What Is A "False Claim"

What is a False Claim

The False Claims Act covers fraud in any federally funded contract or program, with the exception of tax fraud. The early cases involved Defense contracts, but the recent trend makes health care fraud, including cheating on Medicare and Medicaid - an increasing target in Qui Tam litigation. Some examples: a health care provider bills Medicare and Medicaid for services which are unnecessary, a contractor fakes the test results relating to the quality of its product; a grant recipient charges the Government for costs not related to the grant, a weapons manufacturer overstates its manufacturing costs for the bearings it supplies to the Army for its surface to air missiles. These examples are all actual “false claims” in which the cheater, after a suit was brought, was required to pay the government.

Who can bring a False Claim

The short answer is anyone. If you maintain a sales office, or if you are an engineer involved in sales or quality control, or if you are a nurse or a bookkeeper or respiratory therapist who knows the physician or the hospital is billing Medicare for hospital visits when no visits are taking place, or if you are a machinist who has been asked to add hours to your time cards so that your employer can inflate the cost of labor on a sole source contract, then you can become a whistle blower. It doesn't matter if you are a making $9.69 an hour or if you are a disgruntled former employee who was laid off, downsized, R.I.F'd or even fired for insubordination. It doesn't matter. If your employer has defrauded the Government, your employer is the one who must pay, not you. Your character is not an issue.

However, it must be the Government, and not you, that has suffered the "injury." In other words, the Government, and not you, must be the one that is getting "ripped off."

You can “blow the whistle” if you have knowledge, for example, of:
• Hospital cost reports submitted to HCFA
• pricing, pricing of parts, pricing data
• purchase orders, shipping documents
• costs, cost data for labor, for parts, cost data in sole source contracts
• the bidding process - on supplies, on parts, on labor costs
• copies of invoices, vouchers, sales receipts, the negotiating process
• profit margins for procurement, projected profits versus actual profits

...and

Somewhere in all of this information, you discover proof that your employer, or the health care provider or any other entity with a government contract, repeatedly did something which resulted in either overcharges to the United States Government, or resulted in the United States Government not getting what it paid for because your company shipped inferior parts which failed to meet specifications, or your hospital billed, or double billed, or upcoded for care that was unnecessary.

How Your Employer Breaks the Law

Your company violates the False Claims Act if it does any one of the following: (and here we are quoting directly from the law)

• Knowingly submits (or causes the submission of) false or fraudulent claims for payment of Federal Government funds;
• Knowingly makes (or causes to be made) a false record or statement to get a false or fraudulent claim paid or approved by the Federal Government;
• Knowingly makes (or causes to be made) a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit property to the Federal Government; or
• Conspires to defraud the Federal Government by getting a false or fraudulent claim allowed or paid.

That's the technical language. What kinds of activities does this cover? What does "knowingly submit false claims for payment" mean? What constitutes making "a false record or statement"? How can your company or medical supply provider "conceal, avoid or decrease" an obligation to pay the federal Government? What companies and other types of entities like hospitals or pharmaceutical companies have "conspired to defraud the Federal Government?"

More Examples

In December, 2000, the Department of Justice reported that the nation’s largest for-profit hospital chain, HCA, formerly known as Columbia/HCA, agreed to pay $840 million in criminal and civil fines and penalties. The civil settlement resolved seven of the 27 qui tam lawsuits that were brought against HCA across the United States. The allegations involved billing for services provided to ineligible patients, falsifying DRG codes, improperly billing for certain lab tests and billing for home health services that were medically unnecessary or never provided. The civil settlement included over $95 million to resolve allegations of fraudulent laboratory billing practices; more than $403 million to resolve allegations of upcoding; $50 million to resolve allegations that the company claimed nonreimbursable marketing and advertising costs disguised as community education, and $90 million to resolve allegations of improper charges to Medicare in the purchase of home health agencies.

This is but one example in the health care field. (And you ought to notice that the HCA settlement only dealt with seven of the 27 cases, meaning there still were 20 other unresolved False Claims cases against HCA).

Another example is the Bayer and GalaxoSmithKline (GSK) settlement of a case involving a scheme referred to as “lick and stick.” Bayer and GSK sold re-labeled drugs to an HMO at deeply discounted prices, and then concealed this information in order to avoid their obligation to pay millions of dollars in additional rebates to the Medicaid program. As a result of their fraud, Bayer and GSK agreed to pay over $344 million to settle the largest Medicaid fraud settlement in history.

