Common Types of Fraud Discovered by Whistleblowers
The federal False Claims Act (FCA) applies to fraud and false claims involving most federally funded contracts and programs. The major exception is tax fraud, which is specifically excluded under the FCA, 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 most also apply to other fraud against the state, but these laws vary from state to state.
While there are exceptions to the reach of the state and federal False Claims Acts, qui tam laws have been employed to combat a wide variety of false claims and fraud against the state and federal governments. It seems that there is no limit on the ways to swindle the government out of American taxpayers’ hard-earned dollars intended to support the nation’s vital interests, and no industry is immune to the practice. In fact, many businesses use false claims and fraud against the government to improve their bottom lines and line their pockets.
The volume and variety of fraudulent practices associated with the nation’s healthcare industry are staggering. The majority of successful FCA case recoveries have been healthcare-related. A review of qui tam suits filed in this area suggests that entities in virtually every segment of the industry have engaged in defrauding the government. Some of the most significant cases that the Law Offices of Patrick J. O’Connell’s lawyers have worked on involve drug pricing fraud by the largest pharmaceutical manufacturers against the government—companies like Bristol-Meyers Squibb Company, Baxter Healthcare Corporation, Schering-Plough Corporation and Warrick Pharmaceuticals Corporation. See Texas Goes After Big Pharma.
A review of news sources reporting on qui tam/False Claims Act recoveries provides examples of the types of cases that have been filed around the country and of the corporate fraud that remains to be challenged. Healthcare fraud cases have been filed against health insurers that wrongfully discourage high risk individuals from seeking Medicaid coverage. Other healthcare fraud schemes that have led to qui tam cases include off-label marketing by pharmaceutical manufacturers; hospitals that bill for short stays when hospital admission is unauthorized or unnecessary, or that engage in up-coding; doctors and dentists who perform and bill for unneeded medical procedures, or who bill for services by physicians or licensed personnels when they are actually provided by non-physician staff; ambulance companies that bill Medicare and Medicaid for providing emergency basic life support when their services actually are used for non-emergency situations; and countless other schemes to defraud our cash-strapped government-funded healthcare programs, such as Medicare, Medicaid and Tricare.
Qui tam plaintiffs have also been successful in bringing claims against military contractors that shamefully rip off our armed forces, even while our troops are endangered as a result. Regrettably, some of the conduct has included such despicable acts as supplying defective parts for military aircraft, or body armor that is not sufficient to protect our troops. Other fraudulent practices include freight companies with military contracts rigging bids for moving household goods belonging to U.S. military and civilian families, which results in higher costs for our military and higher taxes for us all.
Many of the nation’s oil companies have failed to make full payment of royalties for federal offshore oil leases, or leases in federal and state rights of way, gouging Americans not just as consumers at the pumps, but also as taxpayers.
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 supplying the government with re-labeled products made in non-Trade Agreement countries, in violation of representations to the contrary.
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 and other government agencies. At the other end of the educational spectrum, such suits have also been used where for-profit schools fraudulently obtained federal funding by inflating graduation and job placement statistics or paying recruiters in violation of law.
These are just a few examples of the types of false claims and fraudulent conduct that qui tam suits have helped to redress. Additional examples of false claims and fraud that have been discovered and litigated by whistleblowers under the False Claims Act, as compiled by Taxpayers Against Fraud, www.taf.org, include the following:
- 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 or medically appropriate.
- 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, resident intern or unlicensed staff.
- 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 or returning 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.