The False Claims Act, the CARES Act, and COVID-19: An Enforcement Overview

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The False Claims Act, which imposes civil and criminal liability on those who submit false claims for payment to the federal government, serves as a primary tool in the federal government’s enforcement arsenal.  At the same time, the global COVID-19 pandemic and the CARES Act have led the federal government to disburse unprecedented amounts of money to the private sector, raising the possibility of future enforcement action.

This teleforum will provide an update on the DOJ’s False Claims Act enforcement priorities to date, and discuss potential trends and activity that could emerge from the COVID-19 pandemic and related stimulus spending.

Featuring: 

John C. Richter, Partner, King & Spalding

 

 

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Event Transcript

[Music]

 

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Greg Walsh:  Welcome to The Federalist Society’s Teleforum conference call. This afternoon’s topic is titled “The False Claims Act, the CARES Act, and COVID-19: An Enforcement Overview.” My name is Greg Walsh, and I am Assistant Director of Practice Groups at The Federalist Society.

 

As always, please note that all opinions are those of the expert of today’s call.

 

Today, we’re very fortunate to have with us Mr. John C. Richter, lead partner at King & Spalding. After our speaker gives his opening remarks, we’ll go to audience Q&A. Thank you for sharing with us today. Mr. Richter, the floor is yours.

 

John C. Richter:  Well, thanks, everybody. Thanks, Greg. Appreciate it and certainly appreciate everybody taking a few minutes today to listen in to this and hope everyone is doing well. In terms of the presentation today, the focus obviously is on the False Claims Act and particularly as it pertains to this weird world of COVID-19. The background, of course, for those of you who are less familiar with the False Claims Act is one that I’ll cover up front. I’ll also describe some of the preexisting trends in DOJ’s approach to the False Claims Act and discuss then the COVID-19 pandemic and the CARES Act. And particularly I’ll focus on the Paycheck Protection Program and how that program presents potential False Claims Act risk for recipients of funds and applicants.

 

In terms of the false claims itself, the False Claims Act imposes criminal and civil liability on those who submit false authority on claims for payment to the federal government. It’s a statute that dates back to the Civil War and was historically focused when first passed on fraudulent defense contractors. But the reach and focus of the False Claims Act has expanded tremendously as federal funds have entered into all sectors of the American economy.

 

Most recently, I think the bulk of the focus has been in the healthcare and life sciences space, although there are certainly other actions and investigations that go into other sectors. The statutes are codified in Title 31, and the primary provision imposes civil liability on anyone who knowingly presents or causes to be presented a false or fraudulent claim for payment or approval. The presentment aspect of a false claim is obviously the paradigm that is naturally thought of given the plain language of the statute.

 

But there are six other ways in which a person can be liable besides presenting a false claim. That includes creating a false record that is material to a false claim, failing to deliver all property or money in a person’s custody that was used or going to be used by the federal government, intentionally and fraudulently delivering a receipt for property without knowledge that the receipt is accurate, knowingly purchasing property from a government employee who is not authorized to sell that property, knowingly creating a false record or statement material to an obligation to pay or transmit money or property to the government, and then conspiring to violate any of those provisions.

 

Essentially, there’s three main elements for a False Claims Act violation: falsity, scienter—meaning intent—knowing that the statement or claim was false. This includes for civil liability purposes the reckless disregard of a claim or statement’s falsity. And then the statement of claims falsity must be material to the decision to pay.

 

There are also -- it’s important to recognize that, as it pertains to falsity, the statute has been construed to reach beyond the obvious kind of government fraud, in other words the billing for goods or services that were never provided or the charging for something that is -- charging more than it was worth in some fashion. Claims can be factually false, in other words misrepresenting the goods or services provided, or legally false insofar as the claimant falsely certifies that it has complied with some kind of legal or contractual requirement but has failed to do so. Particularly in a context of legal falsity, the question is whether it is material. And the Supreme Court in 2016 in a case called Universal Health Services v. Escobar held that a defendant can be liable when a claim fails to disclose noncompliance with a statutory, regulatory, or contractual requirement provided that the misrepresentation was material to the government’s payment decision.

