False Claims Act: Stop Government Contract Fraud

False Claims Act: Stop Government Contract Fraud

The False Claims Act is an important law for preventing and punishing fraud against the government. This law, also known as the “Lincoln Law,” allows private citizens to file lawsuits on behalf of the government against companies or people that try to cheat or swindle government programs.

The False Claims Act has a long history going back to the Civil War. But it continues to be an vital tool today for protecting taxpayer dollars and government spending programs from fraudsters and unscrupulous contractors looking to make an easy buck. Let’s take a closer look at what the law covers, how citizens can utilize it, and what it means for those committing fraud against Uncle Sam.

What Does the False Claims Act Cover?

The False Claims Act covers a wide range of fraudulent activities targeting government money and programs. Some of the main things it tackles:

• Overcharging for goods or services provided to the government
• Double-billing – charging more than once for the same goods or services
• Charging for goods or services that were never provided
• Making false statements in order to obtain government payments you aren’t entitled to
• Delivering substandard products or services that don’t meet contract requirements

As you can see, the law casts a wide net when it comes to fraud against the government. It basically prohibits any attempts – whether through false statements, bogus billing, or violation of contracts – to wrongly obtain government money you don’t deserve. And it allows severe punishments and penalties for those caught committing such fraud.

Citizens as Whistleblowers

One of the most important aspects of the False Claims Act is that it allows private citizens to bring fraud lawsuits on behalf of the government through a provision known as “qui tam.” This allows whistleblowers with inside information about fraud being committed against the government to come forward and sue the perpetrators.

The whistleblower, known as the “relator,” files the case under seal to protect their identity. The Department of Justice then investigates the allegations and decides whether to join the lawsuit. If the government joins, the relator is entitled to 15-25% of any money recovered. If the government declines, the relator can still pursue the case on their own and receive up to 30% of recoveries.

This qui tam provision offers a strong financial incentive for whistleblowers to come forward with fraud allegations. It also vastly increases the government’s ability to detect and prosecute complex fraud schemes that may otherwise have gone unnoticed. According to recent statistics, qui tam cases accounted for over $2 billion in False Claims Act recoveries in 2022 alone.

Penalties and Damages

Those found liable under the False Claims Act face severe civil penalties designed to punish and deter fraud. The law imposes fines of between $5,500 and $11,000 per false claim, plus triple the amount of damages caused by the fraud against the government.

With multiple false bills or payments often involved in government contracting schemes, total penalties and treble damages can quickly pile up into the millions or even billions of dollars. For instance, a 2022 case against medical testing giant LabCorp resulted in the company paying $233 million to resolve allegations it billed Medicare for unnecessary tests.

The prospect of massive judgments under the False Claims Act serves as a strong deterrent for would-be cheats. And whistleblowers who bring such cases are entitled to a generous share of recoveries – providing motivation to uncover and report fraud.

Recent Major Cases

Billions of dollars have been recovered under the False Claims Act in recent years, spanning industries from healthcare and defense contracting to education and financial services. Here are some notable recent cases:

• Wells Fargo – The bank paid $3 billion in 2020 over allegations it illegally signed customers up for products to hit sales quotas.
• Duke University – The prestigious university settled for $112 million over allegations researchers falsified data to obtain federal grants.
• AT&T – The telecom giant and contractors paid $60 million over claims they overbilled the FCC for services under the E-Rate program supporting schools and libraries.

With recoveries like these – and the prospect of a substantial reward – it’s easy to see why whistleblowers are motivated to bring False Claims Act cases forward when they suspect government fraud. The law provides both a means to combat fraud as well as deter it from happening in the first place.

What About Fraudsters?

For those perpetrating fraud against the government, the False Claims Act spells big trouble. The law extends liability not just to those directly involved in making false claims, but also to any accessories who cause false claims to be submitted.

Managers, executives, accountants, lawyers, consultants and even subcontractors could face False Claims Act lawsuits and penalties if their actions contribute to the submission of fraudulent claims. The law also covers those who conspire to violate the Act, so even just planning or preparing a scheme can trigger liability.

On top of huge fines and damages, those found guilty under the False Claims Act often face collateral impacts like debarment from government contracting, damaged reputations, and even criminal charges for related offenses. With so much on the line, government contractors need to take compliance seriously and establish rigorous controls against fraud.

Time To Come Clean

For contractors or entities that may have already submitted false claims, prompt and thorough disclosure can mitigate penalties under the law’s “self-reporting” provisions.

If wrongdoers fully disclose violations to the Justice Department within 30 days, fully cooperate with investigations, and make things right, potential False Claims Act liability can be reduced from a triple damages penalty down to just double damages. So moving quickly to report and correct false claims is critical for potential fraudsters hoping to avoid the harshest punishments.

Staying on the Straight and Narrow

For government contractors and entities participating in government programs, the False Claims Act makes it imperative to put controls in place to detect and prevent fraud. Robust compliance programs, employee training, auditing procedures, and clear reporting channels for whistleblowers are all key to avoiding the huge judgments and reputational hits that False Claims Act violations incur.

It’s no longer enough to just play by the written rules. Contractors need to also live up to the spirit of contracts and performance requirements – no cutting corners or doing just the bare minimum. Transparency, accountability and honesty are essential when billing the government for goods delivered or services rendered.

The Lincoln Law stands as a sentinel to protect taxpayer funds from unscrupulous fraudsters. Fortified by whistleblower participation, this Civil War-era law remains as vital as ever for deterring cheats and promoting integrity across all sectors that receive government money. No contractor can afford to be lax with compliance or tempted by quick and easy money, lest they end up paying dearly under False Claims Act cases driven by insider whistleblowers.