Fraud on the Government – Strictly by the Numbers

03/27/2013 // San Francisco, California, US // Justice News Flash: Featured Column // Kathleen Scanlan // (press release)

For all the words written about the False Claims Act, it is numbers that most dramatically illustrate the need for False Claims Act enforcement. That’s because the numbers are staggering. The federal government calculates losses to fraud, waste and abuse in the hundreds of billions of dollars every year. And since its statistics only account for fraud they have detected, the government numbers are likely conservative estimates of how much is actually lost.

The federal budget for 2013 tops $6.3 trillion. (See ) Even with drastic spending cuts the hot topic in Washington these days because of “The Sequester,” the federal government will continue to pay for everything from parachutes to prescriptions and computers to cruise missiles in contracts totaling hundreds of billions of dollars every year. Everyone knows there is fraud in these outlays. The Government Accountability Office reported that in FY 2011 alone an estimated $115.3 billion was likely lost to improper payments. (See The Office of Management and Budget estimated that these improper payments accounted for approximately 4.7% of the total FY2011 budget. (see at 5) As much as $80 billion a year may be lost in health care fraud alone. (See ) In fact, one recent study concluded that there is likely as much as $1.5 billion a year just in nursing home fraud. (See

With hundreds of billions of dollars leaking out of the federal coffers every year, the logical question is: “Who is committing this fraud and how do they get away with it?” The answer is found, in part, in a 2012 survey released by the nonprofit Ethics Resource Center. The study found that nearly half of the 4,700 workers surveyed — 45 percent — had observed misconduct in the course of their employment. Nearly two thirds of these workers — 65 percent — reported it. Unfortunately, 22 percent of U.S. workers who reported misconduct to their employers experienced a negative consequence for coming forward. That was a 7 percent increase in the incidence of retaliation since the survey was previously conducted in 2009. The increased incidence of retaliation for reporting trains the witnesses to a fraud scheme to keep their heads down and their mouths shut lest they be the next one subject to the retaliation. And so a natural check to fraud, waste and abuse is undermined – and hundreds of billions of dollars bleed out of taxpayer coffers. Unfortunately, many employees don’t even know the False Claims Act exists or how it may help protect them even as they try to expose a fraud on the government.

By an FCA case the whistleblower can achieve multiple goals – recovery for the government of money paid out improperly, compensation for the whistleblower for any retaliation he or she may face, and deterrence for future fraudsters who may contemplate taking up new schemes. Incentivizing even just a handful of individuals to come forward with what they know using the False Claims Act could lead to the return of potentially hundreds of millions (and more likely billions) to the federal government.

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