How the False Claims Act Helps Fight Fraud in Disaster Relief Programs

How the False Claims Act Helps Fight Fraud in Disaster Relief Programs

When disasters like hurricanes, floods, or wildfires strike, the government often provides disaster relief funds to help communities recover. But unfortunately, some dishonest people try to illegally profit from these programs. The False Claims Act is an important tool to fight fraud and abuse in disaster relief.

The False Claims Act (FCA) is a federal law that imposes penalties on people or companies who knowingly submit false claims to get money from the government. For example, if a construction company bills FEMA for disaster repair work it never did, that could violate the False Claims Act. Qui tam whistleblower provisions in the FCA allow private citizens to file lawsuits exposing fraud, and receive a portion of any funds recovered.

Major Cases of Disaster Relief Fraud Prosecuted Under the False Claims Act

Here are some notable recent cases of FCA lawsuits targeting alleged fraud in disaster aid programs:

• In 2022, the architecture and engineering firm AECOM agreed to pay $11.8 million to settle FCA allegations it overbilled for work on hurricane recovery projects in New Jersey and New York. The whistleblower who initiated the case received a $2.2 million reward.[1]
• A Texas company paid $9 million in 2022 to resolve claims it obtained inflated Paycheck Protection Program loans by falsifying financial data. The funds were intended to help businesses survive the COVID-19 pandemic.[2]
• After Hurricane Katrina, a major contractor paid $1 billion to settle allegations it overcharged FEMA for temporary housing provided to disaster victims. The relator received a $168 million reward.[3]

These major settlements show the power of False Claims Act cases to recover substantial amounts misspent due to alleged fraud. The prospect of large penalties and whistleblower rewards creates a strong deterrent.

How the False Claims Act Process Works

The False Claims Act allows both the Department of Justice and private citizen relators to pursue cases. Here’s an overview of how it works:

1. The relator (whistleblower) files a qui tam lawsuit under seal detailing the alleged fraud scheme. This allows DOJ time to investigate the allegations before defendants are notified.
2. DOJ reviews the qui tam complaint and evidence and decides whether to intervene in the case. If DOJ joins, it takes over primary prosecution of the case.
3. Regardless of DOJ intervention, the relator can continue participating in the litigation. Their inside information often aids prosecution.
4. If the defendants are found liable or a settlement is reached, the relator receives 15-30% of the amount recovered for the government.

This qui tam process encourages whistleblowers to come forward with fraud allegations. The relator’s inside knowledge can greatly strengthen these cases.

Types of Fraud in Disaster Relief Programs

Unfortunately, opportunities for disaster fraud abound due to the urgent need to provide aid quickly. Here are some common schemes prosecuted under the False Claims Act:

• Overbilling – Charging for goods or services never provided, at inflated prices, or for unnecessary costs.[4]
• Substandard products or work – Providing used or faulty products, or shoddy, unsafe construction work.[5]
• Kickbacks – Paying or accepting bribes in exchange for contracts or referrals.
• Misuse of funds – Spending aid money for unauthorized purposes, like personal or business expenses.
• Duplication – Illegally obtaining multiple aid payments for the same claimed losses or expenses.

One key to combating disaster fraud is robust oversight, including reviewing documentation, inspecting work, and data analytics to detect warning signs. The FCA provides incentives to report suspicious activity.

How Whistleblowers Can Help

Insider whistleblowers are invaluable to exposing disaster relief schemes. They have firsthand knowledge of wrongdoing that government auditors and investigators may not be able to uncover on their own. Under the False Claims Act, whistleblowers can report fraud and earn substantial rewards.

Here are some steps for whistleblowers who suspect disaster aid fraud:

1. Document evidence of the scheme, like invoices, emails, photos, or recordings.
2. Consult an experienced False Claims Act attorney to assess if a qui tam case may be viable.
3. File a sealed lawsuit so the scheme can be thoroughly investigated.
4. Assist prosecutors by providing insider accounts of how the fraud occurred.

The relator’s participation is crucial to bringing many FCA cases. Their insider knowledge helps build a successful case.

False Claims Act Resources

Here are some useful government resources on the False Claims Act and reporting fraud:

• DOJ FCA information – https://www.justice.gov/civil/false-claims-act
• List of FCA settlements – https://www.justice.gov/opa/press-releases
• FEMA fraud reporting – https://www.oig.dhs.gov/hotline
• SBA fraud reporting – https://www.sba.gov/partners/contracting-officials/contract-administration/report-fraud-waste-abuse

The False Claims Act empowers whistleblowers and helps deter those who would try to illegally profit from disaster aid programs. With strong enforcement, we can better ensure these critical relief funds reach people in need rather than lining the pockets of fraudsters.