Former Prosecutor Loses Qui Tam Because Allegations Had Been Publicly Disclosed and He Wasn’t an “Original Source”

Prather v. AT&T, 2/6/17, 9th Cir.

Plaintiff Prather, a long-time prosecutor in New York, worked for the organized crime task force, overseeing hundreds of wire taps. Telecom companies are required by law to help with wiretaps and must be paid their “reasonable expenses.”  Various federal law enforcement agencies we concerned about telecom charges and asked the FCC to review them. The FCC requested comment on the issue, and New York’s AG submitted comments.  Plaintiff thought the government was being overcharged and he was asked to submit affidavits of part of NY AG’s submission. Submitting affidavits to the FCC was not part of his job description, but they were prepared during his work time and in his official capacity.  In 2009, before amendments to the False Claim Act (FCA), he filed a qui tam action against various telecom companies. The trial court granted defendants’ motion to dismiss his amended complaint without leave to amend because the allegations had been public disclosed and Prather didn’t qualify as an original source. Held: Affirmed.

Before 2010 to the FCA, courts lacked jurisdiction to hear a qui tam case based on publicly disclosed allegations unless the person bringing the action was an “original source.”  (The public disclosure bar is now an affirmative defense instead of jurisdictional, and that change doesn’t apply retroactively.)  Prior to 2010, the statute defined an “original source” as “an individual who [1] has direct and independent knowledge of the information on which the allegations are based and [2] has voluntarily provided the information to the Government before filing an action . . . based on the information.”

Prather didn’t have direct knowledge of the allegedly fraudulent overcharges.  He only saw one invoice and didn’t know about the internal cost and pricing structure of the telecoms.  His knowedge was more a vague belief that telecom companies were doing less but charging more.  That was not sufficient to meet the first element.

Second, 9C said his actions were not “voluntary.” He was asked by a colleague in his office to provide affidavits to the FCC in support of the NY AG’s submission to the FCC. As the trial court found: “his disclosure was involuntary because it was prompted by the FCC’s request for comment and submitted in his capacity as Deputy Attorney General in Charge of the Statewide Organized Crime Task Force, in support [of] the official comments of his superior, the Attorney General.”  Finally, 9C has long recognized that a government attorney is not a quintessential qui tam relator, a factor that worked against him.

Qui Tam targets false claims, not breach of contract


Kelly v. Serco, 1/12/17, 9C
The False Claims Act’s (FCA) qui tam provision permits a private person to bring a civil action on behalf of the United States against any individual or company who has knowingly presented a false or fraudulent claim for payment to the United States.  But is there false claim liability when a contractor submits an otherwise accurate claim knowing that it hasn’t fulfilled one of its obligations under the contract?

The answer is maybe.  The FCA is not an all-purpose anti-fraud statute and is not meant to allow private parties to enforce garden variety breach of contract claims on behalf of the government against their vendors. Submitting a claim when such a condition has not been met may be a breach of contract.  But if the circumstances are egregious, submitting such a claim can trigger FCA liability.  In FCA parlance, this is known as an “implied certification” claim, i.e., a defendant’s act of submitting a claim for payment “impliedly certifies compliance with all conditions of payment.”  


Serco contracted with the government under a contract that required it to submit cost/project reports to the contracting agency.  Federal regulations required such cost/project reports to comply with a laundry list of standards set out in ANSI-748 (e.g., that work performed be submitted under various task codes). There was no mention of ANSI-748 in Serco’s contract, which set out a different standard for how the cost/project reports were to be formatted (i.e., using Excel).  When Serco submitted claims for payment, its reports listed only one task code, a practice that the agency permitted, but one that did not comply with ANSI-748.  A disgruntled former employee filed a qui tam action. The question was whether, in submitting claims to the government, Serco was certifying that it had complied with the ANSI-748 standard. 

Per the Supreme Court, implied certification claims can trigger FCA liability even when the regulations don’t say that compliance with subject contract conditions (or applicable regulations) is an express condition of payment.  To state such a claim, two conditions must be satisfied: First, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths”—i.e., “representations that state the truth only so far as it goes, while omitting critical qualifying information.”  The Court reasoned that “concerns about fair notice and open-ended liability “can be effectively addressed through strict enforcement of the Act’s materiality and scienter requirements,” which “are rigorous.”  What “matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.”

This is where Kelly’s quit tam claim buckled – There was no evidence that Serco’s description of work was false or that the work reported wasn’t performed.  Moreover, there was no showing of “materiality.” The ANSI-748 report requirements were not an express term in Serco’s contract; the agency knew about and allowed Serco’s reporting practice using Excel and only one task code; the agency paid Serco’s bills; and, ultimately, it didn’t find Serco’s reports very helpful and didn’t rely on them for its project.  The Court also rejected Kelly’s argument that the government would not have paid Serco’s bills had they known that its cost/project management reports were non-compliant or fraudulent — That fact, standing alone, is insufficient to demonstrate “materiality.”


9C affirmed the trial court’s dismissal of Kelly’s claims.