The federal government, through the Department of Justice (“DOJ”), uses the False Claims Act (“FCA”) as their main tool to recover losses from individuals or companies who defraud federal government programs. The federal government has even enacted recent legislation to combat it more aggressively (e.g., the 2009 Fraud Enforcement Recovery Act and the 2010 Patient Protection and Affordable Care Act). In 2015, the DOJ recovered more than $3.5 billion in settlements and judgments involving fraud and false claims against the government.
Many states, including New York, have their own FCA regulations that handle fraud related to state government programs and funding. Anyone that receives payments from government programs or operates a government program can be subject to FCA liability. Under both systems, FCA violations are enforced civilly, but related criminal statutes are usually also triggered that could result in criminal prosecution. Both individuals and companies can be subject to FCA liability.
The New York and federal FCAs have “whistleblower,” or qui tam provisions, which allow individuals to bring suits on behalf of the government. In fact, many of the recent FCA claims have been initiated by whistleblowers, who are entitled to a portion of any monetary recovery. A substantial number of FCA claims come from the health care industry. These FCA violations include overcharging for goods and services paid for by government health care programs such as Medicare and Medicaid. A service provider in a defense contract could also be subject to a FCA claim for billing a less skilled employee on a higher skilled employee’s pay structure, or for billing unnecessary services to the government.
If you are contacted by law enforcement with any request for information, even informal, you should contact an experienced defense attorney immediately. Because of the extremely high civil penalties that could result from a FCA violation, it is important to be vigilant and act fast.
FCA violations could range from knowingly submitting a false or fraudulent claim for payment to the government to failing to pay an obligation to the government.
FCA violations are not enforced criminally. A FCA violation can, however, trigger a parallel criminal investigation. A health care provider could violate both the FCA and criminal regulations by, for example, overcharging Medicare or Medicaid for services by submitting fraudulent bills, and offering cash kickbacks to physicians for Medicare or Medicaid patient referrals.
Crimes related to the civil FCA could be fraud, including health care and procurement fraud, money laundering, and structuring to avoid reporting requirements. In a FCA suit involving the health care industry, criminal charges could also come from the Anti-Kickback Statute and the Stark Statute.
The federal False Claims Act is governed by 31 U.S. Code sections 3729-33, and the New York False Claims Act is under Article 13 of the State Finance Law.
The FCA only carries civil remedies, but a violation of the FCA usually gives rise to parallel criminal investigations. FCA penalties range from monetary penalties to exclusion from government programs. A violation of the federal FCA could have a maximum penalty of $11,000 for each FCA violation plus three times the actual damage to the government from the violation. In New York, the maximum penalty is $12,000 for each violation plus three times the actual damage to the government.
A False Claims Act violation generally requires “intent,” which means the individual needs to have intended the action or its consequence, giving way for the “government knowledge defense.” Essentially, if you can show that you provided the government all of the particulars of a claim for payment before the claim was presented, you can’t be said to have knowingly presented a false or fraudulent claim. The logic is that if the government knows what it’s paying for, a claim cannot be false. There are many exceptions and limitations to this defense, however, and it is not automatic.
The federal and New York FCA each have their own laws and penalties and regulate different areas. A state Medicaid program, for example, can be accused of violating a state FCA regulation while the federal Medicare program or a national defense contractor can be accused of violating a federal FCA.
In May of 2016, the City of New York settled a FCA claim in the Southern District of New York for $4.3 million for submitting claims for emergency ambulance services that did not meet Medicare’s “medical necessity” requirement. In November of 2015, a defense contractor settled a FCA claim in the Southern District of New York for over $25 million for selling defective military technology to the federal government.