Articles Posted in False Claims Act

Each Fall, the Justice Department tallies its recoveries of taxpayer dollars that have been pilfered through fraud directed at federal programs. A year ago, DOJ proudly announced $3 billion in recoveries in False Claims Act cases, and a record $8.7 billion recovered in the three years starting in 2009.

Late this year, DOJ will announce that its fraud recoveries tripled from $3 million in FY 2011 to more than $9 million in FY 2012. This trend of increasingly large recoveries of stolen taxpayer funds proves once again the effectiveness of laws like the False Claims Act, which incentivize whistleblowers to expose fraud through its qui tam provisions.

Although health care cases account for the vast majority of FCA recoveries, growing areas include banking, mortgage, and pension fraud cases involving fraudulently obtained taxpayer dollars, as my colleagues at Taxpayers Against Fraud point out. States are also using their own false claims laws to recover stolen taxpayer funds.

In qui tam cases, private citizen whistleblowers (known as “relators”) file suit on the government’s behalf to expose fraud against taxpayer funds. The whistleblowers can receive 15-25% of the government’s recovery of stolen funds if the government prosecutes the case, and 25-30% if the government leaves it to the whistleblower to pursue the recovery.

Consider the history of False Claims Act recoveries that have totalled more than $39 billion since 1986, when Congress authorized meaningful rewards to whistleblowers:
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Recently, I was asked to explain the newly enacted “Georgia Taxpayer Protection False Claims Act” to some 200 city and county attorneys in Georgia. Although our firm has qui tam False Claims Act cases pending around the country, I take particular interest in making successful this law that I helped draft.

Since then, I have had many calls from attorneys about the new state False Claims Act, which includes qui tam provisions allowing whistleblowers to file suit and share in the recovery. Thus, I am summarizing here some major points about the law:

The Georgia Taxpayer Protection False Claims Act is a state version of the extremely successful federal False Claims Act (FCA). The FCA is the federal government’s primary civil tool for combating fraud directed at taxpayer funds. The majority of states already have such a law designed to stop and deter fraud against state government.

Background: The FCA originally was enacted during the Civil War. In 1986, President Ronald Reagan signed into law an amended version of the FCA, which has since generated more than $30 billion in recoveries from those who have defrauded the government. The FCA also helps deter fraud by those who do business with the government.

State False Claims Acts: As noted, based on the federal FCA’s great successes since 1986, Sen. Charles Grassley has helped lead efforts to encourage states to pass their own versions of the FCA. Congress established financial incentives for states that enact their own versions of the FCA that closely follow the FCA’s terms, through the Deficit Reduction Act of 2005. (Those states receive an extra 10% of Medicaid fraud recoveries.) Congress amended the federal FCA in 2009-2010 to increase the FCA’s effectiveness.

At least twenty-eight other states now have enacted their own False Claims Acts, which are also based on the federal FCA. The majority of these states’ laws protect all state spending of any nature.

On May 24, 2007, Georgia’s “State False Medicaid Claims Act” became law. It is based on the 2007 federal FCA, but protects only Medicaid spending. The new 2012 Georgia Taxpayer Protection False Claims Act now protects all state and local government spending.

In sum, the new Georgia Taxpayer Protection False Claims Act (1) protects all state and local government spending from fraud, and not simply Medicaid spending; and (2) amends the State False Medicaid Claims Act to conform to the 2009-2010 federal FCA amendments. All states are required to conform to those amendments by 2013, or lose the federal incentive of an additional 10% of Medicaid fraud recoveries.
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The nation’s newest state False Claims Act was signed into law today by Georgia Governor Nathan Deal, after passing unanimously in both houses of the legislature.

The “Georgia Taxpayer Protection False Claims Act” protects all taxpayer dollars spent not only by the State, but also by counties, municipalities, school districts, hospital authorities, and other local public bodies or entities.

Like the federal False Claims Act, this Act combats fraud and false claims against taxpayer funds by imposing “treble” damages and civil penalties of $5,500 to $11,000 for each false or fraudulent claim. It also provides rewards to whistleblowers.

A critical issue in qui tam cases under the False Claims Act is how government lawyers and whistleblower attorneys prove damages caused by the fraud and false claims involved.

This whistleblowerlawyerblog‘s co-author MIchael A. Sullivan has been asked to moderate a panel discussion on “Recent Developments on Damages and Penalties” at a leading American Bar Association conference on the False Claims Act, the 2012 ABA National Institute on the Civil False Claims Act and Qui Tam Enforcement, on June 6-8, 2012 in Washington.

Joining me for this discussion of damages and penalties under the False Claims Act are Sara McLean, Assistant Director of the Commercial Litigation Branch of the Department of Justice; Paul Kaufman, Assistant United States Attorney for the Eastern District of New York; Jamie Bennett of Ashcraft & Gerel, LLP; Robert S. Salcido of Akin Gump Strauss Hauer & Feld LLP; and Katherine Lauer of Latham & Watkins LLP.

Financial fraud cases under the False Claims Act continue. A Pennsylvania lender has agreed to pay $3.9 million in a False Claims Act case over alleged false statements in mortgage loan applications for loans insured by the U.S. Department of Housing and Urban Development (HUD). The loans were made to two nursing homes.

