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Shannon S. Smith

Assistant United States Attorney

Eastern District of Arkansas

(501) 340-2628

Shannon.Smith@usdoj.govThe views expressed in this presentation are solely those of the author and should not be represented as the

policy or opinion of either the United States Department of Justice or the United States Attorney for the Eastern

District of Arkansas.

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Provides for recovery of treble damages

Do not need to prove specific intent to defraud

Only need to show reckless disregard or

deliberate indifference

Lower standard of proof than criminal cases

Overview of the False Claims Act31 U.S.C. Section 3729-33

Reaches individuals, corporations and

partnerships

Corporations can be liable for acts of employees

even if they did not know about the conduct if the

conduct benefits the corporation

Liability is joint and several

Statute of limitations is 6 years from date of fraud

or three years from date of discovery (not to

exceed ten years)

Targets the incentive for fraud: Money

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FALSE CLAIMS ACT AND FERA

• On May 20, 2009, the Fraud Enforcement and

Recovery Act of 2009 (FERA), P.L. 111-21,

became law. Section 4 of FERA revised certain

provisions of the False Claims ACT (FCA), 31

U.S.C. §§ 3729-33.

• First significant revisions since 1986.

• Revisions focused on only a few sections of the

statute.

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•Congress labeled the FCA

amendments “Clarifications to the

False Claims Act to Reflect the

Original Intent of the Law.”

•“…The effectiveness of the FCA

has recently been undermined by

court decisions limiting the scope

of the law and allowing

subcontractors and non-

governmental entities to escape

responsibility for proven frauds. In

order to respond to theses

decisions, certain provisions of the

FCA must be corrected and

clarified….”

S. Rep. No. 111-10, 111th Cong., 1st Sess. 10 (March

23, 2009).

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Provisions of the False Claims Act

31 U.S.C Sections 3729-33

3729(a)(1)…Any person who…

(A) knowingly presents or causes to be presented, a false

claim or fraudulent claim for payment or approval….

3729(a)(1)(B)

• 3729(a)(1)…Any person who…

(B) knowingly makes, uses, or causes to be made or used,

a false record or statement material to a false or

fraudulent claim.

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Pertinent Dates

• Although the changes made by FERA

generally apply only to conduct that occurs

on or after May 20, 2009, the date FERA

was enacted, FERA expressly states that the

changes to the former paragraph 3729(a)(2)

apply to claims pending on or after June 7,

2008 (two days before the Supreme Court’s

decision in Allison Engine).

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Conspiracy

3729 (a)(1)(C)

• 3729(a)(1)…Any person who…

(C) conspires to commit a violation of

subparagraph (A), (B), (D), (E), (F), or (G).

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More effects of changes…

• A violation of the new conspiracy provision will occur

when a person conspires to violate any of the FCA’s other

liability provisions.

• Proof of a specific intent to defraud should not be required.

• It should be sufficient to show that the defendants agreed

to violate one of the FCA’s substantive liability provisions,

which can include an agreement to act recklessly or with

deliberate ignorance.

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Failure to Deliver Property

3729(a)(1)(D)• 3729(a)(1)…Any person who…

(D) has possession, custody, or control of property or

money used, or to be used, by the Government and,

knowingly delivers, or causes to be delivered, less than all

of that money or property.

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Broad effect

• Intended to cover failure to deliver property.

• Little use in past.

• Eliminated wording about intent to defraud,

willfully concealing, and requirement for

receipts or certificates.

• May be used more since archaic language

and “willfully” removed.

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Reverse False Claims

3729(a)(1)(G)• 3729(a)(1)…Any person who…

(G) knowingly makes, uses, or causes to be made or used,

a false record or statement material to obligation to pay or

transmit money or property to the Government, or

knowingly conceals or knowingly and improperly avoids

or decreases an obligation to pay or transmit money or

property to the Government.

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Changes to Reverse False Claims

• Eliminated “to conceal, avoid, or decrease” from existing

statute.

• Eliminated intent language.

• Result is that a person violates the reverse false claims

provision where he knows that he has received federal

money to which he is not entitled – including money that

he initially was entitled to receive, but is no longer entitled

to retain – and does not return it.

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FCA, FERA and PPACAWhat the large print giveth, the small print

taketh away…

• FCA with FERA change to 3729(a)(1)(G)-

the reverse false claim

• PPACA Section 6402(d) – receipt of

overpayment must be reported within

allotted time period – see Kane case

• Can be a felony – up to 5 years in prison,

plus serious fines (up to $250,000 per

individual or $500,000 per corporation)16

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Odds and Ends• 3733(a)(1)

Attorney General may delegate authority to permit

FCA civil investigative demands (subpoenas).

Information may be shared with Relator.

• 3732

Complaint, while under seal, may be served on co-

plaintiff, State or local government.

• 3731

Government’s Complaint relates back to relator’s

filing date.

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QUI TAM ACTIONS

If a private party files the action, the complaint is

filed under seal for at least 60 days while the

United States investigates the complaint.

The seal period can be extended for "good cause"

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If the United States provides any portion of the

money or property which is requested or

demanded, or if the United States will reimburse

anyone for any portion of the money or property

which is requested or demanded the False Claims

Act applies

Any false invoice

Claims to Medicare

Cost reports

Fraudulent attempts to redeem food stamps

Federal insurance claims

Fraudulent negotiations of Treasury checks

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Federal Health Care Programs

• Medicare – 55 million beneficiaries, $597 billion

in expenditures for 2014

• Medicaid – 70 million beneficiaries, over $400

billion in expenditures

• TRICARE - DOD

• VA

• FEHBP

• Public Health Service Entities

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General HCF schemes

• Overbilling for services rendered

• Billing for services not rendered

• Providing and/or billing for medically unnecessary

services

• Failing to provide adequate care or services

• Billing for defective goods

• Program integrity concerns (Antikickback/Stark)

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ANTI-KICKBACK ACT

41 U.S.C 51-58

Prohibits payment of any kind to or by a

contractor for the purpose of receiving favorable

treatment

Double damages plus a civil penalty

Part A Fraud Schemes

Year-End Cost Reports• Billing for costs unrelated to patient care (e.g.

lavish entertainment, furs, jewelry)

• Disguising non-reimbursable costs as

reimbursable costs (e.g. including Labor and

Delivery in OR costs)

• Shifting non-Medicare patients to cost report (e.g.

nursery)

• Falsifying wage index (hours and salary date) to

increase DRG payments

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Continued….

• Shifting costs related to private-pay patients

to Medicare (e.g. nursing salaries)

• Cost shifting to cost-based services

• Related parties billing at rates including

exorbitant profits on supplies or services

• Overstating costs (e.g. fail to report rebates

on supplies and equipment)

• Physician kickbacks included in cost report25

Still going……

• Double billing

– Billing both Part A and Part B for same

item/service

– Billing Medicare when provider has been paid

by another payor

– Billing the same cost twice on a single cost

report (e.g. billing for management fees and

then including same fees as A & G costs)

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Last one!

• Making false statement to the carrier, fiscal

intermediary or the OIG in furtherance of

the scheme.

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COMMON LAW REMEDIES

Breach of Contract

Unjust enrichment

Mistake of Fact

Conversion

Breach of Fiduciary Duty

Restitution

Single damages

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Questions???

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