USA: Private Prosecution of Criminal Conduct
| DOI | https://doi.org/10.1108/eb025825 |
| Pages | 130-137 |
| Date | 01 April 1997 |
| Published date | 01 April 1997 |
| Author | David S. Friedman |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 5 No. 2 — Analysis
USA: Private Prosecution of Criminal Conduct
David S. Friedman
INTRODUCTION
In the USA, unlike Germany, Japan, and many
other nations, victims ordinarily play a very limited
role in the prosecution of crimes. Indeed, victims
have so little prosecutorial authority that a growing
'victims' rights' movement calls for constitutional
amendments to give victims more control over
criminal trials. Yet American law features some
important exceptions to this general rule — for
many environmental and white-collar crimes, pri-
vate citizens can bring actions to enforce the law.
What makes these actions unique is the absence of
'standing' requirements that oblige the plaintiff to
demonstrate that he or she was directly harmed by
the criminal's actions.
To be sure, a wide array of private lawsuits
enforce public obligations. Private citizens can sue
to enforce laws that prohibit discrimination,
insider trading and securities fraud, anti-compet-
itive business practices, the manufacture of unsafe
products and various other types of misconduct.
Parties that break these laws may be liable not only
for ordinary compensatory damages, but also for
the plaintiffs attorneys' fees, heightened damages,1
and punitive damages. Moreover, private plaintiffs
can often bring class action suits on behalf of a
large number of victims. Thus, the American civil
law system is full of 'public law litigation'.2
But not just anyone can bring these enforce-
ment actions. Statutes and common law doctrine
require private plaintiffs to demonstrate some
actual, or serious potential of, injury directly
caused by the defendant — a requirement labelled
'standing'. In a sense, then, the ordinary lawsuit to
enforce a defendant's public obligation is as much
an effort by an injured party to obtain compensa-
tion as it is a suit to prosecute wrongdoing. These
civil causes of action certainly play an important
role in driving private parties to obey their public
responsibilities, but the principal aim and function
of these lawsuits is not to turn every citizen into a
prosecutor.
A few statutes, however, dilute or eliminate alto-
gether these standing requirements, permitting any
person or organisation to become a private prose-
cutor.3 The federal False Claims Act, various fed-
eral environmental statutes, California's Unfair
Competition Act and other state laws authorise
citizens to serve as 'private attorneys general', even
if they have suffered little or no direct harm at the
hands of alleged wrongdoers. These laws give pri-
vate citizens a special prosecutorial role in order to
promote the public interest, not to allow private
parties to vindicate their rights and recover com-
pensation for injuries.
This article examines the most prominent laws
that relax standing requirements for private actions
to enforce public obligations. This survey illus-
trates that while private prosecution can be an
extremely valuable tool in the enforcement of cer-
tain types of crime, it may not be necessary or
appropriate in all contexts.
THE FALSE CLAIMS ACT
Perhaps the most potent law that permits private
citizens to prosecute criminal conduct is the fed-
eral False Claims Act. The law, originally referred
to as the 'Lincoln Law', was enacted in 1863 in the
wake of the Civil War to combat the problem of
fraudulent defence contracts.4 Congress amended
the law substantially in 1986, and the Act now
permits private plaintiffs to file civil 'qui tam'5
actions on behalf of the government against con-
tractors and other parties who knowingly defraud
the government by submitting false or fraudulent
claims for payment. These qui tam suits are purely
civil actions, and do not threaten defendants with
criminal sanctions.
Under the Act, any private citizen, including
employees of government contractors, government
agencies and private companies, may file a qui tam
lawsuit.6 There are two major limitations: a plain-
tiff cannot file suit if
a
civil case is already pending
and the government is a party to that case; and a
plaintiff may not initiate an action based on pub-
licly disclosed reports of alleged violations unless
that plaintiff had direct and independent know-
ledge of the matter.
- The qui tam plaintiff must first file suit under
seal with the government, and must not serve the
defendant for 60 days. The Department of Justice
thus has a period to investigate the matter and
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