False Claims Act
The FCA was passed during the Civil War to fight corruption among the contractors who supplied the Union Army. It is a qui tam law, which allows a private litigant to sue on behalf of the government. [This is a very old legal tool, dating to the pre- colonial period. See e.g., Shoemaker v. Shirtliffe, 1 U.S. 127 (1785) and Purviance v. Angus, 1 U.S. 180 (1786).] The government may take over the lawsuit, ask that it be dismissed, or allow the private litigant to prosecute the lawsuit for a civil remedy. If the government prosecutes the lawsuit, then the private litigant is entitled to between 15% and 25% of the recovery, [31 U.S.C. § 3730(d)(1).] and between 25% and 30% if the government does not intervene. [31 U.S.C. § 3730(d)(2).] The attraction of these actions in medical care is the statutory penalty—$5,000 to $10,000 per false claim submitted. [United States v. Bornstein, 423 U.S. 303 (1976).] The court does not have the authority to reduce this penalty. [ United States v. Lorenzo, 768 F. Supp. 1127 (E.D. Pa. 1991). In this case, a dentist presented 3,683 false claims, worth approximately $140,000. The court found that it had no authority to reduce the penalty below the $5,000 minimum and awarded the government $18,415,000.]
If the government does intervene, then it has the additional power to bring associated criminal charges under the FCA, for mail and wire fraud, depending on how the claims were submitted, and under other criminal conspiracy laws, such as RICO (Racketeering Influenced Corrupt Organizations Act). The usual pattern is for the government to investigate the claim, then to propose a settlement for some fraction of the potential false claims. [In a settlement, the government is not bound by the $5,000 minimum penalty.] This is attractive because very few medical care providers have defended a false claims action successfully. The government often will agree to settle any potential criminal liability claims as part of the financial settlement, which usually makes the offer irresistible. [Because of the importance of reputation, medical care providers can have their practice destroyed by the publicity of a major fraud prosecution, even if they ultimately prevail. Because criminal defense is not covered by insurance, settling a case may result in personal savings of more than $100,000 in legal fees.]