Taketa-Abbott Pharmaceutical (TAP) Products Inc. was giving doctors kickbacks by providing free samples of Lupron with the knowledge that the physicians would bill Medicare and Medicaid at $500 per dose. TAP got caught, and had to pay $559,483,000 because of fraudulent drug pricing and marketing of Lupron, which is a drug sold for the treatment of prostate cancer.

In January of 2000, Fresenius Medical Care of North America paid $385,000,000 for fraudulent and fictitious blood testing claims by LifeChem, Inc., NMC’s clinical blood testing laboratory, for kickbacks it had paid to dialysis facilities to obtain blood testing contracts.

The above examples are just a fraction of recent false claims that have been uncovered under the False Claims Act. Your company - your employer - cannot double the labor costs of plating operations in the production of landing gear for the B-1 Bomber, and your company cannot inflate bids on spare parts by falsifying time cards, padding travel expenses, or padding materials and discount prices. Your employer cannot systematically misallocate costs between the Government and non-Government commercial contracts so that the Government is overcharged, and your company cannot bill the military $900,000 for maintenance work that was never done.

Your employer cannot pass off false test results on the MX missile's guidance system, and the manufacturer you work for cannot overstate its manufacturing costs during negotiations for the sale of high performance jet engine ball bearings which are ultimately sold to the Air Force. If your employer inflates the costs for nuclear reactor bearings delivered to the Navy, or if it overstates the costs of cryogenic bearings for a U.S. Army helicopter, and the Government pays these inflated costs, then your employer has violated the False Claims Act.

Your company cannot illegally obtain classified Department of Defense documents regarding secret planning, programming and budgeting to gain a competitive advantage, and your company cannot charge the Air Force twice to develop special tools on F-16 fighters to maintain radar.

Your employer cannot rent copiers to Federal agencies and fail to disclose or offer many of the largest discounts it gives to its most favored commercial customers, and it cannot alter vouchers that falsify time cards on Government work and falsely bill $7.2 million of idle time to the U.S. Government.

Your employer cannot keep two sets of books on contracts for flight simulators, and your employer cannot wrongfully receive reinsurance from the Department of Education for more than 13,000 allegedly defaulted student loans by falsely representing that it has taken steps to collect on these student loans when it hasn't.

Your employer cannot systematically misallocate costs between Government and non- Government commercial contracts so that the Government is overcharged, and your employer cannot falsify the qualifications of the home health care aides where you work in order to qualify for Medicare reimbursement. The company you work for cannot systematically short the amount of donated cheese in the prepackaged food it sells to schools for school lunch programs. Your company cannot belong to a collusive Japanese bid rigging cartel in the procurement of U.S. Military contracts that raise costs to the United States 25%.

Your employer cannot provide untested nuts, bolts and screws to aircraft manufacturers who use them on Government contracts. Your company cannot inflate cost estimates to support the company's negotiations with the Government in certain sole source contracts, and your company cannot submit false entries for reimbursement under Medicare. Your company cannot give false prices for aluminum raw materials when negotiating contracts to replace the aluminum "skins" on portions of the KC 135 aircraft.

Your company cannot create false records of historical costs in order to mislead a customer (the Government) on the likely costs of parts in the contract under negotiation. Your company cannot contract to produce a helicopter engine that promises to log 2,400 hours of flight time between overhauls when the engine lasts less than 600 hours before extensive repairs are required.

All of the preceding examples are taken from actual cases, and in each of these examples, the company paid the price for cheating the government.

If your company has committed fraud - in any way similar to what was done in any of the above examples, or in any other scheme that cheated the Government under a federal contract - John F. Murphy would like to be your lawyer.

Putting it another way:

If the inside knowledge you have about the company where you work shows that there has been any misrepresentation whatever in the form of a statement or certification, or that there has been company sponsored inaction in the form of:
• contract financing
• progress payments against costs incurred
• receipt of benefits to which it was not entitled
• failure to credit the United States Government for reduced costs
• inflation of cost data, or falsification of cost data to obtain profit margins not obtainable under DAR 3-807 (Sole source Contracts) and pricing data on form DD 633 to substantiate its costs,

OR...
If you know that the profits obtained by your employer greatly exceed negotiated profit margins because of false cost data,

THEN...
Your employer is guilty of fraud under the False Claims Act.

Your employer also may be guilty of a federal crime, but that is not our concern here. The important point to know is that you can take your employer to federal court and sue your employer for defrauding the Federal Government (once again, please note - it doesn't have to be your employer doing this) and you can recover a percentage of the money which the Government recovers.

And John F. Murphy would like to be your lawyer.