At the outset of every case, we explain and re-explain the concept that a False Claims Act complaint will be filed “under seal.” This is a basic tenant of False Claims Act law, yet is a unique concept to most individuals since most cases are filed in court and are immediately accessible to the public. False Claims Act cases are different — they are filed confidentially and served only on the United States or any participating state, not on the defendant.
In fact, the relator cannot disclose the existence of the case to anyone – not even friends and family. The purpose of the seal is to protect the integrity of the government’s investigation so it can obtain all of the information that it needs without tipping the defendant off.
The seal period in the False Claims Act is only sixty days. However, a case is rarely unsealed in that time. That doesn’t mean it can’t happen, it’s just very uncommon. Typically the United States asks the court to extend the seal for at least one six-month extension, and often several more. We have had cases that were under seal for just over a year and cases that were under seal for more than eight years. The average time for a False Claims Act case to be unsealed, in our experience, is roughly two and a half to three years.
The period during which a case is under seal can be difficult for a relator because of the lack of immediate results. Relators typically seek counsel after reaching a boiling point from witnessing the fraudulent scheme that they are reporting. So it can be tough to then pull on the brakes and wait for the Government to conduct its investigation before getting results. And while waiting, the relators have to keep the case a complete secret or risk jeopardizing their share of any recovery.
Earlier this year, a federal court in Georgia sanctioned two whistleblowers named Victor Bibby and Brian Donnelly for violating the seal in their False Claims Act case by requiring them to return $1.6 million to the United States.
The details of the fraud they alleged in 2006 are heartbreaking: veterans were being overcharged on closing costs from a VA loan refinancing program. The government extended the seal for five years before ultimately declining the case. The men pressed forward on their own to recover more than $161 million from six lenders on behalf of the Government. For their efforts, they were awarded some $43 million. And then, ordered to repay $1.61 million.
So what went wrong?
In mid-2009, the men reached out to local and national media outlets to disclose the fraud that they had witnessed. The case was still under seal and they knew they weren’t supposed to talk, but evidently they couldn’t stand that nothing had been done to stop the fraud that they reported nearly four years earlier.
To be clear, Bibby and Donnelly’s seal violation was not accidental or minimal. For two years, the men shared detailed information with two journalists, including emails and phone calls with progress updates, attorneys’ memoranda, and records of meetings with various government entities and agents.
This part is important, at least in my opinion: the journalists agreed to maintain complete confidentiality until the case was unsealed, and they did exactly that. There is no evidence that the journalists or any other person publicly disclosed any information provided by the relators before the case was unsealed in October 2011. In fact, the Court’s order specifically states, “Wells Fargo and the Government admit that Relators’ seal violations resulted in no actual harm to the Government’s investigation of this case while the case was sealed.”
That said, the Government wanted to make it clear that it would not condone any seal violations, even harmless ones. “The government has a significant interest in protecting the integrity of its investigations as well as the court’s orders,” the government stated. The Court thus found it appropriate to levy a $1.61 million sanction in recognition that the relators acted deliberately to violate the seal, although with “self-defined good intentions” to protect veterans.
Was this an appropriate response by the Court?
The dollar figure seems large, but it still is only a fraction of the amount that the relators received. Still, it seems hefty considering the Government’s position that it suffered no harm.
The moral of their story is clear and simple: don’t talk about your False Claims Act case while it’s under seal and especially don’t tell the media even if they promise to keep it confidential. There are certain circumstances where the substance of a case can be discussed, but not the case itself. These are tricky but sometimes necessary situations so if you’re not sure, ask your attorneys first.