Though it may seem a simple question with an obvious answer, “What is fraud?” in fact opens the door to more than one definition.
Broadly defined, fraud is dishonest or deceptive behavior committed in pursuit of personal or financial advancement, usually at someone else’s personal or financial expense.
There is fraud that employees commit against their employers, where the financial gain comes at the cost of private funding. These types of fraudsters may siphon money from company accounts for personal use, or claim personal expenses as professional expenses.
Fraud can, of course, also be committed against consumers by using false or deliberately misleading information to boost sales.
As it pertains to qui tam relators, fraud has a very specific legal application. For companies that have any sort of government contract, fraud is the deliberate theft or misuse of public funding. Among other factors, this type of fraud involves deliberate intent and financial repercussions that extend far beyond the fraudulent employer.
What kind of fraud is the government worried about?
Though fraud can start with one individual, the cases that lead to government prosecution or hefty settlements are typically those in which the fraud has permeated the very fabric of the company itself.
These cases involve employers that have made fraudulent behavior their company policy, rather than those that made a few minor, unintentional billing errors.
Laws like the False Claims Act prohibit the submission of fraudulent claims to the federal government. Many states also have False Claims Acts or similar laws to prohibit companies, organizations and individuals from requesting unearned reimbursement from taxpayer-funded programs.
Taxpayer funding sustains programs like Medicare, Medicaid and TRICARE, pays for the services of defense contractors that supply crucial military support, and is essential to maintaining and rebuilding public infrastructure.
When an employer deliberately misuses this funding to increase profits or cut corners, it is doing an incredible disservice to the American public.
Determining intent in qui tam cases
For qui tam relators, there are two essential challenges to navigate when collecting evidence. The first is proving the company’s intent to commit fraud.
The second is demonstrating the financial impact of the fraud–in other words, how much public funding is at stake.
Tackling either of these challenges often requires extensive documentation such as internal memos, patient records, invoices submitted to the government, and meeting notes.
It is possible for a defense contractor to bill the government for defective bulletproof vests in order to boost profits, for example. Demonstrating that the company is guilty of fraud, however, requires proof of intent. Intent could mean that the company knew about the defects and billed the government anyway.
It could also mean that the company reasonably should have known about the defects but instructed employees to disregard appropriate testing protocol so that they could produce more vests, thus generating higher reimbursements.
In either case, these intents demonstrate a deliberate deception of some kind with the ultimate goal of receiving unearned compensation at taxpayers’ expense.
Why companies commit fraud
Many people instinctively trust that their employers and coworkers would never knowingly do something wrong. It’s a natural perception, because who would want to work for a company they knew to be fraudulent?
Nonetheless, most individuals that get their companies caught up in fraud allegations are not Bernie Madoff types or sociopaths. Nor are most fraudsters career criminals scheming to steal money from Medicare.
Most of the people who commit healthcare fraud are doctors, nurses, billing specialists, home healthcare providers, and other healthcare workers contracted with federal programs. Since healthcare is a business, even employees and managers with a standard level of morality can make unethical choices to increase profits.
The problem is compounded when no one at the company intervenes, or the organization develops a culture where fraud is not just permitted, but encouraged.
Psychological assessments of fraudsters have shown that companies convince employees to become complicit in fraudulent schemes by using euphemisms for the fraud.
A hospital administrator may not, for example, specifically instruct nurses to upcode procedures, but they may use language like “maximum billing” or “highest possible level” to encourage upcoding. Ultimately, if the service or level of service being billed is medically unnecessary, it could be fraudulent.
People who commit fraud may also assume that their actions aren’t serious if they aren’t physically hurting anyone. They may feel, too, that because their colleagues already commit fraud, one more person participating in the scheme isn’t going to make an impact.
However, committing fraud is never innocuous. It is a crime against taxpayers, the government, and any American, including veterans, hospice patients, economically disadvantaged children, and military personnel, whose safety relies in part on the integrity of publicly funded programs and government contractors.
What to do if you witness fraud
It can be intimidating to consider reporting an employer’s fraud once you’ve witnessed it. Many whistleblowers attempt to report fraud internally first and are either ignored by management, or are instructed to keep quiet.
Here are some questions to ask yourself before reporting fraud externally and/or seeking attorney representation for a qui tam case:
- Who is committing the fraud?
- Are the perpetrators aware that what they are doing may be fraudulent?
- How long has the fraud been going on?
- Is public funding involved? If so, how much has been defrauded?
- What are the potential repercussions of the fraud for the government and the public?
- What evidence do you have that fraud has been committed?
Not only can answering these questions give you clarity about the type of misconduct you have witnessed, it may also help streamline the process of filing a lawsuit with the help of an attorney, or even just to consult with an attorney about whether you are eligible to file a lawsuit.
Once you’ve determined that the misconduct your employer committed is most likely fraud, it’s important to seek legal counsel as soon as possible. Reporting fraud is subject to Statutes of Limitations, which means there is a limited time window in which to convey your original information to the government.
If you are aware of fraud but wait too long to report it, someone else at your company might do so first. That could hurt your eligibility to collect a whistleblower reward or to have legal protection from employer retaliation.