False Claims Act

On March 21, the U.S. Court of Appeals for the Seventh Circuit upheld the district court’s decision to find Anchor Mortgage Corporation and its CEO John Munson liable for false claims submitted in loan guaranty applications to the U.S. government, but reversed the “gross trebling” calculation of the damages in favor of “net trebling,” which reduced the total recovery.

In 2010, the federal district judge found Anchor Mortgage Corporation guilty of lying when applying for federal guarantees of 11 loans, and therefore liable for treble (triple) damages under the False Claims Act.  The judge calculated damages by totaling the amounts that the government paid to lenders under the federal guarantees, trebling it, then subtracting any collateral (in this case, real estate that had been sold).  According to the appellate decision, as an example,

[T]he Treasury paid $131,643.05 on its guaranty of a particular loan. Three times that is $394,929.15. The real estate mortgaged as security for that loan sold for $68,200. The judge subtracted the sale price from the trebled guaranty; the result of $326,729.15 represented treble damages. To this the judge added the $5,500 penalty, for a total of $332,229.15.

The defendants proposed a different approach: beginning with the total of the federal guarantees, immediately subtracting the collateral, and then trebling the amount.  The defendants’ example results in a significantly smaller amount of damages:

Like the district judge, they start with $131,643.05, but they immediately subtract the $68,200 that the United States realized from the collateral. The net loss is $63,443.05.  Treble that, and the result is $190,329.15. Add $5,500 for a total of $195,829.15.

The appeals court affirmed Anchor’s guilt in the matter, but reversed the district judge’s “gross trebling” of the damages in favor of the defendants’ “net trebling,” noting that while the False Claims Act does not specify either a gross or a net trebling approach, “the norm is net trebling.” 

The False Claims Act allows whistleblowers to bring suit on behalf of the U.S. government and share in the recovery.  The Chanler Group, in association with the Hirst Law Group, has years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Earlier this month, the U.S. Court of Appeals for the Eighth Circuit upheld the federal district court's decision that the two whistleblowers, or relators, in Rille et al v. Accenture, LLP et al, No. 11-2054 (8th Cir. 2013) were entitled to a 15% share of the federal government's $46 million False Claims Act settlement with Hewlett-Packard, amounting to a $6.9 million award to the whistleblowers.

The relators, Norman Rille and Neal Roberts, filed a <i>qui tam</i>, or whistleblower, action in 2004 against HP and other defendants on behalf of the United States, alleging that the defendants gave kickbacks to consultants in exchange for recommendations and engaged in pricing schemes that cost the federal government millions of dollars.

In 2006, the government intervened and filed its own complaint against HP and the other defendants, and eventually entered into a settlement in which the government received $55 million: $9 million from the kickback scheme and $46 million for the pricing scheme.  While the government conceded a share of the kickback settlement to the relators, it attributed the pricing settlement to its own investigation, and not the relators'.

The district court found in favor of the relators, writing that "the government had no knowledge of the defective pricing before Relators brought it to light."  The government appealed.  The Court of Appeals affirmed the district court's decision, upholding the whistleblowers' entitlement to 21% of the $9 million kickback settlement and 15% of the $46 pricing settlement.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

The U.S. Department of Justice celebrated the 25^th anniversary of the 1986 amendments to the False Claims Act today.  The False Claims Act has been called the single most important tool that American taxpayers have to recover funds when false claims are made to the federal government, including health care fraud, mortgage fraud, and procurement fraud.     

“In the last quarter century, the False Claims Act’s success has been unparalleled with more than $30 billion dollars recovered since it was amended in 1986 and $8.8 billion since January 2009,” said Attorney General Eric Holder.  “In these challenging economic times when resources are scarce, government budgets are being tightened and so many Americans are forced to do more with less, the need to act as sound stewards of every taxpayer dollar has never been more clear or more urgent.  The Department of Justice has achieved record recoveries in recent years and we will continue to aggressively pursue those who would take advantage of their fellow citizens.”

The False Claims Act was originally passed by Congress during the administration of President Abraham Lincoln in 1863 to help the government recover federal funds stolen through fraud by U.S. government contractors.   During the Civil War, the law was used to recover monies from unscrupulous contractors who sold the Union Army decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions.

In 1986, Congress amended the False Claims Act to permit the government to seek treble damages and revised the statute’s qui tam, or whistleblower, provisions to increase the incentives for whistleblowers to come forward with allegations of fraud.   Since those changes were enacted, the Justice Department has recovered more than $30 billion under the act.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Colorado-based CH2M Hill Hanford Group (CHG) and its parent company CH2M Hill Companies Ltd. (CH2M Hill) admitted to criminal conduct when CHG engaged in years of widespread time card fraud  on the U.S. Department of Energy. Between 1999 and 2008, CH2M Hill had a federal contract to manage and clean 177 large underground storage tanks containing mixed radioactive and hazardous waste at the Department of Energy’s Hanford Nuclear Site in southeastern Washington. The Hanford Site was used for the production of nuclear weapons during World War II and the Cold War. CHG hourly employees involved in the cleanup routinely overstated the number of hours they worked,  and CHG management not only condoned the practice---submitting inflated claims to the Department of Energy that included the fraudulently claimed hours--but certain supervisors engaged in patterns designed to avoid the detection of the routine time card fraud by law enforcement and internal auditors.  So far, eight individuals have pleaded guilty to the fraud scheme and conspiracy.

CH2M Hill will pay $16.5 million to resolve its civil liability under the False Claims Act, refund an additional $1.95 million in wrongfully obtained profits, dedicate $500,000 to increasing accountability at the Hanford site, and pay for independent monitoring.  The allegations were originally brought under the qui tam, or whistleblower, provisions of the False Claims Act by Carl Schroeder, a former employee of CH2M Hill, and one of those to plead guilty to the scheme.  Under the False Claims Act, private citizens can sue on behalf of the United States and share in the recovery.   The act, however, bars whistleblowers from recovering if they were convicted based on their role in the scheme.  Thus, Schroeder will not receive any share of the recovery.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

A jury ordered a nursing home in Illinois to pay a total of $29 million in penalties for false Medicare claims to the government.  Two former employees at the facility filed a complaint that the home allegedly destroyed and/or forged records to make it appear that residents were receiving appropriate care and medications, while residents allegedly went without food or medication, developed bedsores and scabies, and were left to lie in their own waste.  The jury found that the government suffered losses of over $3 million due to the submission of over 1,700 false Medicare claims and awarded the maximum penalty of $11,000 for each false claim.  The two whistleblowers received $400,000.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who uncover fraud of every kind perpetrated against our government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.