False Claims and Qui Tam Suits
The submission of bills (claims) to the Government comes with its own associated risks of prosecution and, potentially, treble damages and fines as well as "rewards" to the whistle blower. The submission of a false claim not only subjects the company (and the responsible officers) to criminal prosecution but permits an individual that is aware of the submissions (even the officer that started out the program of the submissions) to sue the company, in the name of the United States government (and if successful, collect substantial damages).
The financial consequences to a defendant caught up in a false claim action brought by a "relator" (the name ascribed to the individual that brings such an action) can be catastrophic (although very lucrative to the relator). Such a relator may be entitled to up to 30% of the amount collected from the company upon a conviction (or settlement) plus attorney fees to be paid by the convicted company. In addition, each false claim can subject the convicted company to a fine for each false claim submitted. In addition civil damages can be assessed in the case which, in turn, are trebled.
A Qui Tam action is filed under seal (and thus only the Relator and the Government are aware of its existence) and that period under seal may continue for years while the Government decides if it wants to join in the suit or not. If the Government feels the case has merit it will begin an investigation that probably will be both a civil investigation and a criminal investigation which, again, may go on for a number of years before the defendants become aware of its existence. Potentially a very dangerous time for the targets which normally are not aware of the danger or the investigation.
The possibilities of Qui Tam actions involving businesses that directly or indirectly sell to the government seem almost endless. Examples can include the sale of products required to be licensed by the Government (by for example the EPA for rat poison not made in accordance with its method of production and mixture) that is sold to the military or for use in national forests and the like. More common would be improper "coding" by physicians of medical services that are reimbursed by Medicare or kickbacks or referral fees to referring physicians that are illegal even though the treatment was necessary. This includes both doctors and their clinics and/or hospitals and can include nursing homes and various other health care providers.
Other obvious examples of potential Qui Tam actions include companies selling products to the government as part of any federal procurement program. Normally included in the Government contract is an agreement that the company is in full compliance with federal law and that the submission of each bill or claim for payment is an affirmation of such compliance. Thus making the submission of a bill when the company is not in compliance a false claim.
Finally, but hardly less important, the potential fall out of any false claim action is the very real danger of criminal prosecution, the breadth of which is sometimes hard to predict. In this area, the Government has been known to expand its prosecution to include consultants, accountants and lawyers who they believe either aided in the earlier "fraud" or assisted in its concealment.