The government contended that Capmark Finance LLC misrepresented the borrowers’ creditworthiness in these two applications for mortgage loans. When the loans defaulted, the FHA sustained losses.

The Financial Fraud Enforcement Task Force takes credit for this recovery. It was created to investigate and prosecute financial crimes.

Since the 2008 financial collapse, many have called for imposing liability on those whose fraud fueled the crisis.

In this early phase of what we predict will be a wave of financial fraud cases, the Justice Department announced today the largest False Claims Act settlement to date over mortgage fraud. Bank of America has agreed to pay $1 billion to resolve allegations that the Bank, through Countrywide Financial Corporation and some of its subsidiaries and affiliates, engaged in underwriting and origination mortgage fraud.

DOJ alleged that Countrywide knowingly made loans to unqualified home buyers and used inflated appraisals, thus causing hundreds of millions of dollars in damages to the Federal Housing Administration. The FHA insured the loans in question.

At the Healthcare Fraud Institute this past week, I was asked to address what steps whistleblowers should take to ensure confidentiality of emails with their lawyers. Although qui tam cases under the False Claims Act were the focus of our discussion, the same principles apply to tax whistleblowers and SEC whistleblowers.

Potential whistleblowers should never use their company’s email system, or any email account shared with or accessible to another person, for communicating with their attorney or for gathering information or evidence to report to the government.

Although the law encourages whistleblowers to report fraud, whistleblowers can create unnecessary problems for themselves by not following this rule.

First, emails between whistleblowers and their attorneys are privileged and confidential, but the privilege can disappear and be waived if the communication is disclosed to others.

Second, qui tam whistleblower cases under the False Claims Act are filed with a court order “sealing” the case from public view, while the government investigates. If an email accidentally exposes the case, the whistleblower may have violated the court’s “seal” order.

Third, alerting a defendant company that the whistleblower has reported the company’s fraud to the government is almost certain to provoke retaliation against an employee who is a whistleblower. Immediate suspension or firing often follows. Although the False Claims Act and the SEC and CFTC whistleblower laws create remedies for retaliation, those remedies take time to achieve. They will not pay the whistleblower’s mortgage next month–or this year.

We advise all of our clients that they must protect the confidentiality of their emails. Many people do not realize that emails sent from a company’s computer system usually leave some record, even if the employee is accessing a personal Gmail account.
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I have been asked to publicize a seminar at which I am speaking on handling qui tam whistleblower cases under the False Claims Act, the nation’s primary whistleblower law addressing fraud that steals government funds. Here is the announcement:

AAJ will hold a “Qui Tam” Teleseminar on December 6, 2011 at 2:00 pm EST. With recently amended whistleblower laws and several high profile settlements, lawyers need to understand the procedural complexities and pitfalls in qui tam whistleblower cases. Cosponsored by the Qui Tam Litigation Group of AAJ, this teleseminar will provide an understanding this rapidly developing area of law.

View the agenda, faculty and register at www.justice.org/quitam. Use the promotion code QUITAM at online checkout to receive the special rate of $159.

Every two years, attorneys prosecuting or defending qui tam whistleblower cases under the False Claims Act and other whistleblower laws gather for the Whistleblower Law Symposium.

We have written much about “qui tam” whistleblower cases under the False Claims Act. Since last year’s passage of the Dodd-Frank law, whistleblowers who help expose (1) violations of the securities laws or (2) commercial bribery of foreign government officials, now can receive rewards of 10-30% of money sanctions imposed under the new SEC Whistleblower Program. The new IRS Whistleblower program pays whistleblowers 15-30% of amounts recovered. These cases also help stop fraud against taxpayers and investors.

On October 21, an unusual group of national experts on these claims will gather for the Whistleblower Law Symposium, which our firm organizes every two years. Not only do we have senior attorneys from the Department of Justice and experienced whistleblower lawyers discussing qui tam cases, but the Director of the IRS Whistleblower Office Steve Whitlock will participate and explain the tax whistleblower program. Senior SEC attorneys also have stated that they wish to be part of our seminar to discuss the new SEC Whistleblower Program, and are seeking approval to participate.

This conference is broader in scope than any whistleblower law conference in the country of which I am aware, as we have a national faculty of lawyers on both sides of these cases, as well as some of the top government officials involved.

Registration is still open for those who want to register online here:

Please feel free to call or email me with any questions. The Agenda is below.
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When qui tam whistleblower cases under the False Claims Act are “declined” by the Department of Justice, the whistleblower or “relator” is authorized to pursue the case on the government’s behalf.

The DOJ statistics below show that these declined cases have generated more than $97 million in recoveries for taxpayers since 1987, the year after the modern False Claims Act was born.

These facts dispel any notion that the Justice Department has sufficient resources to pursue all meritorious cases. Some of the more notable False Claims Act recoveries were achieved by private attorneys pursuing these “declined” cases.

A list of these declined cases that have brought almost $100 million into the U.S. Treasury is below. This amount is “larger than the sum of all salaries paid to members of the United States House of Representatives and the United States Senate last year,” as observed by Pat Burns of Taxpayers Against Fraud.
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