In 1863, the federal government – the Union government – had a problem. Not only was it fighting a rebel army that was conducting itself with no small measure of vigor and success, but it also confronted a host of unscrupulous defense contractors that were billing the Union Army for dead mules, horses that could barely walk, boots with soles that had been glued on rather than stitched, shoddy uniforms that dissolved in the rain, guns that could not be fired, and bags of gunpowder that had been mixed with sawdust.
Aware that the federal government lacked the insider knowledge necessary to uncover sophisticated schemes of fraud against the federal treasury, President Lincoln proposed and the Congress passed the False Claims Act – the so-called Lincoln Law – to combat defense procurement fraud. The statute, codified at 31 US.C. § 3729, and mechanisms of fraud have significantly evolved over the last 150+ years. And its qui tam provisions, which allow private individuals to sue on behalf of the federal government and receive a portion of the recovery, help ensure the statute’s ongoing vitality.
Nowadays, the fraud schemes subject to scrutiny under the False Claims Act are far beyond the provision of dead mules. Instead, based on case activity and year-end reports, some of the more commonly seen mechanisms of fraud that are pursued under the statute relate to the following:
- fraudulently seeking/obtaining federal government contract (g., fraud relating to the qualifications to obtain a contract)
- fraudulent application for grant of government money (g., fraud relating to qualifying for the grant and/or other perquisites of the grant program)
- seeking payment reimbursement under a program for which the company is not eligible
- submitting a claim that falsely certifies compliance with the law, contract terms, and/or regulations
- charging for services not rendered (g., submitting a claim to the government for reimbursement when the service/product wasn’t actually provided as claimed)
- mortgage fraud for government-subsidized loans based on false information
- health care
- billing for services/products not actually provided
- billing for services that were not medically necessary
- quality of care (g., providing care that is so bad it is essentially worthless or so bad the government should not pay)
- upcoding the services actually provided to another category for greater reimbursement amounts
- off label marketing and promotion
- kickback (paying/receiving money for referrals)
- inflating charges
The scope of these mechanisms is limited only by the imagination of those perpetrating the fraud on the federal government. And it is for that reason, in large part, that the False Claims Act encourages whistleblowers to come forward with information by offering potentially substantial monetary rewards.