 

What makes the False Claims Act powerful is that it allows for treble damages. What makes it powerful, obviously, is that the government can investigate using its subpoena and civil investigative demand authority. And in conjunction, we frequently see False Claim Act investigations being conducted in parallel with criminal investigations where criminal tools are being used also as an investigatory method.

 

Damages are generally determined under a benefit of the bargain framework, although that is seldom conceded by the government in negotiations. To encourage self-reporting, the statute only imposes double damages if the violator self-reports within 30 days of discovery and cooperates fully. The government also generally negotiates at a lower multiplier in any kind of resolution, thereby incentivizing a negotiated resolution without litigation. In addition to the damages portion of the remedy, the statute allows for penalties, which currently are adjusted up to a range of $11,665 to $23,331 per false claim, which you can imagine would add up in any kind of a high-volume situation like you have in the healthcare space.

 

The False Claims Act is procedurally unique in the law because it is a so-called qui tam statute, meaning that private citizens, so-called relators, can sue in the stead of the United States -- on behalf of the United States. And we now have, of course, almost 40 states that have baby versions of the federal False Claims Act in place. If a relator is successful, the relator is entitled to receive a portion of the ultimate recovery, which obviously provides a bounty incentive to relators to serve and to allege fraud as private attorneys general.

 

The whole provision has a fairly unique procedural path insofar as a relator files a sealed complaint in federal court. The relator serves the government with a copy of the complaint and provides the material evidence in his or her possession but does not serve the defendant with a complaint. Then the government must investigate.

 

The statutory period for the government to investigate while the matter is kept under seal is 60 days, but the government routinely seeks extensions for good cause. And at the conclusion of the government’s investigation, the government can decide whether to intervene and litigate with the relator’s participation or leave the relator to litigate by not intervening the case. The government has the power also to move on its own to dismiss the case over the relator’s objection. Although that obviously is often an issue that is contested and controversial. And I’ll discuss that a little bit in a moment. The relator, though, is entitled in any recovery to between 15 and 25 percent of the recovery if the government intervenes in a litigation matter. If DOJ does not intervene, the relator’s entitled to between 25 and 30 percent of the recovery.

 

The False Claims Act has been a major weapon in DOJ’s fraud enforcement arsenal really since the late 1980s. It was amended in 1986 and really brought to life again and has, year over year, continued to grow in terms of its use. It’s become big business for plaintiff’s firms and a major area. And I’m sure all of you may have seen advertising by firms seeking -- soliciting for whistleblowers who may have claims to file against the government.

 

The False Claims Act has also become a major source of money for recoveries for DOJ. And the past few administrations have touted the amount of recovery each year in annual reports. The latest -- and DOJ announced in the fiscal year ending September 30, 2019 that DOJ had recovered more than $3 billion from fraud and False Claims Act civil cases and noted that DOJ had recovered more than $62 billion under the False Claims Act since 1986. So this is big money, and this is something that Congress pays attention to and sees and that the Department regularly uses as a means to suggest that it is essentially making money and that these positions -- investigatory positions and enforcement actions more than pay for themselves through these recoveries.

 

Report for the Department -- this most recent report noted what has been the primary focus for quite a few years, and that is that healthcare is a primary focus. Most of the dollars achieved by DOJ in the past few administrations have been through major settlements, most often with pharmaceutical manufacturers. In this most recent, it was major settlements with pharma related to the opioid crisis and related to pharma companies that paid hundreds of millions of dollars to resolve claims related to independent charitable foundation patient co-pay investigations.

 

The Trump administration has certainly, like its predecessors, relied on the False Claims Act in several respects and emphasized it. The Trump administration, however, has also made some policy moves that are of interest. In January of 2018, the Civil Division issued a memo, which now is referred to as the Granston Memo based on the director who issued it at the time.

