Category: False Claims Act/Whistleblower/Qui Tam

The Obama-era saw over thirty-one billion dollars in whistleblower recoveries under the False Claims Act. That’s thirty one followed by nine zeros. Sounds like a lot right? It is, and there are a number of reasons this area of law has become so lucrative. Enormous government contracts and structural and complex payment systems like Medicare mean big opportunities for private entities to take advantage.

Keeping in mind that these lawsuits often take years to wind their way through the legal system, the DOJ under the Obama administration continued the fight against fraud against taxpayers.  Well over half of all recoveries were against companies in the health care field, which probably should come as no surprise as health care is now the single largest federal expense.  Next in line was the financial sector in the wake of the financial crises.  Rounding out the list were procurement contractors and “other,” which  consisted of everything from oil and gas companies and a for-profit education group.   In many cases, including the largest recoveries, the fraud was committed by companies that are household names- like GlaxoSmithKline, Pfizer, Johnson & Johnson, Bank of America, Wells Fargo, Northrop Grumman, BP, and the list goes on.

When it comes to the False Claims Act, like any good auditor, the rule is to “follow the money.”  After running on populist rhetoric, it should be interesting to see how the Trump administration’s DOJ handles fraud committed against taxpayers.   For a more detailed list of companies hit by the FCA, a link to the DOJ’s significant fraud settlement list is below:

https://www.justice.gov/opa/press-release/file/918366/download

In 2008, pharmacist James Garbe, of Northwest Ohio, sued Kmart in federal court for overbilling Medicare Part D patients for their prescriptions.  According to the DOJ, Kmart charged one price to cash customers, but a far HIGHER price to the government for the same drugs.

In December of 2017, Kmart settled the lawsuit for a total of $59 million dollars, which was a small fraction of their overall potential liability.  This sum is to be split between the federal government, multiple states who were also defrauded in the scheme, the relator, and Mr. Garbe’s attorneys. A link to the DOJ’s news release on the settlement is below:

https://www.justice.gov/opa/pr/kmart-corporation-pay-us-323-million-resolve-false-claims-act-allegations-overbilling-federal

 

Well, if you’re a company, you may be sued under the federal False Claims Act, 31 USC 3729, et seq.  Also called the “qui tam” or “whistleblower” law, these statutes were originally passed during the Civil War due to widespread fraud in the North performed by government contractors.

This law has seen several changing iterations over the last 150 years or so, but the basics remain the same- the law allows a whistleblower (or “relator”) to report the suspected fraud to the government by filing a lawsuit under seal (or temporarily without the suit being a matter of public record).  The federal government, via the Department of Justice (DOJ), decides if it wants to join in the lawsuit and pursue it.  Whether the government jumps on board or not, the whistleblower can choose to continue the suit on his or her own.

Whether the DOJ pursues the case or not, the whistleblower is entitled to a percentage of the ultimate recovery, up to 30%, plus attorney fees.  Since some of these cases can be in the hundreds of millions of dollars, the payouts can be big.

All that said, these are usually complex cases against extremely powerful defendants, defendants that have the wherewithal to cheat the American taxpayer out of enormous sums of money and defend against these cases with out-sized resources.  These days, these defendants increasingly seem to include tax cheats and health care companies engaged in Medicare and Medicaid fraud.   After all- that’s where the big money is.