Types of Qui Tam Fraud
Qui tam lawsuits are brought by an individual who chooses to “blow the whistle” on fraud affecting the federal government. But what conduct can constitute qui tam fraud?
Qui tam cases are governed by the federal False Claims Act (31 U.S.C. §3729). Under the False Claims Act, fraud eligible for qui tam litigation includes:
- making false claims of approval or payment;
- conspiracy to pay or allow a false claim to go forward; delivering or making false receipts for property intended for the government with the intent to defraud;
- knowingly making false statements in connection to promises or obligations to pay or hand over property or money to the government;
- failing to fully execute a contract’s obligations; and
- receiving or purchasing public property that is handed over by an officer or employee of the government, including armed forces personnel, who are not authorized to sell or hand over such property.
- causing others to defraud the government, e.g., by encouraging “off-label” use of pharmacy drugs by promoting non-FDA approved uses in prescription drug sales.
In What Context Does Fraud Against the U.S. Government Often Occur?
Fraud against the U.S. government often occurs in connection with the following:
- Medicaid and Medicare Fraud, such as falsifying documentation that results in Medicare overbilling, performing additional, unnecessary medical procedures in order to receive greater reimbursement from Medicare, or even the use of billing rates attributed to doctor care even though care was not administered by a doctor, but simply a nurse or other, lesser medical professional
- Student Loan and Education Fraud, which can consist of accepting educational grants under false pretense, or providing the government with false/inaccurate records in order to display better results than actually existed after a given process
- Government contract fraud, including entering into a contract with a government agency, such as the military, with no intention of fulfilling the contract or providing services other than those stipulated by said agreement with the government agency
- Billing for services not provided, charging twice for services performed, or falsifying employee timesheets and other such information that is pertinent to the amount of money given to a contracted company or other entity by the U.S. government
- Mortgage Loan Fraud, such as falsifying documentation in connection with home mortgage loans that are guaranteed by the government
- “Off-label” prescription fraud, where federal reimbursement is sought for the cost of prescription drugs prescribed for treatments not approved of by the FDA. Both prescribers and drug companies can be held responsible.
- Abuse of the USAC and USF e-rate programs for schools and libraries or rural healthcare, wherein the government subsidizes telecommunications costs through the Universal Service Fund, administered by the Universal Service Administrative Company
- Providing false documentation to the U.S. government, which could include documentation that indicates that a certain quality of product was used in a given situation, when in fact a lesser quality product was used; that a certain product has passed safety inspections when it actually has not; that faulty or untested equipment is fully operational and has been safety tested; that a certain product has passed safety inspections and is consequently safe, when in fact no such safety inspections have been passed, and said product is continued to be used or sold in order not interrupt profit stream
- Any form of fraudulent activity regarding Home Health Care, such as insurance fraud, or billing for more expensive brand-name medications and other drugs when generic drugs have been used
- Any false certification to the federal government intended to obtain money or property to which the certifier is not entitled
- Bid rigging or false certifications of compliance with bidding processes
- In general, any activity that essentially steals taxpayer money from U.S. citizens, particularly those situations where the government has been led to believe that services performed or goods provided are more extensive or better than those actually performed or provided
An In-Depth Look at Qui Tam Fraud
These circumstances may seem vague when presented in list form, so let’s look at a few examples of potential qui tam fraud.
Overcharging the government is a common type of fraud. For example, a medical facility might file a claim for Medicare assistance for a person who never received such assistance or more commonly might “upcode” the treatment, billing for more services than were actually provided.
Substitution of a product or service is another example. A government contractor might knowingly supply a lesser grade of materials than was ordered by the government, but still charge the full amount. Another example is false pricing, in which a contractor or individual charges an inflated amount for goods or services rendered.
Many other cases involve fraud through violation of the promises and representations made at the time of contract formation. Government contracting is complex and usually requires a contract administrator to pay close attention to the company’s sales.
Often there are promises made, such as that the product will be produced inside the United States (or countries with which we have free trade agreements), or that the product is sold to the government at the same price as private customers (“most favored customer price”), or that the bidding process is fair and results in the most cost-effective funding.
Sometimes fraud involves production violations, for example, promises that the production process will involve certain inspections or quality checks, or certain production steps that are ignored or falsified. Another type of fraud is when scientific grant money or public service grant money is spent differently than was promised in the terms of the grant.
Pharmaceutical companies that promote the use of drugs for conditions not approved by the FDA (Food and Drug Administration) are engaged in “off label” sales promotions which cause doctors to wrongly charge Medicare and Medicaid, making the drug companies responsible for large over-payments.
Other whistleblower reward programs exist as well, including reporting tax fraud to the IRS and reporting to the SEC (Securities and Exchange Commission) about false public statements of accounting, inventory, sales, or other data which affects the stock price of a publicly traded company.
Whistleblowers who suspect qui tam fraud should immediately seek experienced qui tam counsel before stepping forward as a relator in a qui tam case. This is partially due to the complexities of qui tam litigation, and partially to protect the whistleblower’s own rights in connection with filing a qui tam case.
For example, telling other people about the fraud is a bad idea, since they could file the case themselves, even if they only know what you told them. The first to file the case usually recovers the entire reward. Though whistleblowers are protected by United States laws – and compensated well when they bring forward a winning qui tam case – they can face many questions and possible retaliation when coming forward with a qui tam action. Bringing a case is an important step and should be considered from all sides.
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