Thursday, October 03, 2013

Qui Tam Enforcement: A Possible Anti-Corruption Tool in India

I had this op-ed in Mint today on Qui Tam Enforcement. Basically under qui tam enforcement a private citizen can sue on behalf of the state to recoup ill-gotten gains from corruption. If she wins most of the money goes back to the state, but a portion of the money is given to the person who brought the suit as a reward for their efforts and to cover their costs (the op-ed explains what is and is not qui tam enforcement in more detail and to save space here I don't recap this).

Since I had limited space in the op-ed I wanted to layout on the blog a few additional features of qui tam enforcement in the US that might be of interest to those considering it in the Indian context:
1. Although qui tam enforcement is initiated by a private citizen - usually a whistle blower - the government can join the suit. This is important because in the U.S. the government can cover many of the costs of the litigation (and investigation) if they join a suit. In fact, most successful qui tam suits are eventually joined by the government in the US. 
2. Although qui tam suits are for civil damages this does not preclude the government from bringing criminal charges against those implicated in a qui tam lawsuit.
3. In the U.S. most federal qui tam enforcement is brought under the False Claims Act. Most U.S. states also have enabling legislation for qui tam enforcement. As a result, there have been many different models of qui tam enforcement that have been tried in the US. This might be of interest to Indian policymakers if they want to adapt qui tam enforcement and want to explore the different ways such a law might be written.
4. In the U.S. not only may private citizens bring cases for qui tam enforcement, but also government entities. For example, if a city government discovers corruption being carried out against the state or federal government it can bring a qui tam suit and be similarly rewarded if it won.

One concern about qui tam enforcement in the Indian context would be the ability of the courts to filter (in an efficient manner) meritorious qui tam suits from frivolous ones that are instead aimed at harassment. At one level, one wouldn't expect too many frivolous cases because it takes money to bring a case and why do so if one knows one will lose. On the other hand, such a case could be used as leverage against a company and a form of extortion could develop (i.e. "I'll drop the case if you pay me something whether or not you did anything wrong"). To make the system work you need competent judges that can quickly discern legitimate from illegitimate cases and punish those who are clearly bringing cases that are harassment. We might not have full-confidence this is possible on a consistent basis.

In the final analysis I think qui tam enforcement is a powerful idea in the Indian context because it not only allows citizens to bypass the government to fight corruption, but as a result it will egg government on to join these suits and become a collaborator in fighting corruption.  Once someone files a qui tam suit and facts start coming to light in court the media will ask why the government doesn't join the case or why it doesn't bring criminal charges against those implicated in the case. Qui tam is no perfect solution, but by creating an open market for the prosecution of corruption it can realign the incentives of a whole range of actors from whistle blowers to government prosecutors. As John Braithwaite puts it in Regulatory Capitalism (from where I got some of the ideas for this op-ed):
"Qui tam is a statutory private justice reform that instead of substituting public with private justice, institutionalizes collaborative networking that enables more credible regulatory escalation. Mobilizing public virtue to regulate private vice is not the only path around capacity deficits. Private markets in virtue can also be mobilized to regulate vice, indeed to flip markets in vice to markets in virtue.”

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