The federal False Claims Act allows private citizens, known as whistleblowers, to bring false claims actions against companies that defraud the government. As an incentive, the False Claims Act has a provision that rewards whistleblowers. Whistleblowers can receive as much as a thirty percent share of the recovery.
On December 14, 2016, the United States Department of Justice issued a press release which touted that $4.7 Billion were recovered as the result of the Federal False Claims Act. Of the $4.7 Billion recoveries, more than fifty percent of the amount came from the health care industry, which includes drug companies, hospitals, nursing homes, laboratories, and physicians. Fraud against the government is not, however, limited to healthcare.
False Claims Act settlements have been made for fraud committed in government purchasing contracts. Every year, federal and state governments purchase products and services from thousands of businesses. Overall, the federal government spends more than $500 Billion a year on contracts with for-profit firms. A significant amount of money is spent on defense contracting. The sheer volume of purchases and contracts, coupled with limitations on the government’s ability to oversee all of the transactions, creates an environment that is ripe for fraud.
Below are examples of government contract fraud. If your employer contracts with the federal government, please take notice of these examples:
- Charging for goods and services that were not provided
- Submitting false cost or pricing data to the government during the negotiation of a contract to obtain an artificially inflated contract price (commonly referred to as “Defective Pricing”)
- Failure to give the government the “best price” (where the contract has a “Price Reduction Clause” that requires the contractor to provide the government with the lowest price offered to other customers)
- The contractors’ failure to satisfy the performance requirements under the contract with the government
- Billing for labor, materials, or equipment that were not used to perform the government contract
- Failing to pass along discounts to the government, where the contractor receives such discounts for volume, prompt payment, etc., from the suppliers and subcontractors used by the contractor
- Fraudulently billing for labor costs not incurred, such as providing “journeyman” rates in a bid and then using lower-paid apprentices to perform the work under the contract
Be on the lookout for fraudulent activity. Reporting fraud committed against the government has made millionaires out of the people who have reported it. To be eligible for compensation as a whistleblower, fraud reporting must be done in a specific way.