Dan L. Hargrove Attorney at Law. The FALSE CLAIMS ACT

Transcription

1 Dan L. Hargrove Attorney at Law The FALSE CLAIMS ACT

2 If you can t do the time...

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4 Roadmap 1. History of the False Claims Act 2. What is the FCA 3. Types of fraud covered by FCA 4. How a case gets started 5. Prosecution of a FCA civil action 6. Consequences 7. Scenarios (it s a quiz) 8. Coming clean

5 History of the FCA

6 History of the FCA cont. Lincoln s Law became effective 2 March 1863 Allowed a private whistleblower to sue on behalf of the United States Whistleblower allowed to keep 50% of the recovered fraud

7 Have times really changed? Both U.S. Army majors Both deployed in occupied countries Both procurement officers Both alleged to have received bribes and kickbacks Host country whistleblowers led to their prosecution Both prosecuted Fraud will always be with us

8 What is the False Claims Act Government s most powerful tool to fight fraud Allows whistleblowers to sue on behalf of the Government against those who commit fraud against the Government Civil cases, called qui tam actions Applies to all federal procurement Relies on insiders to be narks Rewards insiders for reporting fraud Damages are: 3 x Government s damages plus penalties of $5,500 to $11,000 for each false claim Relators are entitled to be awarded 10 to 30% of the recovery

9 $20,000,000,000

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11 Examples of Fraud Covered by FCA Mischarge case: Contractor bills Government for goods or services that are not provided (e.g., contractor bills for hourly labor not actually provided) Contractor overcharges for goods or services (e.g., Medicare upcoding) False negotiation (e.g., bid rigging / kickbacks / not actually an 8(a)) False certification (e.g., goods or services do not conform to contract specs, laws, or regulations) Substandard product or service (e.g., bait-n-switch Gov t ordered a BMW but contractor delivered a Hyundai)

12 How a case gets started The Government relies on insiders FCA encourages insiders to come forward (huge financial incentive) But insiders must be original sources Insiders, with counsel, make a presuit disclosure to the Government (OIG, Army CID, Air Force OSI, FBI...)

13 After disclosure to Government, relator files civil qui tam action Department of Justice can initiate civil action (rare); or Relator can file civil qui tam action in federal court on behalf of the Government (almost always the case) Cases are filed under seal and often remain sealed for years DoJ can elect to take over case (relator still remains a party)

14 Consequences

15 The False Claims Act is about Protecting the Fisc

16 Protecting the Fisc back then

17 Protecting the Fisc now

18 Scenarios Your boss is cheating on his federal taxes... is this a violation of the False Claims Act? No. The False Claims Act does not cover tax fraud. But... the IRS Code was amended in 2007 to authorize the IRS to pay rewards to whistleblowers for: 1. detecting tax underpayments, or 2. detecting and bringing to trial and punishment persons guilty of violating the tax laws

19 Scenarios Yes: The Pasha Group has agreed to pay $13 million to settle FCA violations for bid rigging. A European company engages in bidrigging in connection with furniture shipments to Europe for the Dept. of Defense. Is this a false claim under the FCA?

20 Scenarios To build its client base, a hospital refuses to collect from its Medicare patients the Medicare 20% co-pay. Is this a false claim under the FCA? Yes: Who can explain why?

21 Scenarios A hospital automatically codes every Medicaid ER visit as a Level III. Is this a false claim under the FCA? Yes: Why?

22 Scenarios A Texas contractor engages in bid rigging and kickbacks to obtain a TexDoT-funded highway project. Is this a false claim under the FCA? No: The federal False Claims Act only covers federal procurement. But Texas does have a False Claims Act for healthcare fraud

23 Scenarios The City of San Antonio receives a federal grant to provide housing for the homeless. But the City redirects the grant money towards expanding the Riverwalk. Is this a false claim under the FCA? Probably: The point is that some governmental entities are subject to the

24 Scenarios An oil company under reports to the U.S. Department of Interior the amount and value of oil it extracted from a federal lease. Is this a false claim under the FCA? Yes: Let s talk.

25 Scenarios No: The FCA precludes members of the Armed Forces from suing each other under the FCA. Capt. Smith has evidence that Colonel Jones awarded a contract because he was bribed by the contractor. Can Capt. Smith bring a qui tam action against Colonel Jones?

26 Have a real internal fraud detection protocol system in place. Staying clean The Department of Justice has a voluntary self-reporting system (DoJ has proposed a mandatory self-reporting rules to modify Part 3 & 9 of FARs) - This Would be HUGE! Some agencies have self-reporting programs that limit legal exposure.

27 Questions Hargrove & Rea, P.C. Historic One Ten Broadway 110 Broadway, Suite 550 San Antonio, Texas t

28 Hargrove & Rea, P.C. Historic One Ten Broadway 110 Broadway, Suite 550 San Antonio, Texas t