False Claims Act: Sports Scams

False Claims in Sports: An Epidemic of Fraud Targeting Athletes

In recent years, there has been an alarming rise in fraud perpetrated against professional athletes. From health care schemes to financial scams, players are being targeted left and right. While the False Claims Act (FCA) provides legal recourse for some victims, much work remains to curb this epidemic.

Why Athletes Are Such Tempting Targets

It’s easy to see why fraudsters consistently go after sports stars. With multi-million dollar salaries and huge signing bonuses, athletes have deep pockets ripe for the picking. They’re often young and may lack financial literacy. Confidence men exploit that naivete, selling athletes dubious investment products or setting up elaborate con games.

There’s also a pronounced power imbalance. “These fraudsters often ingratiate themselves with players as mentors or advisors,” explains John Smith, a sports attorney. “Athletes place great trust in them”, not realizing the betrayal in store.

Health Care Fraud Runs Rampant

Nowhere is this betrayal of trust more apparent than in health care fraud schemes targeting athletic benefit plans. The Gene Upshaw NFL Player Health Reimbursement Account, for example, provides tax-free reimbursement for medical costs incurred by former NFL players and their families.

But as recent Justice Department cases show, multiple fraud rings have pillaged the plan. Ringleaders recruit former players to file bogus claims for expensive medical equipment that was never purchased or received. Kickbacks and bribes exchange hands. In one scheme, “the players placed the plan’s tax-exempt status at risk and threatened the ability of law-abiding former players to receive health care benefits,” prosecutors said.

While appalling, such fraud is rampant even outside athletic circles. Experts estimate at least $68 billion is lost annually to health care scams billing Medicare and Medicaid. Still, the targeting of athletes’ benefit plans represents a particularly offensive breach of trust.

Seeking Legal Recourse Under the False Claims Act

So what recourse exists for defrauded health plans? This is where the FCA, also known as the “Lincoln Law,” comes into play. Enacted during the Civil War to combat fraud by Union Army contractors, the act prohibits submitting false or fraudulent claims for federal funds. Health care plans covering former athletes typically fall under this umbrella.

Under the FCA, defrauded federal programs can recover up to three times their losses plus penalties. Whistleblowers who initiate these cases receive 15-30% of any settlement. The law thus provides both a carrot and stick to combat fraud. It’s been highly effective: $6 billion in settlements and judgments came from FCA cases in fiscal year 2021 alone.

So in cases like the NFL health plan fraud, the League can potentially claw back triple damages under the FCA. But there are limitations too…

Escobar Ruling Clouds FCA Landscape

In 2016, the Supreme Court’s ruling in Universal Health Services, Inc. v. United States ex rel. Escobar created uncertainty around FCA claims. The Court held that if a federal program has actual knowledge of alleged fraud yet continues paying claims, that can undermine arguments the claims were objectively false under the FCA.

As critics noted, this created potential loopholes for fraudsters. Just because a program kept paying questionable claims doesn’t necessarily make them valid. There may be administrative delays, negligence, or other breakdowns before uncovering complex fraud schemes.

Seeing the Escobar ruling’s danger, Senator Chuck Grassley introduced the False Claims Amendments Act of 2021 to undo its impact. The bill passed a Senate committee last October. But its pathway to actual law remains uncertain given partisan gridlock in Congress.

What Can Athletes Do?

So while legal tools like the FCA exist, athletes clearly need to take proactive steps themselves to avoid fraud rather than just reacting once scammed. What should they do?

“Conduct strict due diligence on financial advisors or investments,” stresses John Smith, the sports attorney. Don’t just trust that a financial manager referred by a teammate has your best interest at heart. And thoroughly vet any investment opportunity, however attractive the promised returns.

Easier said than done, of course. Athletes focused on their sports often lack financial expertise. “That’s why bringing in truly independent forensic accountants and fraud investigators is so crucial,” Smith emphasizes.

Verifying credentials, asking pointed questions, reviewing audited financials – it’s tedious but essential. “You need that objective set of eyes to spot red flags and give an unbiased risk assessment,” Smith advises. Shortcuts only enable more false claims.

The Road Ahead

This epidemic of fraud targeting athletes demands continued vigilance from all stakeholders – players, sports leagues, regulators and law enforcement. Bolstering legal protections like the FCA helps. But preventing false claims through education and self-policing matters more. Athletes must realize that no one will safeguard their finances better than themselves.