Utilizing The Fair Claims Act To Combat Contract Fraud

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The False Claims Act, originally drafted by Abraham Lincoln during the Civil war, encourages whistleblowers with knowledge of fraud on the government to come forward, report the fraud and receive a bounty for their efforts. Since the 1986 amendments that significantly strengthened the Act, more than $56 billion dollars has been recovered – most of it in cases brought by whistleblowers. Over each of the past eight years, the Department of Justice has recovered more than $2 billion under the Act. In 2017, The DOJ recovered $3.7 billion of which $3.4 billion was from cases brought by whistleblowers.

So what is the False Claims Act and what type of cases can be brought utilizing this unique tool to combat fraud on our tax dollars?

LIABILITY UNDER THE FALSE CLAIMS ACT:

Liability under the False Claims Act is statutory: that is, it is based upon a violation of one of the seven subsections of the FCA found in 31 U.S.C. §3729(a)(1). The primary violations are:

(A) Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; ….

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(G) Knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”

DAMAGES

If a defendant is found guilty of violating one of the seven false claim subsections, 31 U.S.C. §3729 (a) provides that the court shall assess “three times the amount of damages which the government sustains because of the act of that person…”

The calculation of damages is simply stated – that is damages are the difference between what the government actually paid minus what the government either received or should have paid had the claim or statement not been false.

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THE WHISTLEBLOWER’S SHARE

For assistance in bringing the fraud to the attention of the government and prosecuting the lawsuit, a qualifying whistle blower is entitled to a 15-30% share in any recovery by way of verdict or settlement.

TYPES OF CASES

While the types of cases that can be brought under the FCA are limited only by the ways contractors can steal from the Government, the primary areas of focus are defense contracting and health care, as in the following examples:

Defense: Over $5 billion has been recovered in qui tam cases involving fraud on defense contracts. False Claims Act cases in the defense arena have involved:

  1.  Bid rigging
  2. Falsification of quality assurance tests
  3. Failure to perform required inspections and tests
  4. Engineering Change Proposals in Sole Source Contracts
  5. Failure to report known product defects (e.g. failing to report faulty bullet proof vests)
  6. Use of unqualified or uncertified personnel on contracts calling for mil-std certified personnel.
  7. Double Billing – charging more than once for the same goods or services
  8. Supplying sub-standard equipment and arms to our fighting forces
  9. Submitting false service records or samples in order to show better-than-actual performance

Healthcare: More than $36 billion has been recovered under the FCA for fraud on Medicare, Medicaid and Tricare. Examples include:

  1. Charging for services not performed
  2. Double billing – charging more than once for the same service
  3. Charging for services that are not medically necessary (e.g. DaVita paid $55 million settlement for medically unnecessary drug dosing)
  4. Charging for services for which patients do not meet the medical criteria to receive those services, i.e. placing patients are hospice care that are not suffering from a terminal illness from which they will die in the next 180 days.
  5. Changing patient diagnosis
  6. Upcoding patient visits
  7. Off label marketing of pharmaceuticals (e.g. GlaxoSmithKline to pay $3 Billion for fraudulent marketing)
  8. Billing for premium equipment but providing inferior equipment
  9. Overpayment by the Government for the sale of a good or service but no report of any overpayment made
  10. Unbundling of billing codes
  11. Bundling: Billing for a battery of tests when only a single test was ordered
  12. Billing for brand name drugs when only generic were provided
  13. Forging of physician signatures on required medical documentation
  14. False Certifications of Compliance with applicable federal and state laws
  15. Paying kickbacks to physicians and other medical providers to refer patients for services in violation of the Stark and Anti-Kickback laws.

Filing a FCA case is procedurally complex and failure to follow the rules can result in your case being dismissed. If you have never filed an FCA case, you should consider partnering with experienced FCA counsel. Don McKenna

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