Relator an original source?

The court then evaluated whether the relator was an original source under both the pre-2010 and post-2010 versions of the False Claims Act.  Id. at *11.  Under the post-2010 statute, the court concluded that the relator did not have "independent knowledge materially add[ing] to the information already in the public domain."  Id. at 12.  The court found that standing alone the information that the relator had "cannot form the basis of a claim[.]"  Id. Even though the information that the relator had "may prove critical to overcoming Defendants' affirmative defenses, it is not necessary to alert the Government to fraud that otherwise would have gone unnoticed." Click here to learn what makes a good Qui Tam Case.

Osheroff v. HealthSpring, Inc: Different Court Concludes Same Conclusion About Relator

In United States ex rel. Osheroff v. HealthSpring, Inc., 938 F. Supp.  2d 724 (M. D. Tenn 2013), a different court revisited similar claims made by the same relator and came to the same conclusion as the Southern District of Florida.  Id. at *10.  The Middle District of Tennessee noted that just because the relator had information that free food  that was provided "may have included more than a snack, and/or free rides sometimes involved transportation beyond the medical clinic is a matter of degree, and of little moment[.]"  Id.

In United States ex rel. Lockey v. City of Dallas, Tex., No. 11-354, 2013 WL 268371 (N.D. Tex. Jan. 23, 2013) the court considered relators' claims that the city of Dallas was engaged in a scheme to prevent development of low income housing in downtown Dallas pursuant to HUD regulations.    The court first concluded that the relators' claims had been publically disclosed pursuant to normal HUD practices and a June 10, 2010 news article.

The court determined that the relators did not have independent knowledge

In considering if the relators were an original source s to pre-2010 conduct, the court determined that the relators did not have independent knowledge because the information they had was not "gained by the relator's own efforts rather than second-hand through the efforts of others."  Id. at *11 (quoting United States ex rel Reagan v. East Texas Med Cxtr. Reg'l Healthcare Sys., 384 F.3d at 177)).  The court also noted that it is not enough that the relator simply applies "his expertise to publicly-disclosed information."  Id. The court reached the same conclusion as to the post-2010 conduct and noted that even though the test changed in 2010, the relator still has the burden "to show that the information and allegations they discovered were qualitatively different information than what had already been discovered and not merely the product and outgrowth of publicly disclosed information."  Id. at *16.  The relator's "investigation or experience . . . must translate into some additional compelling fact, or must demonstrate a new and undisclosed relationship between disclosed facts . . .."  Id. (quoting Reagan, 384 F.3d at 179).

False Claims Relators and Contractor Fraud

In United States ex rel. Beauchamp v. Academi Training Center, 933 F. Supp. 2d 825 , (E.D. Va. 2013), relators brought claims against a private security contractor for false claims submitted between 2007 and 2011.   The Beauchamp relators alleged: (1) Academi submitted false information related to guards Academi provided having appropriate qualifications for using firearms and (2) Academi submitted false reports and bills to the State Department that listed guards working in positions in which they did not actually work.

In a previous qui tam complaint ("Davis"),  other relators had unsuccessfully  alleged that from 2005 to 2009 Academi submitted false claims for contractors and  travel expenses, and fraudulently concealed Academi's failure to ensure that contractors complied with use of deadly force provisions.  In a later non qui tam case, two plaintiffs employed by Academi brought a civil action alleging unlawful retaliation under the False Claims Act for investigation into the scheme concerning qualifications for using firearms.    In addition to these two lawsuits, various government agencies had also investigated Academi.

The court stated that "the new definition of original source still imposes a barrier to putative relators after public disclosure has occurred[.]" , but went on to note that "the [2010] amendment opens the door to late-comer relators who possess knowledge that can materially add to what has already been publicly disclosed."  Id. at 842 . The court concluded that relators' knowledge as to the billing scheme did not "materially add to the already disclosed allegations and, therefore, the relators do not qualify as original sources for the false billing scheme."  Id. at 843.

In Ping Chen ex rel. United States v. EMSL Analytical, Inc., --- F. Supp. 2d ---, 2013 WL 4441509, (S.D.N.Y. Aug. 16, 2013), a relator alleged that an air monitoring company billed the government for fake and improper environmental testing.  The court ultimately concluded that the relator was not an original source because the fraud was publically disclosed by previous criminal prosecutions and disclosures  that were "sufficient to set the government squarely upon the trail of the alleged fraud," even though the relator offered information against a new defendant.  Id. at *13 .

Although the court noted that under Section  3730(e)(4)(B)   the relator had independent knowledge , the court concluded that the relator's information did not materially add to the publicly-disclosed allegations. The court made this determination because the relator's complaint was too "bare bones" and primarily consisted of "repetitive allegations."  Id. This was despite the fact that the relator did have some "scattered allegations" that contained "Defendant-specific details" because "none of these allegations can be said to materially add to the already robust universe of publicly-available information[.]"  Id. at *15.

Amended False Claims Act Language (2010)

Congress amended the language of the public disclosure bar of the False Claims Act in 2010 .  Section  31 U.S.C. § 3730(e)(4) (2010) now reads:

(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;

(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or

(iii) from the news media,

unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

(B) For purposes of this paragraph, "original source" means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.

Contact Us to Learn More

If you have discovered evidence of government fraud, contact an experienced False Claims Act attorney before blowing the whistle. You may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys of Berger & Montague are nationally recognized experts in Whistleblower/Qui Tam actions with over a decade of experience pursuing these complex fraud cases. For more information or to schedule your confidential consultation, use the page on this form or call us at 1-800-424-6690.

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