 

And this memo basically states that -- and this is an internal memo, and it has only -- has no binding effect externally to the Department. But it basically listed a series of factors that the Department should consider when weighing whether to request a dismissal of a non-intervening case, presumably over the objections of the relator who would otherwise be able to bring the claim. The factors that were listed were curbing meritless qui tam actions under the False Claims Act, preventing parasitic or opportunistic qui tam actions, preventing interference with agency policy and programs, controlling litigation brought on behalf of the United States, safe-guarding classified information and national security interests, preserving government resources and addressing egregious procedural errors.

 

That memo generated a significant amount of attention in the legal community and certainly reflected an ongoing debate as to the issue of allowing third parties, like relators, to essentially assert the United States’ interest. We know as a matter of pure numbers that the total number of qui tam False Claims Act complaints filed on an annual basis has grown seemingly exponentially but certainly grown fast in the past 10 to 20 years and continues to grow and that the number of cases that the Department of Justice intervenes in or is able to intervene in has remained fairly static, notwithstanding the growth in the size of the Department during that period. It means that more actions are being litigated without DOJ intervention, which necessarily means that the United States’ interest in those actions are being controlled more and more by private parties who are bringing the actions.

 

As a practical matter, while the Department has signaled a desire to dismiss actions and to focus on using its power, DOJ has only moved to dismiss 45 out of the 1,170 qui tam cases, for example, that were filed in the calendar years 2018 and 2019. So this means DOJ’s basically moved to dismiss around 4 percent of the actions. That is probably more than may have been dismissed in the past, but it also raises the question as to how meaningful this is in reality.

 

In addition to the Granston Memo, then Deputy Assistant -- Deputy Attorney General Rod Rosenstein announced a DOJ “piling-on” policy back in May of 2018. That was basically trying to discourage using the application of multiple penalties for the same conduct. And the Department in May of 2019 issued some civil voluntary disclosure cooperation guidance trying to provide some framework around the award of credit that could be cognizable for defendants that cooperate and voluntarily disclose misconduct, as one of the complaints has been that the amount of credit given is not necessarily readily apparent if a client comes in and discloses as compared to one that is just discovered and fights for a while and then ultimately decides to settle and resolve.

 

In terms of the most recent statements, there are some recent statements that are probably worth paying attention to. The Deputy Assistant Attorney General Ethan Davis, who I guess is the principle now and serving as acting and essentially leading the Civil Division given that the Assistant Attorney General position has been vacated -- and Mr. Davis delivered some remarks earlier this summer addressing DOJ’s top priorities for enforcement actions related to COVID-19. It’s clear that, at least in his view, the Department is very focused on using this tool. He highlighted two areas that are driving DOJ’s COVID-related enforcement efforts, one, obviously using all the tools that are available from an enforcement perspective. And that would include the False Claims Act.

 

He also noted with approval that DOJ will seek to dismiss qui tam actions that it finds meritless or that interfere with Agency policy or programs. Most notably, he noted that they are now including a series of questions during relator interviews. Early on when DOJ gets a case, they’ll necessarily reach out to the relator and his or her attorney to interview. And they’re including as a series of questions whether there are third-party litigation funders behind the effort. This has been an issue of some controversy, and I think there’ve been some other presentations that The Federalist Society Teleforums have covered in which they’ve addressed the use of third-party funding and its role from both a litigation and justice perspective.

 

In terms of DOJ priority areas, Mr. Davis noted that DOJ certainly is focused on those who commit fraud related to the various COVID-19 stimulus programs. In particular, they’re focusing on the Provider Relief Fund and the Paycheck Protection Program. And they’re certainly looking at knowing violations of the terms and conditions of the Provider Relief Fund, as well as looking at fraud related to the PPP, particularly focusing on borrowers that falsely certify compliance, meaning using the money for the purpose -- that fail to use the money for the purposes that were represented.

