The Process of Reporting Customs Fraud with the False Claims Act

  • A False Claims Act case typically begins when a whistleblower, known as a “relator,” discovers evidence of fraud against the government. The relator, usually an insider or someone with direct knowledge of the misconduct, works with an attorney to prepare a detailed complaint that outlines the fraud, its impact on government funds, and the evidence supporting their claim. This complaint is filed under seal in federal court, meaning it remains confidential while the government investigates. The relator also submits a “disclosure statement” to the Department of Justice (DOJ), providing additional evidence of the fraud. This initial phase is crucial for establishing the validity of the case and allowing the government to conduct a preliminary assessment without alerting the defendant.

  • Once the case is filed, the DOJ, often with assistance from federal agencies affected by the alleged fraud, conducts an in-depth investigation. This investigation can take months or even years, as the government assesses the scope of the fraud, reviews evidence, and determines if the case warrants intervention. The government’s decision to intervene, or “take over” the case, is pivotal: it can increase the likelihood of success, given the DOJ’s resources and authority. If the government intervenes, it assumes primary responsibility for prosecuting the case. However, if the government declines to intervene, the relator may still proceed independently with their attorney’s support, though without the direct resources of the DOJ.

  • If the case moves forward, either with government intervention or solely under the relator’s direction, it enters the litigation phase. Both sides engage in discovery, where they exchange evidence and build their arguments. Many FCA cases reach settlement rather than going to trial, as defendants often choose to resolve the allegations to avoid the expense and potential reputational damage of protracted litigation. Settlements in FCA cases can be substantial, covering the amount of damages suffered by the government plus additional penalties. If the case goes to trial and succeeds, the defendant can be liable for treble damages (three times the actual loss to the government) as well as civil penalties.

  • If the case results in a financial recovery, whether through settlement or a favorable judgment, the relator is eligible for a “relator’s share,” typically ranging from 15% to 30% of the recovered amount, depending on the level of government involvement and the quality of information the relator provided. This financial incentive encourages individuals to report fraud and aids the government in recovering lost funds. The case concludes either with a settlement, a trial judgment, or, in some cases, dismissal if there’s insufficient evidence. Ultimately, FCA cases play a critical role in deterring fraud against the government and ensuring accountability, with each successful case reinforcing the integrity of government spending.