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How Pennsylvania Can Win the Battle Against COVID-19 Fraud

Posted  September 11, 2020

With co-author Jack Kolar of the Government Accountability Project.

Legislation is now before the Pennsylvania Senate that, if signed into law, would protect COVID-19 stimulus funds, as well as other state programs, from fraud. As former federal prosecutors and current whistleblower attorneys, we strongly urge all Pennsylvanians to support enactment of the Commonwealth Fraud Prevention Act (CFPA). While the COVID-19 pandemic continues and government resources become increasingly precious, this bipartisan legislation will form an essential part of the state’s battle plan against fraud.

The Need for a Pennsylvania False Claims Act

The CFPA was, in part, inspired by the federal False Claims Act (FCA), which was originally enacted in the middle of the Civil War to address rampant fraud and profiteering in military contracts by service-members, politicians, and private individuals.

Pennsylvanians today are fighting not rebels, but the coronavirus, an unseen enemy that impacts every aspect of our daily lives. Throughout the United States, the battle has already cost more than 190,000 lives, forced millions into unemployment, and depleted state and federal funds.

Unfortunately, as during the Civil War when unscrupulous contractors sold diseased mules, defective rifles, and shoddy uniforms to the Union Army, some individuals and businesses today primarily see the pandemic as an opportunity to make a profit. Hospitals are sold mislabeled and defective PPE, companies lie on applications to receive payroll protection, and phony COVID-19 treatments are sold as cures. More fraudulent schemes will undoubtedly emerge over time as  individual patients are left vulnerable to infection, and taxpayers are stuck with the bill.

Whistleblowers Can Help Stop Covid-19 Fraud

What measures can be taken to stop the fraud? One solution is to reward individuals with inside information about fraud schemes – whistleblowers – to come forward and report illegal activity to authorities. We should empower them to file and litigate civil complaints based on this information. This “qui tam” process (derived from a Latin phrase translated as “he who sues on his own behalf as well as the King”) originated in 13th century England and was at the core of the original FCA that President Lincoln signed into law.

Today, as during the Civil War, incentivizing whistleblowers to come forward remains the most expeditious way to root-out fraud in government programs. Of course, corporations and individuals involved in fraudulent activities don’t like this idea at all. They don’t want to be subjected to government investigation, let alone made to pay damages and attorney’s fees for whistleblowers. But the public good should come before private profit.

The Success of Whistleblower Reward Programs

Indeed, empowering and rewarding whistleblowers has proven astonishingly successful under the FCA. Since 1986 when the FCA was significantly amended, the US Department of Justice has recovered more than $62 billion for the US Treasury. Of this total, more than $44 billion is derived from qui tam actions filed by whistleblowers. Federal officials recognize that whistleblowers are “key partners in the Justice Department’s efforts to combat fraud,” often stepping forward at “significant personal risk to themselves.” Because of this, the FCA also protects whistleblowers from retaliation.

Limitations of Federal Enforcement

But the FCA only protects federal and certain hybrid federal-state programs, such as Pennsylvania Medical Assistance, from fraud. It does not protect state-only programs. And it provides no guarantee that the US will devote federal resources to state cases or give states a seat at the table when prosecuting or settling complaints. Just recently, US Treasury Secretary Steven Mnuchin urged the federal government not to audit more than $500 billion in small business stimulus loans. The federal government appears to be abdicating responsibility for ensuring that COVID-19 stimulus funds are well-spent.

Therefore, to fully protect state interests, each state must enact its own false claims act. So far, as indicated on this map, 31 states, plus the District of Columbia, Puerto Rico, and the Virgin Islands, have done so. Most of Pennsylvania’s neighbors, including New York, New Jersey, Delaware, and Maryland, have followed suit and benefited greatly as a result.

The Current Bill Should Be Strengthened

Although Pennsylvania has the fourth largest Medicaid program in the country and is contributing tens of millions of dollars to COVID-19 relief, it still lacks a state false claims act. The Commonwealth Fraud Prevention Act will correct this glaring omission. Admittedly, the current bill, HB 2352, is far from perfect. For example, it does not provide whistleblowers with a private right of action nor require that they be rewarded for coming forward. To be truly effective and eligible for certain federal incentives, it should be strengthened to match the FCA.

As during the Civil War almost 160 years ago, the war against COVID-19 fraud requires all the weapons at our disposal. We should not assume that the federal government will protect state interests in the fight; Pennsylvania needs to be a full participant in the battle. Enacting a strengthened version of the Commonwealth Fraud Prevention Act would be a major victory for truth and accountability in the war against COVID-19 fraud.

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