The unprecedented $5 trillion approved in recent federal stimulus packages will help millions of people in need, but it also attracts shady operators looking to defraud the government and make a quick buck.
Whistleblowers consistently have been the main mechanism in detecting and reporting fraud, even more successful than law enforcement agencies, internal auditing, management review and other reporting mechanisms combined.
Statistics from the U.S. Department of Justice show that whistleblowers uncover 70% of the civil frauds recovered by the government.
In 2019, of the $3 billion recovered from fraudsters, $2.1 billion is attributed to whistleblowers who first detected and then reported the fraud.
Whenever emergency funding is provided, fraud rates increase because the government isn’t able to implement effective anti-fraud systems before distributing the money.
This leaves the government in a “pay and chase” scenario where whistleblowers are more vital than ever.
How it works
Anyone with personal knowledge of a fraud committed on the government can be a whistleblower as long as their information is not previously known to the government.
Whistleblower cases typically are filed under seal by a private attorney, and the DOJ then has the option to intervene and prosecute the case on behalf of taxpayers.
Why come forward?
Whistleblowers are entitled to a share of the financial recovery obtained from the fraudster.
Under the most commonly used authority, the False Claims Act, whistleblowers may be awarded 15% to 30% of the amount recovered.
There also are laws in place to protect whistleblowers from being unfairly retaliated against by employers.
In my experience, most whistleblowers just want to do the right thing and are relieved after reporting the suspected fraud.
Common coronavirus schemes
While new schemes are always being developed, three types of government funding are particularly susceptible to fraud in the COVID-19 scenario.
First, many companies have taken advantage of the Paycheck Protection Program. The DOJ already has criminally charged 57 people for defrauding the PPP program.
The number of civil prosecutions is expected to be exponentially higher. Former California Banking Commissioner Walter Mix estimated that 10% to 12% of the PPP applications submitted were fraudulent in some fashion.
The schemes vary, but some have fraudulently certified the number of employees, the necessity for the loan or made improper use of the funds.
Second, medical billing fraud is being committed against government health insurers including Medicare, Medicaid and Tricare.
Some of the most common scenarios are overbilling for health care services, such as telehealth visits, or billing for inadequate or worthless medical services.
The DOJ recently rolled out a new nursing home enforcement initiative to combat this latter type of fraud.
Third is procurement fraud. It is only as limited as the creativity of fraudsters, but often involves the delivery of inferior goods, price gouging, kickbacks or bribery, or collusive efforts to undermine a fair bidding process.
Procurement fraud was the catalyst for creating the False Claims Act during the Civil War because contractors were supplying the Union Army with inferior weapons and horses.
Taking action
The DOJ is making coronavirus-related fraud schemes a top priority by designating a prosecutor in each district around the country to serve as a coronavirus fraud coordinator. If you believe you might be able to save taxpayer money and serve as a whistleblower, time is of the essence.
Every dollar recovered from fraud can be redistributed to those who need it most.
Bradley Bodiford is a former federal and state prosecutor and an attorney at the Terrell Hogan law firm representing those harmed by fraud, defective products and negligence.
