Common Types of Fraud for Whistleblowers
The federal False Claims Act generally applies to fraud involving almost any federally funded contract or program. The major exception is tax fraud, which is specifically excluded under the Act, but which is included under a special IRS whistleblower law. In addition, the federal False Claims Act does not apply to: suits by a current or former member of the armed forces against another member, arising out of the person’s service; claims against a “member of Congress, a member of the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government when the action was brought”; and cases “based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.” The state False Claims Acts generally apply to Medicaid fraud, and often to other fraud against the state, but these laws vary.
While exceptions to the False Claims Acts’ application are few, there are myriad circumstances under which the Qui Tam laws have been employed to combat corporate fraud against the state and federal governments. The unfortunate truth is that a good deal of American ingenuity seems to be devoted to devising schemes to swindle the American taxpayers out of hard-earned dollars that are intended to support the nation’s vital interests, not to line corporate wallets. No industry, it appears, is immune to the practice.
The volume and variety of fraudulent practices associated with the nation’s health care industry are staggering. A review of Qui Tam suits filed in this arena suggests that entities in virtually every segment of the industry have engaged in defrauding the government. See Texas Goes After Big Pharma.
A search of Baron & Budd’s Qui Tam/False Claims Act related news provides examples of the types of cases that are being brought around the country and of the corporate fraud that remains to be challenged. Health care fraud cases have been filed against health insurers that wrongfully discourage high risk individuals from seeking Medicaid coverage. Other health care fraud schemes that have led to Qui Tam cases include hospitals that bill for unauthorized services, and doctors who perform and bill for unnecessary medical procedures. Ambulance companies bill Medicare for providing emergency basic life support when their services actually are used for non-emergency situations. And pharmacies overcharge Medicaid when a patient is also covered by private insurance.
Qui Tam plaintiffs have also been successful in bringing claims against military contractors that shamefully exploit our military, even now while our troops are in harm’s way. Sadly, some of the claims are directed to conduct as despicable as supplying defective parts for military aircraft. Other fraudulent practices may not endanger our young soldiers, but when freight companies with military contracts agree to rig their bids to move household goods belonging to U.S. military and civilian families, the rate fixing results in higher costs for our military and higher taxes for us all.
At least one of the nation’s oil companies has been busy, it appears, gouging American citizens not just as consumers at the pumps, but also as taxpayers entitled to the full payment of royalties for federal offshore oil leases. A former auditor with the U.S. Department of the Interior filed a False Claims Act suit to put a stop to the oil and gas producer’s underpayment of such royalties.
Whistleblowers have filed False Claim Act suits targeting government suppliers that cheat the Federal General Services Administration by charging more than the agreed upon markup rate for goods and by fobbing off onto the government re-labeled products made in non-Trade Agreement countries.
Qui Tam litigation has been used to redress fraud in the nation’s universities, where highly educated faculty members overstate the hours they work on projects funded by grants from the Centers for Disease Control and Prevention. At the other end of the educational spectrum, such suits have also been used where a job training school fraudulently obtained federal funding by inflating its graduation and job placement statistics.
Incredibly, these are just a few examples of the types of fraud that Qui Tam suits have helped to redress. Further examples of fraud prosecuted under the False Claims Act, as compiled by Taxpayers Against Fraud, include:
Health Care Fraud:
- Performing inappropriate or unnecessary medical procedures in order to increase Medicare reimbursement.
- Billing for work or tests not performed.
- Automatically running a lab test whenever the results of some other test fall within a certain range, even though the second test was not specifically requested.
- Unbundling – Using multiple billing codes instead of one billing code for a drug panel test in order to increase remuneration.
- Bundling – Billing more for a panel of tests when a single test was asked for.
- Upcoding – Inflating bills by using diagnosis billing codes that suggest a more expensive illness or treatment.
- Billing for brand – Billing for brand-named drugs when generic drugs are actually provided.
- “Lick and stick” prescription rebate fraud and “marketing the spread” prescription fraud, both of which involve lying to the government about the true wholesale price of prescription drugs.
- Upcoding employee work – Billing at doctor rates for work that was actually conducted by a nurse or resident intern.
- Prescribing a medicine or recommending a type of treatment or diagnosis regimen in order to win kickbacks from hospitals, labs or pharmaceutical companies.
- Billing for unlicensed or unapproved drugs.
- Forging physician signatures when such signatures are required for reimbursement from Medicare or Medicaid.
Miscellaneous Fraudulent Practices:
- Billing for goods and services that were never delivered or rendered.
- Billing for marketing, lobbying or other non-contract-related corporate activities.
- Billing for premium equipment but actually providing inferior equipment.
- Billing to increase revenue instead of billing to reflect actual work performed.
- Double billing – Charging more than once for the same goods or service.
- Billing for research that was never conducted; falsifying research data that was paid for by the U.S. Government.
- Submitting false service records or samples in order to show better-than-actual performance.
- Presenting broken or untested equipment as operational and tested.
- Defective testing – Certifying that something has passed a test, when in fact it has not.
- Failing to report known product defects in order to continue selling or billing the government for the product.
- Phantom employees and doctored time slips – Charging for employees that were not actually on the job, or billing for made-up hours in order to maximize reimbursements.
- Yield burning – Skimming off the profits from the sale of municipal bonds.
- Falsifying natural resource production records – Pumping, mining or harvesting more natural resources from public lands than is actually reported to the government.
- Being over-paid by the government for sale of a good or service, and then not reporting that overpayment.
- Misrepresenting the value of imported goods or their country of origin for tariff purposes.
- False certification that a contract falls within certain guidelines (i.e. the contractor is a minority or veteran).
- Winning a contract through kickbacks or bribes.