 

They’re going to be looking, of course, also at other areas such as actions against borrowers and lenders that are violating the eligibility and other covenants of the Federal Reserve’s Main Street New Loan Facility, which it was a loan program under the CARES Act designed for small and medium sized businesses. They’re targeting private equity investors, in particular, that they believe have taken an active role in illegal conduct. And they’re certainly focusing their efforts, making use of the Consumer Protection Branch in the Civil Division, which notably, for those of you concerned about the growth of government, has tripled in size since 2017 and is an area that focused primarily on the FDA’s regulation -- enforcement of the Food, Drug, and Cosmetic Act and the Controlled Substances Act and seems very much focused on pharma, medical device, and other life sciences companies.

 

So what Ethan Davis’ remarks, I think, illustrate is that the False Claims Act is still very large and a very prominent tool and that, in particular with regard to the CARES Act and the most recent spending—which of course the CARES Act authorized $2.2 trillion to be spent—that we can expect that, as prior stimulus programs that frankly now paled in comparison to these, that the Department will be following up and following the money for many years to come. I’m going to spend just a little bit of time here talking a little bit about the Paycheck Protection Program because I think that’s the one area that’s most developed and that we’ve seen enforcement actions but is illustrative of how liability is likely to be explored and pursued under the CARES Act pursuant to the False Claims Act.

 

The Paycheck Protection Program, you may recall, was originally a $349 billion program intended to provide American small businesses with cashflow through federally guaranteed loans. It was then expanded in late April, adding an additional $310 billion in funding, so basically became a $659 billion program, which I guess these days if anything begins with a B it’s not that meaningful in the federal government when trillions of dollars now seem to be the currency of choice. But the Paycheck Protection Program, I think it has a number of risk areas.

 

The applicant business that applied for those loans was supposed to be doing so in order to keep its business afloat and keep employees on the payroll. And under the program, the loans would be fully forgiven if they were used for payroll costs, interest on mortgages, rent, and utilities. At least 60 percent must have been used for payroll.

 

The program stopped dispersing funds earlier this month. I think it was August 8. And lenders and borrowers who participated in the Paycheck Protection Program were required to make certain certifications in their applications that I think are relevant to thinking about how the False Claims Act enforcement may reveal itself here in the next months and years.

 

So the application, they obviously had to provide information about the company’s average monthly payroll, the purpose of the loan, and the number of employees. They had to make a number of express certifications. And included in that was that the current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant; the fund will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments; and the information is true and accurate that was provided in the application.

 

You can see where any of those could go sideways, both currently and after the fact. With regard -- in a lender application, the lender was required to certify that it had complied with all lender obligations under the relevant Paycheck Protection Program rules, and it obtained and reviewed required applications, including documents demonstrating qualifying payroll amounts. For any of these businesses that would have applied, the question’s going to be, just like we saw in the mortgage fraud crisis, whether the lenders in fact did the necessary diligence and acted on aspects of the diligence that may have given rise to a reason to further investigate.

 

Because this Paycheck Protection Program, like so much of the CARES Act, was implemented so quickly and administered so quickly, there was very little guidance upfront, little experience or institutional knowledge for those participating in the program, and particularly there were many participants who had never received money from the federal government in the past. And for those kinds of participants, they likely did not have the kind of compliance checks nor the advice of counsel that more experienced players would have that, notwithstanding that experience, still find themselves getting crossways with the federal government from time to time under the False Claims Act.

 

And because the government retroactively scrutinizes and investigates under the False Claims Act, the government’s going to have the full benefit of time and hindsight in looking at the underlying conduct. Likewise, of course, many of these actions we can expect to be brought by relators, which essentially are going to be employees or former employees or other third parties who have observed what they believe or at least are alleging was fraud or misrepresentations under the program. And because of the technical nature of the program, you can see where even honest mistakes could give rise to claims and investigations.

 

There’s certainly been a great deal of backlash about a number of companies receiving money. And so we can expect that, from a political perspective, the scrutiny of how the Department goes about investigating will be of great interest over the next few years and the subject of congressional scrutiny and oversight. Because of the kinds of express certifications that are contained in there, we could certainly -- we can see that the low hanging fruit cases are going to be those who just simply misrepresented their payroll or employee numbers or other basics.

