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What is the False Claims Act?

Every year, billions of taxpayer dollars are paid to contractors and others who either file or cause to be filed false and fraudulent claims for payment to either the U.S. or various state governments. These are crimes, but finding these fraudulent claims, investigation them and finally, prosecuting those who perpetrate this fraud depend greatly on the assistance of whistleblowers, who are authorized by the federal False Claims Act to sue those individuals and companies who defraud government and taxpayers at any level.

These lawsuits are filed under seal in federal court and they are then investigated by the Justice Department. In return for their help with recovering funds for the federal or state government, the whistleblower or whistleblowers are then rewarded with a significant portion of those recovered funds; between 15 and 30 percent of the overall recovery. This can sometimes result in a reward in the six- and seven-figure range.

About the False Claims Act

So, what is the federal False Claims Act and why should you care?

The federal False Claims Act is a law that creates a civil remedy to recover taxpayer money paid on false and/or fraudulent claims for federal government funds and property. In addition, there are about 30 state false claims laws that work roughly the same way in recovering state and local funds that are paid out fraudulently. That includes a Texas version of the Act, which is substantially similar to the federal version.

The federal False Claims Act triggers civil and criminal penalties for making fraudulent claims under government contracts, as well as under Medicare, Medicaid and veterans’ benefits programs. They also apply to fraudulent claims made against federally insured loans and mortgage programs, research grants, as well as disaster assistance, farm support and any other program administered by the federal government using federal taxpayer dollars.

The Texas False Claims Act is very similar to the federal version, in that the actions that tend to bring about civil and criminal penalties are largely the same. One key difference, however, is that, under the Texas version, a party may be liable if they present a claim under Medicaid for services that were provided by someone who was unlicensed or who was not approved by a licensed healthcare practitioner. The Texas version also provides larger civil penalties for acts that result in injury to a patient who is a child, elderly or disabled.

Becoming a Whistleblower

Before deciding to become a whistleblower, it may be helpful to know the most common types of fraud cases brought under the False Claims Act:

  • Financial Fraud — These have become more common in recent years and the term can refer to virtually any type of fraud perpetrated by anyone that is financial in nature, including fraud by commercial or investment banks, broker-dealers and insurance companies. Some of these settlements run in the billions of dollars and many were initiated by whistleblowers.
  • Healthcare Fraud — Over the last couple decades, whistleblowers have guided the Medicare system to recover billions of dollars. These cases involve such practices as; upcoding, in which providers inflate medical bills by making claims that patients received more expensive procedures than were actually necessary; misrepresentation of diagnoses, in order to justify services that are medically unnecessary; self-referrals, in which a physician refers services to another entity in which they have a financial stake; kickbacks to physicians and pharmaceutical companies or others for promotion or purchase of specific products.
  • Pharmaceutical and Medical Device Fraud — This category refers to many fraudulent practices that often depend on whistleblower to discover. Among the most common practices investigated under the False Claims Act include; marketing and prescribing drugs for purposes or to patients that are not approved under FDA guidelines; kickbacks to healthcare providers as a way to get them to prescribe certain drugs over others or; billing practices that artificially increase the price of prescription drugs. There are many other types of fraud, but this refers to anything that perpetrates a fraud on any government program that buys prescription drugs or medical devices.
  • Defense Contractor Fraud — There is a lot of money available to contractors for the Department of Defense, which means there is a lot of opportunity for fraud. Among the most common forms of defense contractor fraud include; intentionally inflating prices on items used on contracts; using less-expensive parts when charging for parts of much higher quality; using defective parts or; failing to comply with the specifications of a contract.
  • Construction Fraud — This is potentially one of the most potentially dangerous forms of fraud against the government, not just because of the lost taxpayer dollars, but because of the potential risk presented to the average American having to use faulty buildings, roads, bridges and other things that we rely on daily. Various forms of construction fraud can include; failure to meet contract specifications; bid-rigging in order to obtain the contract; unauthorized substitution of parts or equipment, including the use of inferior parts when a contract calls for a high-quality part; intentionally inflating costs or prices on a contract, and; a lack of quality control, including a failure to test for safety flaws or defects.
  • Information Technology Fraud — Because this is a constantly growing area, this is quite possibly the fastest-growing form of fraud perpetrated on government, both at the federal and state levels. Some of the most common forms of IT fraud include: failing to comply with contract specifications; lack of quality control and a failure to properly test for flaws and defects; unauthorized substitution of parts or equipment, especially the use of cheaper, lower-quality parts than called for under the contract and;; failing to comply with the specifications of the contract.

Both the federal and Texas False Claims Acts have a whistleblower provision, and they both have provisions to prevent employer retaliation against whistleblowers who report false claims made by their employer. Under the qui tam provisions of the False Claims Act, if the suit is successful, the whistleblower is eligible to receive as much as 25 percent of the recovery, although that can rise to 30 percent if the whistleblower litigates and recovers alone. The government has paid out billions of dollars to whistleblowers over the years.

Despite the potential reward, the whistleblower who learns that a business, who is often their employer, is engaged in defrauding the government and who chooses to blow the whistle, can often find themselves in a very difficult situation. In some cases, they put their reputation on the line, and they put their career and sometimes their safety at risk. It is not wise to initiate a False Claims Act lawsuit by yourself; you need a lawyer who is well-versed in both the federal and Texas False Claims Act to help you. The False Claims Act attorney at Hill Law Firm has the experience and knowledge you need to get you through the process and help the government recover taxpayers’ money while protecting your interests.

False Claims Act