False Claims Act. Background

Transcription

1 False Claims Act Background The False Claims Act was enacted in 1863 by President Abraham Lincoln to help prevent defense contractor fraud during the civil war The False Claims Act allows private citizens to file suit in the name of the government against individuals or entities that have made false or fraudulent representations in order to secure government money or property 1

2 What is a considered a violation of the False Claims Act? Pursuant to 31 U.S.C. 3729(a)(1)(A) liability attaches when a person knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval that is paid with government funds For example: billing for services not provided, billing for defective parts, or making false representations to the government to secure a contract Violations continued.. Liability also extends to a person who knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim. 31 U.S.C. 3729(a)(1)(B) This provision addresses the use of materially misleading or fraudulent documents provided to the government by a defendant upon which the government relies to make a decision to pay 2

3 Violations continued.. Liability similarly extends to any person who conspires to commit a violation of the False Claims Act. 31 U.S.C. 3729(a)(1)(C) Violations continued.. Liability under the FCA also attaches when a person has possession, custody or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property, or when a person is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true. 3

4 Violations continued.. An individual is also liable if he or she knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property. Violations continued.. The FCA also addresses what are known as reverse false claims which occur when an individual knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government. 4

5 What Can A Relator/Whistleblower Recover? An individual who does so is referred to as a relator, but is commonly called a whistleblower Relators are entitled to receive a bounty or a partial assignment of the money recovered for the government Bounties range from percent of the money recovered if the government intervenes in the case and percent of the money recovered if the government does not intervene and the relator litigates the case on his/her own Recovery Since 1986, whistleblowers bringing suit under the False Claims Act have enabled the United States Government to recover more than $20 billion The statute generally provides for recovery of three times actual damages; AND Civil penalties between $5,000 and $11,000 for each false statement used to secure payment from the Government 5

6 Common Schemes Defense Contractor Fraud Fraudulent Loans and Grants Federal Government Contract Fraud Medicare Fraud Examples U.S. ex rel. Bunk v. Bikart Globistics GmbH & Co. European freight companies allegedly conspired to fix minimum bids for shipping services provided to the United States Department of Defense 6

7 Examples Pfizer In September 2009, Pfizer agreed to pay $2.3 billion in civil False Claims Act Litigation damages and criminal fines to resolve allegations the Company promoted a number of its drugs for off-label uses Pfizer admitted to allegations brought by whistleblowers that it illegally promoted: Bextra a painkiller; Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug As a result Pfizer caused false claims to be submitted to government healthcare programs for uses that were not medically accepted and therefore not covered by those programs State False Claims Acts Along with the Federal False Claims Act designed to protect Federal Funds, numerous states and cities have passed similar statutes to protect state and city funds from fraud. These states/cities include: California, Chicago, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Michigan, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, New York City, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, and Wisconsin 7

8 Case Development: Is this a Conclusion or Fact? When developing a case you want to look at core facts and not make broad conclusions. What is a Conclusion? the accident was caused by reckless driving What is a Fact? the driver was driving a sports car the driver had 6 oz. of whiskey before getting in the car the speed limit was 100 kph the driver was driving at 200 kph the car hit a tree False Claims Act Example Facts: the government contract with Victorcorp states that the landing gear must be subject to Magnaflux testing a letter transmitted to Victorcorp from the government states that "The contractor has no discretion to substitute an alternate form of testing for Magnaflux testing" A Victorcorp internal memorandum states: "We have substituted visual inspection for Magnaflux testing" Victorcorp presents a written certification to the government that it has complied with all contract specifications Victorcorp receives payment Conclusion: Victorcorp defrauded the government by providing them planes that did not meet contract specifications. 8