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What's a qui tam lawsuit?

Just like any large organization -- and any person or small organization for that matter -- the federal government wants to protect its financial interests. Federal organizations will therefore do their best to identify any potentially fraudulent transactions made between itself and private companies.

In addition to investigating suspicious activity, the government also offers big monetary rewards in some cases to people who report instances of fraud against the government. Under the federal False Claims Act, for example, individuals receive money in exchange for revealing secrets about people who are engaging in less than kosher business transactions.

When an employee reports the unlawful activity of his or her private employer to the federal government, it's known as a "qui tam" action. For example, imagine you are an accountant for a tire company. The military has ordered 60,000 tires. The problem is, the accountant's boss asks him to purposefully only send 50,000 tires. This means that the federal government will pay for 10,000 tires it never received. The question is, where did the money go? Straight into the pocket of the dishonest company's owners.

If the accountant chooses to file a claim with the government about the billing and product delivery fraud being committed by his company, it will be referred to as a "qui tam" claim. If the claim is successful, and if the federal government proves that the business was purposefully violating the law, then the business will be fined and the reporting employee may be entitled to receive a portion of the fines as his or her "bounty" for making the complaint.

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