 

With regard to the requested funds being necessary, then there’s going to be a question as to -- and a judgement post hoc as to whether it really was necessary or that the applicant actually spent the funds exactly as was required under the statute. And we can expect that plaintiff’s counsel who see an opportunity for a bounty will be serving numerous -- many, many sealed complaints alleging that their relator filed false claims -- or that their employer filed false claims in order to get relief funding under the Paycheck Protection Program or one of these other programs.

 

There’s certainly already been some investigations that have been publicly announced or charges brought. Attorney General Barr certainly instructed U.S. attorneys to prioritize COVID related fraud schemes. Deputy Attorney General Rosen directed U.S. attorneys to appoint a coronavirus fraud coordinator in each U.S. attorney’s office. The head of the Criminal Division announced a preliminary review of information obtained from the SBA and was looking at a number of the largest Paycheck Protection Program loan processors for indicia of fraud. And there have been a number of charges filed generally against sort of the most blatant and most egregious kinds of criminal conduct that are just straight up -- effectively just straight up theft from the program and misrepresentation rather than more nuanced hearings.

 

Of course, in addition to the DOJ and other traditional law enforcement resources, under the CARES Act a Special Inspector General for Pandemic Recovery position was created. Brian Miller, who some of you may know—a former White House attorney, former DOJ attorney—is now the Special Inspector General for Pandemic Recovery. And he’s been tasked, then, obviously with investigating the use of federal funds under these programs.

 

Congress has also put together a congressional oversight commission that will be reporting every 30 days on how Treasury and Federal Reserve are managing COVID-19 related funds. This is similar to the TARP congressional oversight panel that was created, and it awaits a joint appointment of a chairman by Senate Majority Leader McConnell and House Speaker Pelosi. I guess it remains to be seen whether those two can agree on anything. In terms of investigator activity, we certainly are seeing that and hearing from the Executive Branch -- HHSOIG has announced it will audit CARES Act provider relief programs to hospitals and healthcare providers. The Treasury Department has announced it’s auditing funding for air carrier worker support according to a March 30 memo that was tweeted out.

 

There are obviously a lot of considerations and potential ramifications for companies who received loans or CARES Act related funds. Documentation, of course, is critical. And making sure that appropriate documentation for any of the bases of the representations and/or the use of the monies received is going to be critical for all of these players. In terms of -- like all areas when you’re dealing with federal funds, having appropriate policies and procedures governing those funds is critical. And that generally means having and hiring lawyers.

 

So generally these programs are great for the legal industry. They’re great for also creating compliance departments and program. So often the recipients of these kinds of monies to the degree that they are smaller companies -- smaller/medium sized companies don’t have the kind of robust compliance programs. And if they haven’t been in an area of -- in which the federal government plays a large part, they may -- they are not used to dealing with the kind of compliance concerns and requirements that other companies may have experience with.

 

I think the interesting part about all of this, of course, from a political standpoint is that this is an area where both political parties, Republican administrations, Democratic administrations, emphasize its use. While there are critics of the False Claims Act and its use, there is little political will to change this paradigm or this structure. And as the Department is dealing with congressional decisions to appropriate trillions of dollars in very rapid fashion and deferring, then, to the Executive Branch to try to come up with ways to oversee those funds, I think Congress will continue to look to the Department of Justice to investigate, to prosecute, and to hold persons accountable, whether it’s for the right reasons—because there was actual fraud done—or whether it’s for the wrong reasons -- because there’s an industry of lawyers who make their living doing this and who contribute and are big political supporters from time to time.

 

Regardless of the motivation, I think we can see that the False Claims Act is here to stay and that this pandemic further insulates the federal False Claims Act from anyone who would be critical of it or seek to reform its use. So let me stop there. I’m about 36 minutes into the presentation. I would welcome the chance to take questions and hear thoughts that others on the call may have. I appreciate your listening. Greg, I’ll turn it back to you. All right. It sounds like we don’t have any questions. Greg, do we have any?

