Individuals and businesses doing business with the U.S. Government may face False Claims Act (“FCA”) culpability for several reasons – including retaining overpayments.  31 U.S.C. 3729(a)(1)(G).   The retention of known overpayments is colloquially called “reverse false claims,” which Chilivis Grubman attorneys have discussed.  

Since 2009 and the enactment of the Fraud Enforcement and Recovery Act (“FERA”), an individual or business may be liable for violating the FCA under the reverse false claim theory if it “knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.”  31 U.S.C. 3729(a)(1)(G).  The offending party need not take an affirmative act to conceal, avoid, or decrease their obligation to pay.  All that is required is that the offending party know that they received or have retained money to which they are not entitled (i.e., an overpayment).  

Knowledge of an overpayment, under certain circumstances, can result in an obligation to repay large sums of money.  For example, knowledge of a single overpayment incident involving a defective system may impute knowledge of a potential overpayment to all transactions using that same defective system.  This may cause a massive obligation to repay funds to the government, and if not repaid, a large reverse false claim (which may include liability for treble damages).  While the reverse false claim theory may receive less publicity, the government equally enforces reverse false claims and often with other FCA theories.  This was the case for California’s second-largest skilled nursing facility operator. 

On June 29, 2021, the U.S. Department of Justice (“DOJ”) announced that the corporate entities of McKinley Park Care Center (collectively, “McKinley”) have agreed to pay more than $451,439 to resolve FCA allegations.  According to the press release, a McKinley employee allegedly created billing records for services not rendered and the government issued Medicare reimbursements that were higher than merited based upon these allegedly false records.  The DOJ also alleges that McKinley is culpable under the reverse false claim theory.  According to the press release, management at McKinley learned of the false billings to Medicare (i.e., knowledge of overpayments) but did not properly investigate the conduct nor submit a refund for the overpayments.  The DOJ also contends that McKinley did not self-disclose the false billings, despite knowing about its employee’s improper acts. 

Like many FCA settlements, McKinley’s settlement resolves a qui tam lawsuit.  Under the FCA’s qui tam provisions, whistleblowers – known as relators – are granted financial incentives and procedural mechanisms to bring FCA cases on behalf of the government.  The financial incentive can be significant, as whistleblowers are entitled to 15% to 30% of the money the government recovers, based on several factors.  The whistleblower that brought the McKinley action, a former employee, will receive over $90,000.  The McKinley whistleblower may also receive additional compensation related to her claims for retaliation and attorneys’ fees, which are pending. 

Individuals and businesses doing business with the U.S. Government must ensure compliance with the FCA.  Compliance programs should give equal weight to acts of employees and agents that may create culpability under any FCA theory.  Where an individual or entity knows of an overpayment, the FCA requires affirmative action, and the government’s expectations of entities are clear.  “Knowingly retaining Medicare funds obtained by fraud is itself a violation of the law, and this office is committed to pursuing enforcement actions to remedy this conduct,” as noted by Acting U.S. Attorney Phillip A. Talbert.  Issuing a strong warning, Talbert also explained that failure to voluntarily disclose fraud may cause “significant consequences.” 

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and related litigation.  If you need assistance with such a matter, please contact us today.