The federal government spends roughly $6 trillion annually. A huge amount of that money goes into certain, predictable categories year after year. Spending on Medicare and Medicaid account for roughly 25% of the federal budget, defense spending, in recent years accounts for another 15% or so. Social Security payments and interest account for another 33% collectively.
Accordingly, it makes sense that the lion’s share of settlements under the False Claims Act, one of the government’s main fraud-fighting tools, result from allegations regarding overbilling by defense contracts or fraud on the Medicare or Medicaid programs. But it’s worth noting that the government funds so, so many more things than just healthcare, defense, social security, and interest payments. Overbilling most of those programs can result in a violation of the False Claims Act and the potential for whistleblower suit.
A settlement from last month demonstrates the law’s breadth. Under that settlement, Hahn Airlines, a German airline with a US subsidiary, agreed to pay the Department of Justice nearly $27 million to resolve allegations that it failed to pay the US certain commercial airline fees it collected from passengers, as require by law. Specifically, the carrier failed to pay fees to the USDA that fund agricultural inspections, fees to the CBP that fund customs processing, and fees to the TSA that fund security screenings. The case was filed by a whistleblower.
But, in addition to financing the operation of the US aviation system, and recovering dollars lost to fraud in that industry, the government has financed, and recover lost dollars lost to fraud in many industries, including:
Crop Insurance: a program the US subsidizes that insures agricultural output in case of natural disasters. Submitting a false insurance claim to the program can be an FCA violation.
Flood Insurance and Disaster Relief: The federal government funds both programs and submitting false claims to them, such as claiming something damaged by a negligent fire resulted from a natural disaster, can be an FCA violation.
Mortgage Fraud: The Fair Housing Administration is a program that underwrites certain mortgages. To verify if a loan qualifies, the FHA relies on various private companies. Failure to follow proper underwriting procedures can result in an FCA violation.
Oil and Gas Fraud: An awesome volume of the US’s energy production is derived from lands owned and managed by various federal agencies. Mining companies generally owe the government royalties based off the resources extracted from government land. Failing to pay the proper amount of royalties can be an FCA violation.
Education Fraud: The federal government funds many student loan programs, each having rules concerning attendance, education requirements, and the like. An education institution not following those requirements while continuing to be paid by federal loans can be in violation of the FCA.
Grant Fraud: The US government funds a lot of research in the form of grants. Not following a grant’s terms or falsifying data instead of reporting the real results of funded research can be an FCA violation.
The above is not meant to be an exhaustive list. With budgets the size of the US government’s, it’s hard to find an industry where zero government money is affected. A simple rule of thumb is that if the federal government is being overcharged, a possible FCA violation is afoot, and whistleblowers can likely bring the fraud to a halt.
