March 20, 2023

How Qui Tam Lawyers use FCA Today

There are many types of fraud perpetrated against civilians, businesses, and the Government. As long as there has been recorded history, we can find examples of unscrupulous individuals seeking a way to make a quick buck. Finding ways to match wits with criminals, undermine their plans, and stop them before committing crimes can be difficult. It is no different when it comes to fraud committed against the Government.

There are many agencies, processes, and workers involved with the federal Government’s day-to-day activities. It is a large machine with many moving parts. It seems that the larger the scope of Government, the more opportunities there are for fraud to be committed. Therefore, it is easy to understand why a large entity, such as the Government, would be seen as a prime target.

The Federal Government has been combatting fraud through qui tam or the False Claims Act (FCA) since President Abraham Lincoln signed it into law in 1863. The False Claims Act, also known as the Lincoln Law, imposes liability on persons or companies who defraud the Federal Government.

In its earliest uses, the FCA sought restitution for defective or poorly manufactured items sold to the U.S. Government, weapons, ammunition, food provisions, and the aforementioned malnourished mules.

Today, qui tam cases often involve healthcare (Medicaid, Medicare) and defense contractors, but some also relate to financial services, environmental regulation, oil, gas and mining, and scientific research.

FCA suits today are becoming more and more diverse. For example, Qui tam lawyers litigate on behalf of relators in PPP Loan cases, immigration cases, and cybersecurity. We might even see False Claims Act liability regarding the compliance of Federal workers and vaccine mandates.

False Claims Act and PPP Loans

In recent years, whistleblowers have been important in addressing fraudulent activity related to the Paycheck Protection Program (PPP). One case, settled in September 2021 and reported by EIN Presswire, marked the fourth False Claims Act case involving PPP rules. The PPP, established by Congress on March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), aimed to support small businesses by offering forgivable loans backed by the Small Business Administration (SBA). These loans were designed to cover payroll costs, rent, mortgage interest, and utilities.

This particular case involved a South Florida-based jet chartering company, All in Jets, LLC, receiving a PPP loan totaling $1,173,382 in April 2020. However, the owner misused over $98K of the loan to pay off personal and medical expenses and made a substantial donation to a construction firm to build a drive-in movie theater.

A whistleblower, who was a former accountant for All in Jets, LLC, filed a sealed action under the False Claims Act against the company and its owner, suspecting fraudulent use of the PPP loan proceeds. The Department of Justice and the U.S. Attorney’s Office for the Southern District of Florida ultimately settled the case, with All in Jets, LLC’s owner paying over $360K back to the Government.

False Claims Act and Cyber-Fraud Initiative

The DOJ outlined three types of suits it may pursue against contractors or grant recipients under the False Claims Act in a press release. (1) If a contractor knowingly provides cybersecurity products or services that are deficient; (2) If they knowingly misrepresent their cybersecurity practices or (3) intentionally violate obligations to monitor and report cybersecurity incidents and breaches. In a statement, Acting Assistant Attorney General Brian M. Boynton said that “False Claims Act enforcement and whistleblower reporting will help spur compliance by contractors and grantees.”

Victims of a data breach brought on due to activities outlined above will have the Department of Justice utilizing the total leverage of FCA to bring justice.

False Claims Act and Vaccine Mandates

According to an article recently posted on the Covington website, the Government’s imposing of the vaccine mandate has been a top story. The possibility of noncompliance with the vaccine mandate may result in FCA cases brought before the DOJ for review. Covington predicts that qui tam lawsuits alleging FCA liability predicated on noncompliance with the vaccine mandate will happen. Under The Federal Acquisition Regulation (FAR), all executive agencies must follow guidelines in procuring services and supplies with the appropriated funds. A failure to comply with FAR could lead to a finding that invoices submitted under covered contracts are invalid under the False Claims Act.

False Claims Act and Visa Fraud

The FCA has been an effective weapon in combating fraud perpetrated against the federal treasury, as shown in the above situations. But in the case of visa fraud, can qui tam be used to show that the Government lost money? According to Law360’s report, a whistleblower attorney alleged that a high-tech giant’s use of the H-1B program led to: “the company cheating the government out of all the payroll tax revenue it was due since allegedly it didn’t pay the visa workers prevailing wages.” The company had allegedly hired other alien workers using B-1 (tourist) or L-1 (international executive) visas, which are bargains, instead of the pricier H-1B visas, which should have been employed instead.

There have been other cases such as this brought before the courts. However, the judge attempted to dismiss the case in this example, and no judgment or settlement was reached.

Qui Tam and Tomorrow

As the size of the government increases and programs along with it, opportunities for fraud will also grow. Therefore, the ability of qui tam lawyers to utilize the full scope of the FCA to bring these criminals to justice will be of the utmost importance.

The firm of Berg & Androphy handles all qui tam cases on a contingency fee basis, meaning that the firm earns a fee only if it is successful for the whistleblower and their qui tam claims. The firm also represents individuals in white-collar civil and criminal cases. Many whistleblowers with inside information on illegal activities may have civil and potentially criminal exposure. Decisions will need to be made about the risks of pursuing a qui tam case, weighted against whistleblower protections afforded through the Federal False Claims Act amendments. The private citizen or relator may seek back pay and reinstatement if an egregious action is taken against them by the defendant for the FCA claim, through civil penalties.

The firm of Berg & Androphy has expertise in both qui tam and white collar matters. Joel M. Androphy is the author of books on the False Claims Act/qui tam laws and white-collar crime. Most qui tam law firms do not have this dual expertise.

For more information or to seek legal advice on a false claims act case, email quitam@bafirm.com.