 

Greg Walsh:  We don’t have any questions in the queue. There we go. We just got one from area code 443.

 

Caller 1:  Yes, thanks very much. Really fascinating presentation. I’m looking forward to the podcast so I can take notes on all the outstanding information you provided at the beginning. I’m just curious as to -- you did mention that there were a number of sort of junior False Claims Act statutes that have been enacted at the state level.

 

I’m curious if there’s much variation among them in terms of either how they’re employed. Generally the dollars at issue are smaller, but are there any significant procedural differences or substantive differences of how they can be pursued? Assuming that the political challenges you identified could be overcome, are there any good sort of models from the laboratories of democracy that we could apply for revision of the federal act if opportunity presents itself?

 

John C. Richter:  Well, good question. In terms of the baby False Claims Act in the states, the federal government has essentially incentivized a lot of the states to pass these acts by tying them -- the passage of the acts to certain benefits that those states can receive under certain federal programs. And so that’s driven a number of states to pass these statutes. For the most part, they are very similar, and the vast majority of states’ case law is highly deferential to the federal jurisprudence in the area. For the most part, then, the actions tend to tag along.

 

So the most traditional model is in a situation in which, for example, the healthcare space where a target of an investigation—the claims relate to both, say, Medicare and Medicaid—the relator will bring claims both under the federal False Claims Act as well as under the applicable state False Claims Acts related to the Medicaid funds that have been received. There is a group of state attorneys general who generally will coordinate when there are multiple states’ False Claims Act provisions that are brought into the mix. Typically where you’ve got Medicaid funds involved, almost every state has a Medicaid fraud control unit.

 

And in most states, it’s housed in the state attorney general’s office. And those units then coordinate usually through a coordinating group of Medicaid fraud control unit personnel. There is an assistant attorney who will serve and be paid as a consultant to coordinate all the different states who then are working with and alongside and, to some degree, may also be (Inaudible 00:39:30).

 

Greg Walsh:  John, are you still there? Sorry, folks. We seem to have been having some technical difficulties this morning. I think Mr. Richter got disconnected. I’m going to try and call him back now. We do have a question in the queue. So when we get John back, we can segue right into the next question.

 

John C. Richter:  Greg?

 

Greg Walsh:  John, are you back on the line?

 

John C. Richter:  I am. My apologies. I don’t know what -- just lost my -- lost the call.

 

Greg Walsh:  Yeah. I don’t think it’s on your end. I think everybody’s having audio difficulties this morning. We do have one caller in the queue, so let’s go directly to them.

 

John C. Richter:  Okay.

 

Caller 2:  Hi. I was interested in your discussion about the focus on private equity firms who --presumably suggesting that they would -- if their implementation of PPP loans for their platform companies. Have there been cases either referred or initiated by the Justice Department to date against private equity firms in connection with their encouragement of platform companies seeking PPP loans?

 

John C. Richter:  So I think what I know right now is there have been no such referrals that have been publicly disclosed.

 

Caller 2:  Right.

 

John C. Richter:  But given that Ethan Davis, the principle Deputy Assistant Attorney General, saw it as important in his remarks to highlight that fact, I think it’s pretty fair to conclude that there probably have been and, if there haven’t been, that they are scrutinizing programs in particular where third parties, like private equity. have been involved in the process. In particular, of course, you’ve got political pressure.

 

You’ve got both the requirement that the funds be, quote, necessary, unquote, and where a private equity might be involved, a question as to whether they had access to other funds that made this less necessary. And then you’ve just got the plain, frank -- the politics of it all, which is that, notwithstanding, if Congress went out and effectively gave a blanket check pretty quickly, then when parties started taking advantage of it that weren’t the little guy, politically that became a talking point and subject to some scrutiny and obviously blame shifting. So there’s certainly going to be circumstances in which I can imagine that aspect of the factual scenario will be examined.

 

Was the entity that applied for the loan in a position to receive funds that would have sustained it from other sources, and if so, why was it still okay to say it was necessary? There may be perfectly legitimate reasons why it was. But I think those are the kinds of areas that Mr. Davis was suggesting are likely to be scrutinized.

