A regular Source feature, Undercurrents explores issues, ideas and events as they develop beneath the surface in the Virgin Islands community.
Over the weekend Gov. John deJongh Jr. vetoed a bill many residents didn’t even know had been passed. Called the False Claims Act, or sometimes the Whistleblowers Act, the legislation is a local version of existing federal law that makes it a crime to defraud the government and rewards people who help get money back from companies or individuals who have defrauded the government.
The person who relates the evidence to the federal government – the so-called relator – is someone in a position to see the wrongdoing and to collect at least some evidence of it, perhaps a secretary, an accountant or a board member. He or she gets a cut of the money that the government ultimately recovers from the wrongdoer. The relator also is protected against repercussions such as being dismissed by an employer who was found at fault.
The concept in U.S. legal circles goes back at least as far as the Continental Congress, and President Abraham Lincoln pushed for enactment of the actual original law in 1863 to discourage profiteering during the Civil War. The law was narrowed in 1943, but in 1986 Congress revitalized and expanded it.
The law establishes a mechanism called qui tam, under which a person may file a complaint in court on behalf of the government. The complaint remains sealed for 60 days – possibly longer if the court determines there is sufficient reason – while the Justice Department decides whether or not to pursue the case.
If Justice takes on the case, the relator’s work is done. He or she gets between 15 and 25 percent of any money the government recovers, assuming it’s successful in court. If Justice does not pursue the case, the relator may drop it or he may decide to pursue it himself. In that case, if he wins, he gets a larger share of the recovery.
Of course, most relators don’t have the legal expertise to argue cases. Such qui tam cases have become a niche legal business. According to the website of one national legal firm, Phillips & Cohen LLP, the firm has recovered $8.5 billion for federal, state and local governments, $730 million of which has gone to relators.
Wikipedia cites some $22 billion recovered through such claims between 1987 and 2008.
“The whole idea is to get money for the government” and “to empower citizens to help the government to fight fraud,” according to David Nissman, who pushed for the local version of the law. A former U.S. Attorney in the Virgin Islands, Nissman is now in private practice and has filed several federal qui tam complaints on behalf of clients.
Lawyers doing this kind of work usual get about half of the money that the relator gets, he said, although he charges less.
In vetoing the bill, the governor called it “redundant and superfluous as current Virgin Islands’ laws already protect against fraudulent contractors making false claims against the government.” He also said it “would encourage baseless and frivolous claims” and requires the attorney general to investigate them regardless of merit.
With so much of the money the local government spends actually coming from the federal government, the existing federal law covers most potential instances. And, deJongh noted, in some cases, the local proposal would have given relators a larger share of recovered monies than the federal law does.
While both set the perimeters at between 15 and 25 percent when the government pursues a case, they differ on the amount when the relator (or his attorney) pursues the case. Federal law sets the share at between 25 and 30 percent, while the local bill would have made it up to 50 percent.
Like the federal law, the local legislation would have created a special fund to house any money recovered by the government, to be used to pursue future fraudulent claims cases. The V.I. inspector general would have been charged with auditing the fund annually.
Inspector General Steven van Beverhoudt said Monday he was not consulted in discussions about the bill and hadn’t read the legislation that was passed in November.
“I really don’t know how successful (the concept) has been in the federal system,” he said.
“We shouldn’t have to get to that point” of paying people to come forward and report crime, van Beverhoudt added. “I’m afraid that you’re going to get people filing all kinds of lawsuits without anything to back it up.”
Nissman disagrees. He sees the law as a way to get cases into court that the government may be reluctant to bring simply because they are very complicated.
It was unclear Monday whether there would be any attempt to override the veto. Attempts to reach the bill’s sponsor, Sen. Louis Hill, were unsuccessful.
