The False Claims Act: The law that makes fraud whistles blow
Investigative reporters love whistleblowers.
As immortalized in Michael Mann's terrific "The Insider," people who have seen corruption, fraud and abuse firsthand can provide a news story (or a movie based on a news story) with the drama and intrigue that facts alone cannot.
Whistleblowers in cases involving health insurance fraud are often using the False Claims Act and are motivated not only by a sense of injustice, but also by the promise of a payday. It's important to understand these motivations when pursuing stories and to understand the inner workings of this law. Over the next few posts, I will try to demystify the law and its consequences.
The False Claims Act, put simply, rewards people for report people or companies who are defrauding the government. If you report the fraud, and the case is proven, you stand to reap a portion of the recovered money.
And there's a lot of money being recovered.
According to The False Claims Act Legal Center, a branch of the Taxpayers Against Fraud Education Fund, the government has recovered more than $28 billion since 1987. The group's website states, "In the health care arena, the U.S. Government is recovering $15 back for every $1 invested in False Claims Act health care investigations and prosecutions."
The act, passed in 1863, was prompted by fraudulent war contractors during the Civil War. President Abraham Lincoln said at the time, "Worse than traitors in arms are the men who pretend loyalty to the flag, feast and fatten on the misfortunes of the Nation while patriotic blood is crimsoning the plains of the South and their countrymen moldering the dust."
One case involved a contractor in Philadelphia who was paid $60,000 to outfit Union soldiers with trousers but never delivered the order. In modern dollars, that's $1 million worth of pants, a Halliburton-sized chunk of war cash. No wonder that the attorney arguing the case said that the contractor had been "trifling with the government and periling the great interests of the people in the greed of his speculation" while endangering "the half-clad regiments who were fighting and marching".
After a flurry of fraud cases during and after the war, the act fell in and out of use over the years. Amendments in 1943 made it harder to bring a case, but, in 1986, Congress enacted a significant overhaul that started to generate new cases and new investigations of fraud.
Here's how it works: Someone sees or hears about fraud against the government. The fraud can be happening directly or through a subcontractor, and the whistleblower does not have to be a victim in any way. The person then sues the fraudster as a "qui tam relator."
The term "qui tam" comes from the Latin legal phrase "qui tam pro domino rege quam pro se ipso in hac parte sequitur," which means "he who brings a case on behalf of our lord the King, as well as for himself." Typically, people can only sue if they have "standing" in a case, meaning that they have to have been involved or harmed in some way. In a False Claims Act case, the realtor can be an employee at the company committing the fraud, a former employee or a bartender who happened to be privy to some sensitive information. Court precedents have decided that the relators share in the legal injury suffered by the government, which makes sense since all of us as taxpayers are footing the bill for the fraud.
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Next: Where to find federal whistleblower cases
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