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Unpacking Lincoln’s Law: The Importance of the False Claims Act

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By Nathaniel Smith

Nathaniel Smith

Nathaniel Smith

In 1863 the government was receiving sand instead of sugar, brown paper instead of leather, and decrepit mules instead of sound horses – yet still paying those vendors the full contract price despite the worthless goods. President Lincoln sought to end this fraud against the government through enactment of the False Claims Act.

As the largest consumer in the United States, indeed, the world, the United States Government is susceptible to fraud from a vast array of sources. The False Claims Act has become the primary tool to stop those who reap financial benefits based on false statements and misrepresentations to the Government. During the Civil War, the Government was being sold worthless goods to supply its troops. Today, fraud against the Government can come from billing for health care services never provided, illegal kickbacks, defense contract bid rigging, and, yes, selling worthless goods to the Government, among other fraudulent schemes.

The quintessential case under the False Claims Act involves a false statement, made to a government agency, that causes the Government to pay money that it otherwise would not have paid had it known the truth. A simple example is a nursing service providing care for Medicaid/Medicare patients that submits a bill stating its employee worked a ten-hour day, when in fact only six hours were worked.

The False Claims Act is important because it allows ordinary citizens to report fraud against the Government, while providing them financial incentives and protections from retaliation. These whistleblowers are key partners for the Government in identifying fraud that may otherwise go undetected. Under the False Claims Act, whistleblowers, known as “relators,” bring suit on behalf of the Government by filing a case under seal. Relators can be most anyone with unique knowledge of the fraud taking place, including not only employees, but also independent contractors, patients, clients, or competitors. Relators cannot proceed pro se and are wise to retain counsel experienced in the unique procedures of the False Claims Act.

Through the False Claims Act’s qui tam provision, these relators are entitled to compensation for blowing the whistle on fraud against the government. Generally, whistleblowers are awarded between 15 and 30 percent of the funds recovered by the government.

Additionally, Defendants found to have violated the False Claims Act can be held liable for up to three times the amount the government was defrauded, and may be liable for penalties between $10,781 and $21,563 for each false claim presented to the government.

Though the types of fraudulent schemes have changed since the 1800s, organizations continue to deceive the government for their own financial gain. The private-public relationship that occurs when private relators bring claims to the Government is the hallmark of the statute, and provides increased access to resources that may otherwise be unavailable to the government to combat fraud. In 2016, private relators returned some $2.9 billion to the federal coffers. With trillions of dollars being spent by the government, ordinary citizens willing to report fraud are valuable partners to the Government.

A  whistleblower attorney at Halunen Law, Nathaniel Smith represents whistleblowers (or relators) in False Claims Act / qui tam lawsuits throughout the United States, including healthcare fraud, fraudulent billing to Medicare and Medicaid, pharmaceuticals fraud, medical-device fraud, small-business fraud, and Department of Defense fraud. Contact him at (612) 605-4098.

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