A Constitutional Accounting of the False Claims Act

Abstract

The False Claims Act has served as the federal government's primary weapon against fraud for over a century, recovering nearly $80 billion since 1986. Central to the statute is its qui tam provision, which allows private individuals-called relators-to file lawsuits on behalf of the United States and share in any recovery. Yet in its 161st year, a federal district court became the first in history to hold this provision unconstitutional under the Appointments Clause, reasoning that relators are effectively "officers" who improperly appoint themselves. With three Supreme Court justices already expressing interest in this question, the stakes could not be higher. This Article argues that the qui tam provision can and should be preserved, but such preservation requires reform. We demonstrate that relators in intervened cases-where the government participates-satisfy Article II because the False Claims Act imposes no duties on relators, and the government has primary responsibility for prosecuting the case. The constitutional concerns arise in nonintervened cases, where relators proceed independently. Beyond these constitutional infirmities, our empirical analysis of nearly seven thousand qui tam lawsuits reveals a striking inefficiency: The government declines to intervene in approximately 62% of cases, yet these declined cases contribute only about 10% of total recoveries. The 90th percentile of recovery in declined cases is zero dollars, meaning the vast majority produce nothing for the treasury while consuming disproportionate judicial resources. We propose a reformed False Claims Act that eliminates the ability of relators to proceed when the government declines to intervene. This modification directly addresses the constitutional objections by removing the relator's independent prosecutorial authority-the primary basis for the Article II challenge-while preserving the relator's essential role as an information source. Relators would still file complaints under seal, receive bounties when their tips lead to successful prosecutions, and participate in government-supervised litigation. The result would be a fraud-enforcement mechanism that is both constitutionally sound and economically efficient.

Keywords: False Claims Act, Article II, qui tam, efficiency

JEL Classification: I18, K00, K23, K29, K41