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How the False Claims Act Helps Fight Fraud in Federal COVID Relief Programs
How the False Claims Act Helps Fight Fraud in Federal COVID Relief Programs
The COVID-19 pandemic has led to unprecedented government spending on relief programs to support individuals, businesses, healthcare providers, and state and local governments. With huge amounts of money being disbursed quickly, there is unfortunately opportunity for fraud and abuse of these programs.
That’s where the False Claims Act comes in. This long-standing federal law allows whistleblowers to file lawsuits alleging fraud against the government and receive a portion of any funds recovered. With COVID relief spending, we are seeing an uptick in False Claims Act lawsuits aimed at prosecuting fraud and misuse of funds.
What is the False Claims Act?
The False Claims Act (FCA) is a federal law that imposes liability on persons and companies who defraud governmental programs. It allows the government to recover treble damages and penalties from individuals and entities who knowingly submit or cause the submission of false or fraudulent claims for government funds.
The FCA was originally enacted during the Civil War to combat fraud by defense contractors. It was significantly amended in 1986 and has become one of the government’s primary tools for combatting healthcare fraud. The FCA imposes both civil liability and civil penalties for presenting false claims.
Key Provisions
- Allows private citizens to bring qui tam lawsuits on behalf of the government alleging false claims. These whistleblowers, known as “relators,” can receive 15-30% of the government’s recovery.
- Establishes liability for any person who knowingly presents a false claim to the government for payment.
- This includes direct presentment of a false claim, as well as causing a false claim to be submitted.
- Violations are subject to treble damages plus civil penalties up to $23,000 per false claim.
How it Works
The FCA permits either the Attorney General, or a private party known as a relator, to bring a lawsuit alleging fraud on the government. FCA lawsuits involve detailed pleadings setting forth the specifics of the alleged fraud, such as billing for services that were not rendered, double-billing, up-coding, or other factually false claims.
If filed by a relator, the FCA complaint remains under seal for at least 60 days to allow the government time to investigate the allegations and determine whether to intervene in the lawsuit. The government intervenes in about 25% of qui tam cases. If the government intervenes, it takes over primary control of the litigation. If not, the relator can pursue the lawsuit on behalf of the government.
Whether or not the government intervenes, if the lawsuit is successful, the relator receives a share of the recovery, typically 15-30%. The government recovers the remainder of the damages and penalties.
FCA Lawsuits Targeting COVID Fraud
In response to COVID-19, Congress authorized massive spending on relief programs including the Paycheck Protection Program, provider relief funding for healthcare entities, expanded unemployment benefits, and Economic Injury Disaster Loans. With the government disbursing over $3 trillion in aid, opportunists have found ways to take advantage.
Attorney General Merrick Garland has made prosecuting pandemic-related fraud a top priority. Oversight agencies like the Pandemic Response Accountability Committee are also ramping up audits of COVID relief spending. In this enforcement environment, FCA lawsuits will likely play an important role in targeting fraudulent claims for COVID relief funds.
Areas of Concern
Some areas where we may see FCA litigation concerning COVID relief funds include:
- PPP loan fraud – allegations related to ineligibility, falsifying payroll and employment numbers, using funds for unauthorized purposes, duplicate loans, etc.
- Healthcare provider relief funding – improper reporting of lost revenues, fraudulent patient counts, misuse of funds received
- Unemployment insurance – claims filed on behalf of ineligible individuals, fictitious claims, failure to validate claims
- FEMA/emergency funding – misuse of funds received by state and local governments and agencies
- Economic Injury Disaster Loans – fraudulent applications, ineligible recipients, duplicate loans
Essentially any false or fraudulent claims connected to COVID relief programs are ripe targets for FCA enforcement.
We are already seeing FCA cases being filed targeting alleged fraud on COVID relief programs:
- A California company agreed to pay over $100,000 to settle allegations that it falsified financial information to obtain a larger PPP loan than it was entitled to receive.
- Two physicians in Texas were criminally charged with falsely certifying that their clinics were open and operating during the pandemic in order to obtain $3 million in provider relief funds.
- A chiropractor in Pennsylvania faces civil FCA allegations that he falsified patient records to obtain higher COVID-19 relief payments.
These early cases are likely just the tip of the iceberg. As oversight continues, we expect to see many more whistleblower suits aimed at alleged fraud and misuse of COVID relief funds.
Role of Whistleblowers
Whistleblowers have played an essential role in False Claims Act enforcement since the law was originally enacted during the Civil War. Individuals with inside information about fraud against the government can bring these allegations to light by filing a qui tam lawsuit.
The FCA provides powerful incentives for whistleblowers to come forward. If the government recovers funds based on a relator’s allegations, the whistleblower can receive 15-30% of the recovery. The average FCA whistleblower award is around $200,000.
For COVID relief programs, employees are well-positioned to detect fraud. Loan officers, healthcare billing staff, government auditors, and others may uncover misconduct in their day-to-day work. Coming forward under the FCA’s whistleblower provisions provides a path to report these issues and receive a financial reward.
Protections for Whistleblowers
The FCA prohibits employers from retaliating against employees for lawful whistleblowing activities. If an employee experiences retaliation for reporting fraud, they can file a claim under the FCA’s anti-retaliation provisions and recover damages including double back pay and reinstatement.
Whistleblowers also benefit from filing their FCA qui tam lawsuits under seal. All complaints remain under seal for a minimum of 60 days, and often longer, which allows whistleblowers to report fraud anonymously without fear of reprisal.
Finding an Attorney
Experienced whistleblower attorneys can advise individuals considering bringing a qui tam lawsuit under the False Claims Act. This is a highly complex area of law and having skilled legal counsel is essential.
When evaluating attorneys, look for lawyers with extensive FCA expertise including taking cases through trial. Whistleblower rewards often come years after filing so you need an attorney in it for the long haul. Costs should be handled on a contingency basis so it costs nothing to bring a case.
Each year billions are recovered thanks to brave whistleblowers reporting fraud against the government. With COVID relief oversight just getting started, employees with information about misconduct can make a difference and earn substantial rewards by filing an FCA qui tam lawsuit.
Takeaways
- The False Claims Act allows whistleblowers to file suit alleging fraud against the government and receive a reward.
- With massive COVID relief spending, fraudulent claims for relief funds are coming under scrutiny.
- Employees with inside information about COVID fraud can report it and earn 15-30% of any government recovery.
- Experienced whistleblower attorneys can advise individuals considering bringing an FCA qui tam lawsuit.
The False Claims Act is one of the government’s best tools for prosecuting fraud, waste, and abuse in federal programs. Whistleblowers have already begun filing FCA lawsuits targeting misuse of COVID relief funds. With billions spent on pandemic relief, we expect False Claims Act cases to take on greater importance in recovering wrongly obtained funds and deterring fraud.