In legal parlance, “qui tam” denotes a general concept. Under qui tam auspices, private parties are empowered to serve law enforcement functions. Traditionally, this role has been reserved for governments.

This quasi-official legal authority is bestowed via legislative action. The motivating factors underlying such legislation are important public policy issues. Fraud detection and deterrence are the main motivations for the qui tam aspects of the False Claims Act (“FCA”).

A Long History

Qui tam’s common-law history dates back to 13th-century England. In the US, its legislative embodiment originated during the Civil War. In 1863, Congress enacted the FCA.

This action occurred in response to rampant government fraud by private Union Army suppliers. Since then, the law has continuously evolved. The most recent major FCA amendment occurred in 1986 and has changed the entire qui tam legal landscape.

Major FCA settlements

The contemporary False Claims Act provides severe civil and criminal penalties for businesses that defraud the US government. Prompted in part by enormous economic incentives, FCA informants are now coming forth in record numbers. The following list is a small sample of
high-profile qui tam settlements of recent years:

2006 - Pfizer $1,000,000,000

This pharmaceutical giant forked over $2.3 billion USD in total FCA sanctions. $1.3 billion USD of this sum constituted criminal sanctions for improper product labeling and kickbacks.

2006 - Tenet Healthcare $900,000,000

This organization remitted $900 million USD in connection with purported billing irregularities. Legal violations included Medicare outlier payment manipulations, upcoding, padding of medical invoices, and kickbacks. In subsequent press releases, a Dept. of Justice official intimated that Tenet realized a profit from its thefts by repaying less than it cheated the government out of.

2000 - The Healthcare Company (“HCA“) $731,400,000

HCA settled for over $840 million USD for illegal billing procedures. The portion of the payout obtained via FCA qui tam totaled $731,400,000 USD. Specific fraudulent acts uncovered in the litigation included unwarranted laboratory tests, falsely coding medical conditions to obtain excessive reimbursement, and billing the government for corporate advertising costs.

2009 NY State and NY City $540,000,000

The New York State and City governments paid out $540 million USD in civil penalties related to a seven-year course of false claims. Fraudulent activities revealed in the FCA action included improper billing for children’s speech, counseling, transportation, and physical and occupational therapy services. Of the total settlement, New York City was liable for $100 million USD.

2009 - Northrop Grumman $325 Million

This defense magnate paid $325 million USD in settlement of an FCA lawsuit. Allegations of deliberately defective manufacture of espionage satellite components were the main focus of the suit. The defects caused major equipment malfunctions and ultimately necessitated costly repairs at taxpayer expense.

2003 - Bayer Corporation $257,200,000

Bayer settled an FCA suit that alleged Medicaid fraud. The company purportedly sold improperly-labeled products to an HMO at a huge discounts. It then failed to disclose these discounts to the government in subsequent reimbursement claims. The apparent motive for the fraud was avoiding payment of certain rebates. Bayer also had $5.5 million USD in criminal sanctions levied against it.

2008 - Amerigroup $225,000,000

Following a jury trial, Amerigroup was held liable for discrimination against pregnant patients designated for inclusion in a Medicaid-affiliated HMO. In August 2008, the company settled to avoid an appeal that could have resulted in it having to pay treble damages.

The above cases illustrate the economic fraud endemic within private-sector providers and contractors. The huge settlements cited above represent just a tip of the financial fraud iceberg that taxpayers absorb annually. Many other cases go undetected or unreported and are occurring as you read these words.

Considering the astronomical amounts being bilked from the government, any rational taxpayer or citizen should not hesitate to invoke the FCA. Such ambitious actions will ultimately improve consumer products, services, and safety. Ultimately, society as a whole stands only to benefit from these effects.