 

And I think it’s a combination of that necessary language in the statute itself as well as the signaling coming from Congress that they’re interested in who received the funds and whether those parties that received the funds were really the little guy who truly needed it as opposed to someone who it’s arguable that they could have survived without it or had access to other capital that could have sustained them. Again, not clear that the statute itself makes those distinctions. And we can certainly see how the definition of “necessary” is going to be -- could be subject to a great deal of debate and litigation and interpretation. And I think that’s about all I can say on the subject at this point given the lack of publicly available information.

 

Caller 2:  Thank you.

 

John C. Richter:  You bet. Greg, I know there was the question that the first caller posed that I got cut off from answering fully. I think he was asking about the baby FCA statutes and whether there were differences. There are not large differences.

 

The one exception I would say is in a few states, including in the state of California, the relator can stay in the matter and drive the matter whether the state attorney general gets involved or not. Also in California, for example, it’s not just up to the state attorney general to make a determination as to whether a state’s interest in state funds should be pursued under the state’s False Claims Act. California law allows local and municipal authorities to also litigate and have their own independent litigating authority.

 

So there are instances, for example, where the state attorney general in California declines to intervene in an action but relator’s counsel are able to get state and local entities to band together and pursue claims notwithstanding that the lead law enforcement official and chief litigator for the state has declined to intervene. So there are some differences there in a few instances. But in the run of the mill states, most of the statutes are very much modeled under the federal version. I don’t think there’s a great model that you could immediately say let’s go look at that particular state to amend the federal act in some fashion because they generally are following the federal lead rather than vice versa.

 

Greg Walsh:  We don’t have any callers waiting right now. It looks like we have one from area code 469.

 

Caller 3:  Hi. Actually just a really quick question, but what was the name of your podcast again?

 

John C. Richter:  I don’t have a podcast.

 

Caller 3:  Oh, I thought that you mentioned a podcast. I apologize.

 

John C. Richter:  The prior caller may have -- they do record these presentations, and maybe he was referring to that. But no, I’m too busy to practice law to be a regular creator of content.

 

Caller 3:  No, I totally understand.

 

Greg Walsh:  John, this is a perfect opportunity for a plug, so let me do that. Keep an eye out for emails announcing upcoming Teleforum calls. You can also consult the fall schedule of our upcoming Telefora on The Federalist Society’s website. Also available there are podcasts of previously recorded Teleforum calls you may have missed as well as on iTunes, Spotify, and Google Play.

 

John, it doesn’t seem like we have any more callers in the queue. Do you want to opine on the future of this legislation if the President gets reelected or in a potential Biden administration?

 

John C. Richter:  Happy to, I guess, say a word or two. Of course, prognostication about the future is much harder than prognostication about the past. Look. I think in terms of if Vice President Biden is elected I think we can certainly see the False Claims Act as a robust tool. I think likewise I think it’s going to remain a robust tool if Trump is reelected.

 

There have been some questions about how hard the Trump administration was going to push these kinds of investigations. And while there have been these memos and actions designed to suggest that there are limits and that the Department of Justice is in the business of policing those limits to some degree and looking out for certain equities and concerns that it may have, that’s simply guidance within authority that already existed under the statutes. And as I noted, I think statistically speaking it’s at the margins.

 

The vast majority of cases are still going to be -- I don’t expect that outside whistleblowers are going to stop filing cases or reducing the number of cases. I think they’re going to increase, and I think the Department is going to continue to be very reliant on those leads to investigate cases and maybe using those leads to generate the cases regardless of who wins in the next election. I think the emphasis obviously changes depending on the particular administration and the particular president.

 

The great thing about the False Claims Act as an enforcement tool, which is also obviously the dangerous thing about it as an enforcement tool, is it covers any receipt of funds and deals with any claim that is presented to the federal government. So it can meet the times. And as the federal government has increased in size and scope and roll in our national economy, it necessarily means that the False Claims Act has greater and greater breadth and has greater ability to intrude into different areas of our economic activity. That just goes -- the statute just follows the federal money, and federal money is obviously -- is out there.

