Covid-19 has spread rapidly throughout the United States, and so has Covid-19 fraud.
Criminals respond quickly and imaginatively to opportunity, and there has been no greater opportunity in recent memory than the enormous amount of stimulus and relief money that Congress has made available in response to the Covid-19 pandemic through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Government prosecutors have been admirably alert for coronavirus-related fraud schemes and have reacted quickly after spotting them. The Department of Justice is pursuing many cases concerning a wide variety of misconduct, ranging from fraudulent loan applications to the promotion of sham cures.
Whistleblowers can support DOJ enforcement efforts by reporting Covid-related fraud schemes. When the fraud involves government funds, the False Claims Act protects whistleblower who file “qui tam” lawsuits against those defrauding the government and provides for whistleblower rewards when funds are recovered on the government’s behalf as a result of the whistleblower’s case.
Federal prosecutors in many states have filed criminal or civil charges alleging a wide range of misconduct, which the following examples show.
Prosecutors stressed that their charges in the below cases are merely allegations, and the defendants are presumed innocent until proven otherwise.
Fraudulent loan applications under the Small Business Administration’s Paycheck Protection Program (PPP)
- Multiple PPP applications: Federal prosecutors in New York charged a man with fraudulently obtaining $630,000 in loans by filing applications for multiple loans (only one loan per entity is allowed) and falsely stating that he was not subject to a pending indictment.
- False number of employees: New York prosecutors charged a man with fraudulently attempting to obtain more than $20 million in PPP and Economic Injury Disaster Loans. According to prosecutors, the applicant was the only employee of the companies for whom he sought loans, even though his applications claimed those companies had hundreds of employees.
- No employees: Rhode Island prosecutors charged two men with seeking PPP loans for companies that purportedly had dozens of employees, when in fact they had none.
- Fictitious companies: Prosecutors in western Washington charged a man with fraudulently, but unsuccessfully, using fictitious payroll expenses to seek PPP loans for fictitious companies.
Covid fraud involving selling goods or services that the seller doesn’t deliver
- Personal protective equipment (PPE): Federal prosecutors in New York charged a man with attempting to sell New York City $45 million worth of personal protective equipment that the man did not possess and was not authorized to sell.
- PPE: Federal prosecutors in San Francisco charged a man with operating an e-commerce site that allegedly obtained payment for personal protective equipment, which was never delivered.
- Transportation services: Prosecutors in Arizona charged six people associated with three business with fraudulently billing Arizona’s Medicaid system for non-emergency transportation services that they never provided, after Covid-19 emergency orders dramatically decreased the need for those services.
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Selling unnecessary medical tests or sham cures
- Fictitious Covid-19 vaccine kits: DOJ and prosecutors in western Texas filed a civil suit to shut down a website that offered access to fictitious vaccine kits in exchange for a “shipping charge” of $4.95 and the customer’s credit card information. In response to the government’s suit, a judge issued a temporary restraining order blocking access to the website.
- Fake Covid-19 cure: Federal government attorneys in northern Texas obtained a temporary restraining order preventing a chiropractor from promoting his homeopathic treatments as a Covid-19 cure. According to the government, the doctor had advertised his treatments as a “C-19 vaccine” and a “treatment, reducing severity and duration of [Covid-19] symptoms,” and had claimed that they were “basically” and “for all intents and purposes” a coronavirus cure.
- Sham treatments for Covid-19: Prosecutors in eastern Michigan charged a doctor with billing Medicare for medically unnecessary high-dose intravenous vitamin C infusions. The doctor allegedly made a series of videos with false information, including that the infusions would increase the immunity of people at a high risk for contracting Covid-19, would lessen the severity and length of the illness and would reduce the contagiousness of the disease. The government also alleged that the doctor failed to observe Covid-19 safety protocols, including by allowing Covid-19 patients to share his waiting room with healthy patients.
- Unproven Covid-19 tests: Prosecutors in the northern California charged the president of a medical technology company with securities fraud for allegedly promoting an unproven Covid-19 test and making misrepresentations to potential investors about the company’s future prospects for Covid-19 testing.
- Free Covid-19 tests with other medical services: Prosecutors in Arizona charged the CEO of a healthcare company with offering unnecessary Covid-19 testing for free if patients also purchased other services from the company, then billing an Arizona Medicaid health plan for those tests.
- Price-gouging and hoarding: Prosecutors in New York charged a pharmacist with violating the Defense Production Act by price-gouging and hoarding N95 masks.
- False statements about price gouging and hoarding: Prosecutors in New Jersey charged a Brooklyn man for making false statements to law enforcement in connection with their investigation of his alleged offers to sell N95 respirators at a 700% markup from their normal price and the hoarding of other scarce medical resources.
- Kickbacks for Covid-19 tests: Prosecutors in Florida charged a woman with offering and receiving kickbacks in exchange for referring Medicare beneficiaries for Covid-19 tests.
- Kickbacks for unnecessary medical tests: Prosecutors in New Jersey charged a man with offering kickbacks in exchange for medically unnecessary tests, including scarce Covid-19 tests.
Covid-19 fraud, whistleblowers and the False Claims Act
When Covid-19 fraud involves government funds – such as Paycheck Protection Program fraud or healthcare kickbacks that cheat Medicare – the False Claims Act may apply.
In these cases, whistleblowers may play a key role in stopping fraud by filing a “qui tam” lawsuit, while also protecting themselves from job retaliation and earning a reward.
The False Claims Act allows private individuals to sue alleged fraudsters – individuals, companies and other entities – to recover funds on behalf of the government. In successful cases, whistleblowers can receive a portion of the recovered funds as a reward.
Whistleblower lawsuits brought under the False Claims Act are called “qui tam” lawsuits – a shortened version of a Latin phrase describing the type of legal action.
The False Claims Act requires the government to investigate whistleblowers’ allegations in qui tam lawsuits and decide whether to intervene in, or join, the case. If the government decides not to intervene, whistleblowers may continue litigation on their own.
Whistleblowers who file qui tam lawsuits under the False Claim Act are entitled to rewards of 15 percent to 30 percent of the funds recovered as a result of their case.
The False Claims Act also protects whistleblowers from employment retaliation. Those who are demoted, fired, harassed or suffer other forms of retaliation can sue for reinstatement and collect compensation, damages and attorneys’ fees if successful.
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