Perhaps the most powerful tool available to the United States in its efforts to combat fraud against the government is the Federal False Claims Act (FCA). Since January 2009, the Department of Justice has recovered more than $22.4 billion in fraudulent billings through the prosecution of FCA cases.
The FCA allows citizens who discover that companies are committing fraud against the United States to sue on behalf of the government through what are known as qui tam lawsuits. Qui tam is short for a Latin phrase that means “he who sues on behalf of the King as well as for himself.” Qui tam actions were widely used in Europe during the Middle Ages, since there were no official police systems and citizens were encouraged to maintain law and order on behalf of the King. In 1863, President Lincoln adopted this concept when the False Claims Act (FCA) was enacted in an effort to stop war profiteers from defrauding the Union during the Civil War.
When a citizen files a qui tam lawsuit on behalf of the government, that citizen is called a whistleblower or “relator.” Under the qui tam provisions of the FCA, relators may receive between 15 to 25 (and, in some cases as much as 30) percent of any money recovered by the government. By creating this incentive for citizens with evidence of fraud to file their own qui tam cases on behalf of the government, the law enhances the government’s ability to investigate fraud claims that it would not otherwise know about. This partnership between the government and the whistleblower has been a very powerful tool in fighting widespread fraud.
Not surprisingly, schemes to defraud the government are most common in those areas of enterprise that receive the most federal funding. They can be broadly grouped in the following categories:
Qui Tam / Whistleblower Industries & Fraud Examples
Aerospace corporations are involved primarily in the manufacture and maintenance of aircraft, spacecraft, and satellites. Many of the top Department of Defense (DoD) contractors are aerospace companies. Aerospace fraud frequently involves overbilling for parts and labor, or supplying defective parts to the military.
Defense Contractor Fraud
Defense contractor is a related area of widespread abuse. Again, the fraud is generally marked by overbilling for parts, materials, or services for the military. A report on defense contracting fraud prepared for congressional defense committees by the Department of Defense in 2011 stated that, over a 10 year period, more than 300 Department of Defense contractors entered into settlement agreements or had civil judgments rendered against them. During that period the DoD was contracting with over 235,000 companies, a fact which underscores the critical need for whistleblowers to assist the United States in policing defense contractor fraud.
(Medicare and Medicaid)
Since 2009, more than $23 billion has been recovered by the government through the prosecution of False Claims Act violations. Of that staggering amount, more than $14.8 billion involved health care fraud. There are a seemingly endless variety of often complex schemes used to defraud federal health care programs such as Medicare and Medicaid. Health care fraudsters often bill these programs for health care services that were substandard, not medically necessary, or never actually provided.
Hospice Care Fraud
Hospice Care is generally meant for patients who have a life expectancy of six months or less, but some hospice care providers devise schemes to bill Medicare for patients who are not terminally ill. Medical records may be falsified to make it appear that patients either need hospice care or require the most expensive levels of care when that is not actually the case.
Mortgage fraud generally involves the omission, misrepresentation or misstatement of facts by buyers or lending agents, in securing mortgage loans, or the purchase or insuring of such loans. According to one expert, the total cost of mortgage fraud in the United States for lenders, taxpayers, and the federal government might be as high as $13 trillion.
Fraud in the pharmaceutical industry is widespread and may occur during the development, marketing, or sale of medications. It is not uncommon to find fraud in all three areas tied a single drug. Drug makers seeking approval from the Food and Drug Administration (FDA) frequently hide or minimize known adverse side effects of their drugs, market drugs for uses that have not been approved by the FDA, and engage in a variety of deceptive practices to maximize profits.
Securities fraud is one of the most devastating forms of fraud and it is not just individual investors who are harmed. It is widely believed that the 2008 financial collapse in the United States and financial markets throughout the world was largely due to various forms of securities fraud involving mortgage backed securities.
Tax fraud by individuals and businesses has been estimated to cost the government nearly $400 billion annually. It can be carried out by filing false or deceptive tax returns, hiding assets and income in offshore bank accounts, concealing business ownership or other financial activities, or through outright identify theft.
Baum Hedlund Whistleblower Cases
The whistleblower attorneys at Baum, Hedlund, Aristei & Goldman are currently representing numerous whistleblowers, or relators in qui tam claims throughout the country and the world. Although most of our cases remain under seal and are being investigated by the government, some of our whistleblower lawsuits have recently been unsealed, including cases against the San Diego Hospice, BizLink Technology, and two lawsuits filed by former Takeda Pharmaceuticals medical reviewer Dr. Helen Ge.