Should you blow the whistle?

Handling Whistleblower Cases Nationwide from Newport News, Virginia

It comes as no surprise that the False Claims Act has become increasingly relevant during the recent economic downturn in the U.S.

Corporate structures often designate profit as the top priority, throwing aside goals of ethical business practice. Medicare and Medicaid enrollment have increased significantly in the past decade and are at all-time highs, creating greater opportunity for fraud to occur. False claims related to government procurement and defense, the most traditional type of fraud, continue to surface as international engagements consistently require increased federal funding.

In response, Americans are now more eager than ever to “blow the whistle” in search of monetary reward. Since January 2009, the number of whistleblower cases filed with the Department of Justice has increased nearly 50 percent. In 2011, 760 cases involving the False Claims Act produced $4 billion in government recoveries, with whistleblowers keeping over half a billion dollars to themselves. The government has recovered roughly $1.6 billion since 2009 from matters regarding procurement and defense, including a $325 million settlement paid by Northrup Grumman. In just the past five months, the largest healthcare fraud case (GlaxoSmithKline) and the largest mortgage false claims suit (Bank of America) have produced settlements of $3 billion and $1 billion, respectively.

Despite the increasing number of false claims lawsuits, payments received by those defrauding the government constitute nearly 10 percent of the U.S. treasury’s annual budget, according to some estimates. This means that the government spends over $30 billion a year making payments it shouldn’t make.

Will the government continue to simply rely on individuals to blow the whistle and combat widespread fraud? To a certain extent, yes.  Whistleblower matters are, after all, “the government’s most potent civil weapon in addressing fraud,” according to Gibson Dunn. But recent statistics like those described above have brought about increased regulation within government agencies regarding fraud.

The Securities and Exchange Commission (SEC), for example, installed a program under the Dodd-Frank Act of 2010 encouraging whistleblowers to report financial fraud directly to the SEC, as opposed to top management within a company. The SEC whistleblower program seeks to counter the risk that those who report fraud internally may become targets for employer retribution.

In the health care industry, anti-fraud groups and task forces like the National Health Care Anti-Fraud Association are taking greater steps to inform citizens on how to recognize and report cases of fraud. On  July 27th, the Federal Government announced its plan to fight fraud by forming a partnership between government agencies (FBI, Health and Human Services Inspector General’s Office, the Department of Justice, and state fraud control units) and insurance industry giants (United Health Group, Amerigroup Corporation, and Blue Cross Blue Shield).