History of False Claims Act Dates Back to Civil War By Tod Aronovitz | 10/13/14 | 0 Comment

It’s almost hard to believe that the False Claims Act has been around for more than 150 years, but this important tool used in the fight against modern day fraud first developed during the Civil War to help citizens report contractors who were supplying the army with shoddy equipment.

The stage was perfectly set for such a law to come about, according to an NPR story on “All Things Considered.” The year was 1863… the country was brutally divided and the union army was desperate for basic supplies such as uniforms and shoes, horses, and gun powder.

The government had to rely heavily on private contractors which, in reality, often provided uniforms that did not hold up in the rain, gunpowder that wouldn’t fire because it was mixed with saw dust, and horses that couldn’t perform because they were weak or even blind.

These grievances got back to families who complained to Congress, but the government had no money to stop the fraudulent activity. Instead, Congress decided to give workers an incentive to turn in their own companies by rewarding them with money. In the early False Claims Act, the government agreed to split any fine it got 50-50 with the whistleblower.

It was lucrative until the Civil War ended. The law was weakened and mostly forgotten until the 1980’s Reagan administration when outrageous stories of military spending leaked out, including $400 hammers and a toilet seat that reportedly cost $600.

Congress subsequently awakened the False Claims Act. The government was so successful using it in the defense industry that it progressed to exposing fraud in drug companies and health care corporations.

Being able to share in the reward money also incentivized modern day whistleblowers, some of whom reap fruitful awards like Elin Baklid-Kunz, who felt that the False Claims Act was the only tool available to report fraud to the government. She received about $20 million when Halifax Health settled with the government in March for $85 million (see ARONOVITZ LAW Blog story from March 13).

Because the False Claims Act is a civil law and not a criminal one, companies that get caught only have a financial penalty; people involved in corporate fraud are often let off the hook.

That’s because during the Civil War, companies were much smaller and fines could bankrupt them. A large fine would usually be enough to stop the fraud.

Although the government is collecting billions of dollars in corporate settlements—$5 billion alone this year so far—the act actually won’t stop fraud outright. But, as history has shown, it is necessary as a means to help counteract and neutralize it.

How to Report Miami Medicare Fraud

Healthcare professionals or medical billing employees who have knowledge of questionable Medicare billing practices can file a confidential legal claim under the False Claims Act. By acting as a “whistleblower” in what is known as a “qui tam” lawsuit, a private party may collect up to 30 percent of the amount recovered, depending on how the case is prosecuted.

ARONOVITZ LAW: Miami Whistleblower / Qui Tam Law Firm

The Miami Qui Tam law firm of ARONOVITZ LAW routinely works with whistleblowers to document Medicare fraud and other forms of fraud against the government. Contact Miami Whistleblower / Qui Tam lawyer Tod Aronovitz to discuss your case.