My Employer is Committing Fraud ... Now What?
What do you do when you think your employer is committing fraud? When management and owners are engaged in fraudulent activity such as billing the government for time not spent working on a government project or seeing a Medicare patient, the False Claims Act can provide an avenue for reporting the fraud? Federal and state whistleblower laws offer protection to individuals who report fraud and provide financial rewards for coming forward.
Federal Whistleblower Lawsuits
Federal whistleblower laws give private individuals a way to report fraud, illegal activity, or other violations. This includes any fraud against the government, including tax fraud, healthcare fraud, and securities fraud. Whistleblower laws allow individuals to file a civil lawsuit to recover damages for fraud. Whistleblower protections also prohibit employers from retaliating against employees for investigating or reporting fraud.
False Claims Act and Qui Tam Lawsuits
The False Claims Act prohibits fraud against the federal government. Under 31 U.S.C. § 3729, a fraud claim can be made against anyone who commits fraud against the government, presents a false claim for payment, or conspires to commit government fraud. When government money is involved, fraud to collect that money comes under the scope of the False Claims Act.
Also known as a qui tam lawsuit, an individual who exposes fraud on the government (a "relator") can bring a lawsuit on the government's behalf and receive a share of the damages recovered. A successful prosecution or settlement under the False Claims Act provides for compensatory damages, civil penalties, and treble (triple) damages. The relator shares in the settlement or judgment proceeds.
False Claims Act cases may involve government fraud in healthcare, defense contractors, government benefits, housing, grants or other areas where a private company does business with the government. Whistleblower claims of fraud against the government may involve solitary incidents of fraud or large-scale enterprises defrauding the government of millions of dollars.
Relators may include employees, consultants, or contractors who suspect or witness fraud. In many cases, this fraud is reported to the company but no action is taken because owners or managers are complicit in the fraud. Employees may even be discouraged from reporting fraud or threatened with termination if they don't stay quiet.
A qui tam lawsuit is filed by an individual in the name of the government, for reported violations of the False Claims Act. The complaint remains under seal while the government investigates the allegations to determine whether it wants to intervene in the case.
If prosecutors decide to intervene, the government takes primary responsibility for prosecuting the claim. If the government decides not to intervene, the individual who filed the claim can usually still continue with the lawsuit. With a qui tam lawsuit, the individual can share in the recovery of damages and penalties, and may also be awarded attorneys' fees and court costs.
A violation of the False Claims Act provides for triple the amount of damages to the government and penalties in ranging up to $22,000 per false claim. An individual who files a qui tam lawsuit will usually be awarded a relator share, between 15% and 30% of the proceeds of the action or settlement depending on whether the government intervenes. The recovery amount depends on the extent of the whistleblower's participation, input and cooperation in prosecuting the case.
One of the most common areas of whistleblower claims involves health care fraud. Thousands of healthcare providers, doctors, nurses, hospitals, insurance companies, pharmaceutical companies, and support businesses are involved in government healthcare programs, including Medicare, Medicaid, and Tricare (Veterans coverage). This provides an opportunity for some to take advantage of the system while enriching themselves at the taxpayers' expense.
Healthcare fraud may involve:
- Paying kickbacks to health care providers
- Billing for services never provided
- Billing for services tainted by the provider's financial interest, for example, sending patients to an MRI facility in which they have an ownership interest
- Overbilling for services
- Upcoding or unbundling
- Using false certifications
- Misusing grant money
- Billing for unnecessary treatment
- Misrepresenting drug and medical device safety
When a healthcare provider, employee, or contractor witnesses possible fraud, he or she may be able to file a whistleblower claim. The government may award a qui tam whistleblower a financial reward of up to 30% of the recovered damages and penalties. State and federal whistleblower protections also prohibit an employer from firing or retaliating against an employee for reporting fraud or illegal activity.
Tax Fraud Whistleblowers
Federal law also provides awards for reporting tax fraud violations. The Internal Revenue Service (IRS) Whistleblower Office can award money to individuals who report people or businesses that fail to pay their taxes. Under 26 U.S.C. § 7623, the IRS can award up to 30% of the additional taxes, penalties, and other amounts collected by the IRS.
In order to report a tax violation for a reward, the whistleblower generally needs to provide “specific and credible information” to the IRS that will result in the collection of unpaid taxes, penalties, interest, and other amounts. If the taxes and penalties collected amount to more than $2 million, the whistleblower may be able to collect 15% to 30% of the amount collected by the IRS.
Many people may be hesitant about reporting tax violators because they do not want to be identified. In most cases, the IRS will work to protect the identity of the whistleblower. However, when the whistleblower has to give testimony in court, they may have to be identified. If you have any concerns about maintaining confidentiality or anonymity for reporting tax fraud, talk to your experienced whistleblower attorney about your case.
Securities Fraud Whistleblowers
The U.S. Securities and Exchange Commission has an Office of the Whistleblower that handles reports of securities law violations. Individual whistleblowers can help the SEC identify fraud and other securities violations. In recognition of the importance of whistleblowers, the SEC is authorized to provide awards to whistleblowers who provide information that leads to enforcement action.
If a whistleblower provides specific, timely, and credible information that results in over $1 million in sanctions, the whistleblower is eligible to receive an award of between 10% and 30% of the money collected. Since 2011, the SEC has awarded more than $160 million to whistleblowers who reported SEC violations.
Florida and New York Whistleblower Claims
In addition to federal whistleblower laws, Florida and New York have a number of state-level whistleblower protections who come forward with information of fraud and other unlawful activity. The Florida and New York False Claims Acts are similar to the federal False Claims Act, which prohibits knowingly defrauding any department, division, or district of the state government. A private citizen can bring a civil action for a violation of the Florida or New York False Claims Act in the name of the particular state. The damage under the State False Claims Acts are similar to those of the federal Act.
Retaliation Against Whistleblowers
Many employees and contractors do not want to come forward to report fraud of illegal activity because they are worried about retaliation. An employee who reports fraud could be fired or demoted, which could impact his or her ability to provide for their family. However, state and federal whistleblower protection laws provide a cause of action for anyone who suffers retaliation for reporting illegal activity.
The False Claims Act provides relief from retaliatory actions against whistleblowers. If an employee or contractor is fired, demoted, suspended, threatened, harassed, or discriminated against because they reported fraud or cooperated with investigators, the individual may have a claim for damages and other equitable relief. This includes:
- Reinstatement with the same seniority status
- Back pay
- Interest on back pay
- Compensation for special damages
- Litigation costs
- Reasonable attorney's fees
Contact Us About Your Whistleblower Case Today
We understand how difficult it can be to come forward with a whistleblower lawsuit. Your job may be at risk and you are concerned about the repercussions for your career and your reputation. At Schechter Legal Group, we can and help protect you and your family and fight to get you the reward you deserve. Contact the Schechter Legal Group today.