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Reporting CARES Act Fraud as a False Claims Act Whistleblower

Have you observed your employer billing Medicare or Medicaid for unnecessary or duplicative services related to COVID-19? Did your employer accept Paycheck Protection Program (PPP) funds but not use those funds to pay employees’ salaries, or obtain those PPP funds under false pretenses?

Is your pharmacy employer paying kickbacks to marketers for unnecessary prescription drug referrals that are reimbursed by Medicare or Medicaid? Do you work for a biomedical research institution receiving CARES Act funding that failed to disclose that its researchers are also receiving funding from foreign governments?

If you are considering becoming a whistleblower and reporting what you reasonably understand to be fraudulent actions by your employer, you must be aware of the steps and pitfalls involved in reporting fraud to the government. The danger of retaliation is real, so you need to protect yourself.

The CARES Act Provides Opportunities for Employers to Defraud the Government 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a $2.2 trillion economic stimulus bill enacted on March 27, 2020 in response to the severe economic crisis caused by the COVID-19 pandemic in the United States.

The stimulus spending included the creation of the Paycheck Protection Program (PPP) that provided forgivable loans to small businesses (subsequent legislation increased the funding to over $650 billion), $500 billion in assistance to larger corporations, and almost $340 billion in funding to state and local governments.

The CARES Act includes a number of enforcement mechanisms designed to avoid waste, fraud, and abuse of funding, but implementation of these safeguards has been weak, leaving the door open for bad actors to abuse the system.

Examples of CARES Act Fraud

The federal government is prioritizing the investigation and prosecution of fraudulent efforts to obtain loans and other monies through COVID-19 relief programs.

Federal prosecutors have begun to pursue charges for mail fraud, wire fraud, and making false statements in connection with employers’ allegedly fraudulent efforts to obtain PPP loans. For example, federal prosecutors recently charged a Virginia man for allegedly submitting fake payroll documentation to obtain $2.5 million in PPP loans, then using the proceeds to buy luxury items for his personal use.

But most instances of CARES Act fraud will be much more difficult to detect. The CARES Act significantly relaxed the regulatory requirements for obtaining reimbursement through Medicare and Medicaid, including requirements regarding signatures to authorize services, prior authorization requirements, provider enrollment rules, and many others.

The CARES Act even allows providers that had been barred from participating in Medicare or Medicaid programs because of previous questionable activity to now receive Medicare and Medicaid payments.

These relaxed requirements will likely result in a marked increase in the prevalence of CARES Act fraud in the Medicare and Medicaid programs.

CARES Act fraud can also involve kickback schemes, price gouging, and selling substandard or phony COVID-19-related equipment. For example, CARES Act fraud can be committed not only by manufacturers of unauthorized or unapproved COVID-19 tests or treatments, but also by the companies whose technologies enable such scams, such as telemarketers, payment processors, and advertising agencies.

CARES Act Fraud and the False Claims Act

Private citizens play a vital role in exposing fraud against the government when they act as whistleblowers and report their employers’ fraudulent activity. The government realizes that employees who work for the businesses receiving CARES Act funds are often in the best position to identify and report any potential illegal conduct.

The False Claims Act is one of several federal whistleblower statutes, and widely considered to be the strongest whistleblower statute on the books. It was originally enacted during the Civil War to protect the government from fraud by suppliers of goods to the Union Army.

The FCA imposes liability on any person who knowingly or recklessly (1) submits a false claim to the government or (2) makes a false record or statement to obtain payment from the government. The falsity must be material to the government’s decision to make a payment.

Qui Tam Actions Under the False Claims Act

Revised many times since its 1863 signing, the False Claims Act has become increasingly powerful over the years, but one provision has remained intact since its passage—the qui tam, or whistleblower, provision. The qui tam provision allows any individual to file a lawsuit on behalf of the United States government in U.S. federal courts.

Whistleblowers can be rewarded for confidentially reporting fraud that results in a financial loss to the federal government. Assuming they provide original information that results in a successful prosecution by government prosecutors, whistleblowers are awarded a mandatory reward of between 15% to 30% of the recovered amount. These whistleblower rewards can be substantial, because violators of the False Claims Act may face a civil penalty as well as treble (triple) damages.

Many states, and the District of Columbia, have their own FCA statutes, which generally track the federal statute.

Complaints are filed under seal, which keeps the identity of the whistleblower anonymous, and hides from the allegedly fraudulent employer the fact that a whistleblower complaint has been filed against it. This gives the government time to investigate the whistleblower’s allegations and determine whether the government wants to join the lawsuit (intervene) as a party.

The False Claims Act Prohibits Retaliation Against Whistleblowers

The FCA prohibits employers from retaliating against employees who engage in protected whistleblowing activity.

An employee engages in “protected activity” under the FCA when he pursues a qui tam lawsuit. He also engages in protected activity when he has an objectively reasonable belief that his employer is violating the FCA, and he takes action based on that belief in an effort to stop one or more violations of the FCA.

For example, it may not be objectively reasonable to believe your employer is committing Medicare fraud in violation of the FCA when the employer is not purposefully submitting false billing records, but rather is simply negligent in maintaining sloppy billing practices. By contrast, an employee was found to have engaged in protected activity under the FCA when he refused his employer’s demand to engage in knowingly fraudulent billing.

Retaliatory actions can include actions short of termination. You may be reassigned to a position in which you can no longer access documents or information related to the ongoing FCA violations. Your supervisors may begin to harass you or micromanage you, or may encourage your coworkers to shun you in the workplace.

To prove that your employer retaliated against you, you must be able to demonstrate that the person or persons who made the decision to take an employment action against you also knew that you engaged in protected activity.

Out of fear of retaliation, employees often want to conceal their whistleblowing activities, or use measured language (“improper” or “unethical,” rather than “illegal”), but doing so can backfire. It can often be safer for an employee to make sure that her entire supervisory chain of command is aware that she is complaining about illegal and fraudulent billing practices (for example). She might still face retaliation for her actions, but her employer will not be able to argue that the supervisors who took the retaliatory actions had no knowledge of her protected conduct.

Take Action if You Face Retaliation for Whistleblowing

If you believe you are facing retaliation because of your opposition to your employer’s efforts to defraud the government, you should keep a detailed journal with dates, events, and names of witnesses, so that you can track these retaliatory events over time. You may think you could never forget the retaliation you face, but it’s vital to have an accurate and detailed timeline of events.

It is always a good idea to contact an experienced whistleblower attorney as soon as your employer pressures you to engage in illegal conduct, or before you report to a supervisor your concerns about your employer’s potentially illegal billing practices.

You may not need to hire a whistleblower lawyer, but you should definitely talk to one so that you know your rights and know what steps you can take on your own to protect yourself.

Peter M. Whelan is a Washington, D.C. whistleblower attorney at Bernabei & Kabat, PLLC.