False Claims Act
“There is no kind of dishonesty into which otherwise good people more easily and more frequently fall than that of defrauding the government.” – Ben Franklin
Mr. Franklin’s statement recognized a darker side of human nature that was present when our nation was founded, and had grown into a substantial problem at the time of the Civil War. The original False Claims Act, sometimes referred to as the “Lincoln Law,” was passed by Congress in 1863 in response to frauds perpetuated by suppliers of the Union Army. These frauds generally involved the provision of substandard or worthless supplies to the government. The original Act authorized “relators” to sue in the name of the government and share in any recovery the government received.
In 1986, Congress amended the False Claims Act following reports of widespread defense contractor fraud, including notorious charges for $400 hammers and $7,000 coffee pots. These amendments strengthened the relator’s role in the False Claims Act and encouraged efforts to fight fraud against the government.
Barrett Law Office, PLLC has substantial experience defending the rights of whistleblowers and recovering taxpayer funds under the False Claims Act.
How the False Claims Act Works
The basis of a False Claims Act case is that the government was cheated in one form or another — the “false claim.” This false claim may take many forms, such as overcharging for a product, failing to perform a service, delivering less than the promised amount of goods or services, underpaying money owed to the government, or charging for one thing but delivering another.
The whistleblower (relator) must file a False Claims Act case under seal, and the case remains under seal while the government investigates the allegations in the complaint. A whistleblower lawsuit is also referred to as a “qui tam” action. While the statute provides for a 60 day period for the government to conduct its investigation, this period is routinely extended to ensure that there is enough time for a thorough investigation of the relator’s claims.
Following its investigation, the government decides whether to intervene in the lawsuit. If it does join the case, the government takes the lead role and the relator provides assistance. If the government declines to intervene, the whistleblower may go forward with lawsuit and his or her counsel assumes primary responsibility for litigating the case.
The False Claims Act provides that perpetrators of fraud pay three times the government’s damages plus a penalty for each false claim. Additionally, they must pay attorneys’ fees and case related expenses of the whistleblower’s lawyer.
To reward whistleblowers for stepping forward to expose fraudulent conduct, the False Claims Act also provides that whistleblowers are entitled to receive 15-30% of the government’s recovery in the lawsuit. Furthermore, the False Claims Act protects whistleblowers from retaliation by their employers, and provides a remedy for whistleblowers who are fired, demoted, suspended or in any other manner discriminated against in connection with their employment.
Types of Fraud Covered by the False Claims Act
Virtually any situation in which the federal government is paying or collecting money can give rise to a False Claims Act violation. Activities prohibited by the False Claims Act include:
- knowingly presenting, or causing to be presented, to the federal government a false or fraudulent claim for payment;
- knowingly using, or causing to be used, a false record or statement to get a claim paid by the federal government;
- conspiring with others to get a false or fraudulent claim paid by the federal government;
- knowingly using, or causing to be used, a false record or statement to conceal, avoid or decrease an obligation to pay money or transmit money to the federal government.
While initially qui tam actions focused primarily on Department of Defense contracts, in recent years most whistleblower lawsuits have related to healthcare, including Medicare and Medicaid.
Although the types of fraud against the government are only limited by the creativity of the fraudster’s mind, fraudulent schemes uncovered to date include:
- Billing for goods and services that were never delivered or rendered
- Double billing – Charging more than once for the same goods or service
- Billing for marketing, lobbying or other non-contract related corporate activities
- Submitting false service records or samples in order to show better-than-actual performance
- Presenting broken or untested equipment as operational and tested
- Shifting expenses from one fixed-price contract to another
- Illegal marketing of prescription drugs and devices through kickbacks
- Billing for non-FDA approved drugs or devices
- Performing inappropriate or unnecessary medical procedures in order to increase Medicare reimbursement
- Billing for work or tests not performed
- Billing for premium equipment but actually providing inferior equipment
- Automatically running a lab test whenever the results of some other test fall within a certain range, even though the second test was not specifically requested
- Defective testing – Certifying that something has passed a test, when in fact it has not
- Misleading the government about the true wholesale price of prescription drugs
- Unbundling – Submitting multiple billing codes instead of one billing code for a drug panel test in order to increase remuneration
- Bundling – Billing more for a panel of tests when a single test was asked for
- Upcoding – Inflating bills by using diagnosis billing codes that suggest a more expensive illness or treatment
- Billing for brand – Billing for brand-named drugs when generic drugs are actually provided
- Phantom employees and doctored time slips: charging for employees that were not actually on the job, or billing for made-up hours in order to maximize reimbursements
- Upcoding employee work: billing at doctor rates for work that was actually conducted by a nurse or resident intern
- Falsifying natural resource production records – Pumping, mining or harvesting more natural resources from public lands that is actually reported to the government
- Failing to report overpayment by the government for sale of a good or service
- Misrepresenting the value of imported goods or their country of origin for tariff purposes
- False certification that a contract falls within certain guidelines (i.e. the contractor is a minority or veteran)
- Billing in order to increase revenue instead of billing to reflect actual work performed
- Failing to report known product defects in order to be able to continue to sell or bill the government for the product
- Billing for research that was never conducted and/or falsifying research data that was paid for by the U.S. government
- Winning a contract through kickbacks or bribes
- Prescribing a medicine or recommending a type of treatment or diagnosis regimen in order to win kickbacks from hospitals, labs, or pharmaceutical companies
- Billing for unlicensed or unapproved drugs
- Forging physician signatures when such signatures are required for reimbursement from Medicare or Medicaid
Other examples of Medicare fraud include:
- A health care provider bills Medicare for services the patient never received.
- A supplier bills Medicare for equipment the patient never got.
- Someone uses another person’s Medicare card to get medical care, supplies, or equipment.
- Someone bills Medicare for home medical equipment after it has been returned.
- A company offers a Medicare drug plan that has not been approved by Medicare.
- A company uses false information to mislead a patient into joining a Medicare plan.
The federal government has dramatically increased its efforts to combat healthcare fraud, including the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint effort between the Department of Health and Human Services (HHS) and the Department of Justice (DOJ).
Additional Whistleblower Resources
- “The False Claims Act: A Primer,” United States Department of Justice
- “False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits,” United States Department of Justice
- Tennessee Medicaid False Claims Act
- Tennessee False Claims Act