Whistleblower (Qui Tam) Types of Reports

by on June 26, 2008

There are many ways that companies and individuals defraud the government. Some examples are as follows:

Health Care Fraud (Medicare and Medicaid)

Medicare and Medicaid fraud have cost the federal government billions of dollars. Qui tam (whistleblower) lawsuits filed under the False Claims Act have been responsible for some of the government’s biggest health care fraud recoveries.

There are many different ways companies and individuals can bilk Medicare and Medicaid. These examples of health care fraud give an idea of the types of fraud that have been or could be the basis of qui tam lawsuits:

  • False claims involving pharmaceutical companies
  • Kickbacks and off-label marketing of medical implants and medical devices
  • Kickbacks and improper payments to group purchasing organizations (”GPOs”)
  • Services not rendered/add-on services
  • Upcoding and unbundling/Fragmentation
  • Kickbacks
  • False certifications and information
  • Lack of medical necessity
  • Fraudulent cost reports
  • Grant or program fraud

Defense Contractor Fraud

Defense contractor fraud remains one of the biggest areas for False Claims Act litigation. Below are common ways defense contractors cheat the government. Many times a defense contractor may be guilty of a combination of fraudulent schemes.

  • Cross-charging
  • Product substitution
  • Improper cost allocation
  • Failure to comply with contract specifications
  • Violations of the Truth in Negotiations Act (”TINA”)

Failure to Deliver (Escheat) Violation of State False Claims Laws

Most states have laws that obligate companies that hold “unclaimed property” to “escheat” or deliver that property to the state if it remains unclaimed for some period of time (generally three to five years). Private individuals who know of a company’s failure to escheat monies to a state may bring qui tam (whistleblower) cases under state false claims laws, and possibly receive rewards for a successful qui tam lawsuit.

There are an almost unlimited number of circumstances in which companies have an obligation to escheat unclaimed money to the state, including:

  • Amounts owed to vendors who for any reason were never paid for the goods or services they delivered (”unbilled vendor payables”)
  • Deposits for orders that were never delivered
  • Funds deposited to an escrow account, but never spent, e.g. where a title company holds funds in escrow in connection with real estate transactions
  • Gift cards or certificates issued, but never redeemed
  • Credit balances on business accounts, credit cards, or other accounts
  • Any other situation in which property has been unclaimed or forgotten by the person or company entitled to those funds

Yield-burning in Municipal Bond Market Violates False Claims Act

Yield-burning of municipal bonds is the practice whereby excessive prices are charged for U.S. Treasury securities sold to municipalities in connection with certain types of tax-exempt bond refinancing.

These refinancing transactions – known as “advance refundings” – permit municipalities to refinance their debt at lower interest rates when interest rates decline, and therefore lower their borrowing costs. Investment banks then improperly pocket the profits made by overpricing the securities, rather than returning those profits to the U.S. Treasury as required.

GSA Contract Term Violations

Companies that supply goods and services to the federal government may be liable under the False Claims Act if they falsely certify they are complying with government contract terms in their Multiple Award Schedule (”MAS”) contracts with the General Services Administration (”GSA”).

MAS contracts differ from commercial contracts in three major ways: they contain what are known as “defective pricing” and “price reduction” requirements, as well as a requirement to comply with the U.S. Trade Agreements Act.

Public Works Projects and Federal Government Construction

The federal government spends billions on public works projects and the construction of federal buildings. Fraudulent practices by contractors include bid-rigging, overcharging for contracts, and failing to follow project specifications. All of those practices could be the basis of a qui tam lawsuit brought under the False Claims Act.

Research Programs

The federal government provides grants for research on a wide variety of topics. Sometimes grant recipients use the funds to pay for salaries or expenses for another research project or other work unrelated to the project for which the grant money was intended, then charge those costs against the federal grant or otherwise inflate their costs for conducting research projects.

Customs

Most goods imported into the U.S. are subject to customs duties (taxes). Companies that undervalue imports to lower the amount of customs duties, or who underpay customs duties through other fraudulent schemes, are liable under the False Claims Act.

Mislabeling or labeling in an ambigous manner in order to avoid proper import and custom duties are also subject to False Claims Act reporting.

Hazardous and Toxic Waste Clean-up Fraud

The federal government spends substantial sums on programs to clean up hazardous and toxic waste. It also requires contractors to follow all environmental laws and regulations, such as the Clean Water Act. Any contractor that deliberately overcharges the government for hazardous and toxic waste clean-up, gets paid by the government for work that it doesn’t perform, or whose service doesn’t meet government specifications, would be liable under the False Claims Act.

For instance, an environmental testing firm settled a qui tam lawsuit charging the firm had not properly tested the level of hazardous substances in soil and water samples as required under contracts with the Army Corps of Engineers.

Loan Guarantees

The federal government has many loan guarantee programs, including loans for education, housing, and small businesses. If the loan is not repaid and fraudulent misrepresentation was made to obtain these loan guarantees, there might be a sufficient basis for a False Claims Act lawsuit.

Underpayment of Royalties on Government-Leased Land

Oil and gas production on federal and Indian lands are governed by lease agreements between the Interior Department and private companies. By law, the companies must pay the federal government and Indian tribes a percentage of the value of the oil and gas as a royalty. Companies must also pay royalties on any timber harvested or minerals, such as coal, mined from federal and Indian lands.

Agricultural Subsidies and Other Agricultural Programs

The False Claims Act also applies to any fraudulent misrepresentation or scheme used to obtain agricultural subsidies or funds from other agricultural programs.

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