 

It certainly seems like Vice President Biden has indicated that he would like to pass some new additional stimulus shortly after he were to take office. There’s obviously been back and forth in Congress about additional packages and additional funds being appropriated. But regardless of which one of these things happens, you can be sure that in the fall of this year and in the fall of 2021 with a new administration or a second term Trump administration that there’s going to be a press release coming out from the head of the Civil Division touting the multiple billions of dollars in recovery and lauding the efforts of the Department in recovering funds.

 

And you can be certain that the members of Congress that are supportive of this, including the appropriators -- many of the appropriators in both the House and the Senate -- are going to continue to point to these kinds of recoveries to show this as a responsible use of federal spending insofar as the cost of the numbers of lawyers and the investigators pales in comparison to the amount recovered under these programs.

 

Greg Walsh:  Perfect. Well, we have one final caller. You’re on the line.

 

Caller 4:  Yes, thanks. A quick follow up. In your earlier answer you’d mention the application of this at the state level for Medicaid fraud. And I understand that about 40 percent of the Medicaid budget these days actually goes to indigent nursing home residents, many of whom -- so they get infirm. The health deteriorates. Their assets are exhausted, and then they qualify to go on Medicaid.

 

And I was actually settling an estate where we had a beneficiary who was in such a situation and ended up having to file an interpleader action involving the state government and getting an attorney appointed for the nursing home resident beneficiary. I’m just curious if there’s any sort of an, I don’t know, inverse condemnation. It seems like as states and the federal government are seeking to resource programs like Medicaid and so forth for these purposes, if you see any potential application of the False Claims Act to circumstances like that, going after assets that might have been arguably dissipated inappropriately or other claims that such individuals might have? It seems like it would have implications for bankruptcy, for estate practice, and maybe a lot farther than the framers of this statute anticipated.

 

John C. Richter:  Obviously, anyone who presents a false claim or makes a false representation to the government in connection when they’re seeking funds for the government, there are numerous statutes that can potentially come into play, not just the federal False Claims Act statute. Obviously, an individual who sought to make themselves eligible for Medicaid by falsely representing their financial status in order to qualify could potentially be incurring criminal or civil liability insofar as they made such a false representation. Those cases, obviously -- and you can see why maybe not the individual patient -- but you could see family members or others having an incentive to try to avoid costs and avoid incurring fund -- the spending of money they might be inheriting, for example.

 

You can see a scenario like that. Those kind of cases, I think, are certainly cases that get investigated from time to time. Certainly, I think the difference between cases like that -- the federal False Claims Act, because it’s a -- because of its bounty provision, while the federal government could seek a False Claims Act theory, I suppose, under a scenario like that to try to recover money from someone, unless the amount of money that was essentially misrepresented -- was a deep enough pocket, you would think that there’s less of an incentive for private attorneys to want to jump on that action because the pocket isn’t deep enough to justify the investment of the time and of the energy.

 

But again, it really comes down to the factual scenario, how egregious it is, how much money was at stake, as to whether or to what degree you could see a private party relator’s counsel wanting to pursue that. In terms of the federal government, they could seek a civil remedy in that instance into the False Claims Act theoretically in order to recover some funds under the right facts. They might very well also have other remedies, civil and criminal, that they could pursue in order to recover or hold persons accountable who made the misrepresentations.

 

Greg Walsh:  Well, I do want to be cognizant of the time. John, is there anything you want to say before we finish up?

 

John C. Richter:  No, that’s it. Thank you very much for everyone’s attention today. Really appreciate the great questions and thanks very much, Greg, for your moderating.

 

Greg Walsh:  Perfect. On behalf of The Federalist Society, I want to thank our speaker for the benefit of his valuable time and expertise today. We welcome listener feedback by email at info@fedsoc.org. Thank you all for joining us. We are adjourned.

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.