Why qui tam provisions of the VFATA and the FCA are vital and the role by played by relator’s private counsel in federal FCA and VFATA enforcement
As regular readers know, the Virginia Fraud Against Taxpayers Act and the federal False Claims Act both make it unlawful for any “person” to submit false or fraudulent claims to the government for payment or approval. Both laws also create stiff penalties in the form of treble damages, a civil penalty of between $5,500 and $11,000 for each false “claim,” plus an award of costs, attorney’s fees, and interest.
Without more, those provisions alone would go a long way towards deterring fraud, but the real power of both statutes lies in what is called a “qui tam” provision. That provision allows for any “person” with non-public, first-hand knowledge of fraud on the government to gather their evidence, hire their own private counsel, and prosecute the case in conjunction with the appropriate law enforcement authorities.
Today, we will take a look at why the qui tam provisions of the Virginia Fraud Against Taxpayers Act and the federal False Claims Act are so important. We will accomplish this by taking a look at methods of detecting fraud on the government other than qui tam claims under the federal FCA and the VFATA — that is, methods that do not involve an insider with personal, first-hand knowledge.
We will also take a look at methods utilizing an insider with first-hand information, albeit an insider without his or her own counsel. The best example we have of this kind of method is the ever-present “fraud hotline” that invites an individual to call and report a fraud on the government. While fraud hotlines are of course a good thing, by themselves they are not enough, for several very good reasons.
Let me say off the bat that this post should not be construed as poking fun at any of the tips suggested by any of these sources. On the contrary, fraud and false claims are, by their very nature, a surreptitious activity. People submitting false and/or fraudulent claims for payment will, in most circumstances, take great pains to keep their activities secret. Moreover, the type of fraud and false claims we are talking about here is almost always the result of years of careful thought and planning by individuals who know the rules — and who know where the weaknesses in the rules can be found.
EFFORTS TO PREVENT FRAUD WITHOUT A QUI TAM RELATOR
As with many problems afflicting society, a large number of very smart people from many different disciplines have thought about the best way to stop fraud on the government.
One example of tips and techniques to catch fraudfeasors in the act comes from a highly accomplished accounting firm. They suggest watching for a number of what they call “red flag personality types.” Those types include “the big spender, the gift-taker, and the odd-couple” as well as “the gift-giver” and my personal favorite, persons exhibiting “the sleaze factor.” The definition of “the sleaze factor” is as follows, according to this website — “the corrupt payer is frequently a person known or suspected in the industry to be involved in payoffs or other fraudulent activity.”
A different example comes to us by way of the U.S. Department of Transportation’s Federal Highway Administration web site. There we find that the following things may be warning signs of fraud or false claims: (1) Repeated awarding of contracts to the same contractors in a particular geographical area; (2) low or no participation by contractors for bidding on certain contracts; and (3) subcontracting between the unsuccessful bidder and the bidder who was awarded the contract.
The problem with all of these things is that it is quite easy to imagine any of them happening with no wrongdoing on the part of anyone. Other warning signs the government watches for include multiple bidders submitting bids that are very close or watching for bidders that frequently use the same subcontractors — those things too can happen without any wrongdoing on the part of anyone.
Another example of efforts to prevent fraud without a qui tam relator involve the use of technology. These efforts can yield some fruit, but they are expensive in and of themselves. One example of this approach is geo-mapping technology that compares the zip codes of individuals submitting claims to Medicaid to the median income for that zip code. The government is well aware that Medicaid claims from individuals living in the 90210 zip code merit attention.
Again, as should be obvious, many of these technological and statistical techniques are only going to catch the low man or woman on the totem pole — that is, the fraudulent Medicaid recipient. Thus, most of the statistical and technological techniques miss the providers that are really doing damage to government programs.
EFFORTS TO PREVENT FRAUD WITH AN INSIDER OTHER THAN A QUI TAM RELATOR
It should come as little surprise that an insider providing information to the government is the best way to catch a fraudfeasor; after all, criminal prosecutions relying on insiders who have cut a deal are as old as the English language. The application of this concept to non-criminal matters predictably yields positive results. The Journal of Accountancy, for example, conducted a study which showed that individual tips are by far the most common method used to catch fraud in accounting transactions.
To this end, the government has created a number of toll-free 800 numbers which anyone can call when they suspect Medicare or Medicaid fraud. Since 2009, health care providers doing more than $5 million in annual business with Medicare or Medicaid are also required to provide mandatory training to all employees on health care fraud, and part of that training must be focused on the ability of any employee to call one of these 800 numbers and report fraud.
To be sure, these tip lines do yield results, but there are limitations on what can be expected from a tip-line. In fact, the reasons the government can only expect so much from a tip-line takes us directly into our primary focus, which is the resources and knowledge a qui tam relator brings to the table in the form of his or her own private counsel.
THE QUI TAM RELATOR AND HIS OR HER PRIVATE COUNSEL — THE BEST OF ALL WORLDS FOR THE GOVERNMENT
There are many reasons why the qui tam provisions of the federal FCA and the VFATA provide the most potent anti-fraud tool in the government’s arsenal. First and foremost is the added resource of the relator’s private counsel. This means that, unlike a 1-800 tip line, the government receives only cases that have been filtered through the false claims act’s legal framework and translated, so to speak, into legal claims.
Just imagine the poor government employee who has to answer that 1-800 number — I can assure you that he or she gets all kinds of wild calls on that number. Sorting through these calls and the mass of information provided by all of the callers would, to say the least, be a difficult job. The job would not be made any easier by the fact that somewhere or other an employee might actually be calling with a valid case.
Anyone who discounts this part of the qui tam framework has obviously never tried to prepare a qui tam case. Even the best relators bring to their lawyers a mish-mash of facts and law blended together with a good dose of emotion, and sorting through it can be time consuming and difficult. As I have discussed before, finding and screening qui tam cases is a large part of the barrier to entry to this kind of a law practice.
On the other hand, the qui tam relator’s counsel properly shoulders a great deal of this burden for qui tam cases. In other words, relator’s counsel serves a very real screening and case preparation role. Cases from a relator represented by counsel can and do some to the government polished, prepared and gift-wrapped for the government’s lawyers.
Stay tuned for more dear readers…
