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Managing Risk Under the False Claims Act

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Today, more than ever before, businesses need to identify and manage the risk of False Claims Act liability.

Under the federal civil False Claims Act the (“FCA”), 31 U.S.C. § 3729 et seq., the Department of Justice, as well as private individual whistleblowers (called “relators”) can recover enormous damages and penalties from companies accused of defrauding the government. Most states, including Colorado, also have state false claims acts.

In the past few years, Congress has continued to expand the reach of the FCA and this expansion has put businesses at higher risk than ever of being accused of FCA violations by employees or ex-employees, customers, auditors, consultants or other professionals. The Fraud Enforcement and Recovery Act of 2009 (“FERA”) and the Patient Protection and Affordability Care Act (“PPACA”) expanded the scope of FCA violations and imposed procedural changes favoring the government and relators who bring cases under the qui tam provisions of the FCA. In addition, mandatory disclosure requirements of FCA violations were included in several pieces of legislation, including the 2008 amendments to the Federal Acquisition Regulation (“FAR”), the Troubled Asset Relief Program (“TARP”) and the American Recovery and Reinvestment Act of 2009.

These legislative changes are a significant concern to companies that do business directly with the government, that report to or make certifications to the government, or that receive government contracts or grants. Last year, the federal government recovered billions of dollars in FCA awards and settlements. The Department of Justice and HHS stated that for FY 2010, they recovered over $4 billion for health care fraud alone. It is estimated that there may be as many as 1,000 FCA actions currently under seal and being investigated by the government.

In light of today’s pro-relator climate, businesses should be proactive. Vulnerabilities need to be identified and systems put in place to better manage government reporting and facilitate employee communication. The lawyers at Waas Campbell Rivera Johnson & Velasquez are highly-experienced with all phases of the FCA and can assist your business in minimizing this uninsured risk. We can perform business-wide or discrete audits of risk and work with you to establish effective protocols to identify and minimize the potential for an FCA claim.