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Criminal Law Bad Mules


A Primer on the Federal & Maryland False Claims Acts


Larry D. Lahman George G. Tankard, III Loren Jacobson & Banafsheh Saifollahi


T he Federal False Claims Act (FCA)1 was enacted


in part because of bad mules. During the Civil War, unscrupulous defense contractors sold the Union


Amy decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations. Tese frauds caused President Abraham Lincoln to urge Congress to pass, in 1863, the original FCA, commonly known as the “Informer’s Law” or the “Lincoln Law.”2 In a nutshell, the FCA made it illegal for a party to


present false statements in writing (claims) to the United States government to obtain money or reimbursement to which the claimant was not entitled—for example payments for sickly mules. Te statute also prohibited the presentation of false claims to conceal an obligation to transmit money to the government, usually referred to as “reverse false claims.” Today, while the FCA is no longer used against traitorous is still an important weapon against


Union suppliers, it


government fraud—one that has become increasingly relevant as the federal deficit mounts and the costs of government- sponsored health-care programs in particular inflate. Today, healthcare costs associated with Medicare and Medicaid alone consume more than 20 percent of the federal budget.3 Te Centers for Medicare & Medicaid Services (CMS)—the agency that administers Medicare—estimated that improper payments for Medicare fee-for-service (FFS) totaled $24.1 billion in calendar year 2009.4


In addition, Medicaid (which is


jointly funded by state and federal governments) is one of the largest and fastest growing items in state budgets.5 For this reason, many states, including Maryland, have


borrowed from the nineteenth century law and enacted their own versions of the FCA, several of which specifically target Medicaid fraud. In 2010, Maryland enacted its version of the


1 31 U.S.C. § 3729 et seq. 2 Dating back to at least as early as 1692, the American colonies had allowed citizens to sue on behalf of the government. However, the FCA in its current form originated in the Civil War. Sylvia,Te False Claims Act: Fraud Against the Government (2d. ed. 2010), § 2:5.


3 Furrow, Greaney, Johnson, Jost & Schwartz, Health Law: Cases, Materials and Problems 370 (abridged 6th ed. 2008).


4 “Improper Medicare FFS Payments Report” in HHS’s Fiscal Year 2009 Agency Financial Report, November 2009.


5 Id.


FCA, the Maryland False Health Claims Act (MFHCA).6 Tis new law prohibits fraud and false claims against the state’s health plan and health programs and allows for civil penalties for those perpetrating the frauds or submitting the false claims.7 Tis article will provide an overview of both the FCA and the MFHCA and how both can be used to protect taxpayer dollars.


History of the FCA The Relator When the FCA was originally enacted in 1863, government


resources were strained by Civil War efforts, and officials could not police and enforce the laws themselves. For this reason, the FCA conferred standing on private citizens to file lawsuits on behalf of the federal government against wrongdoers. An action filed by a private citizen (called a “relator”) on behalf of the government is known as a “qui tam” action – shorthand for a Latin phrase, roughly translated as “one who sues for the King, as well as for himself ”8


because qui tam actions are derived from the


early English common law. Tese qui tam lawsuits are commonly known to the public as “whistleblower” lawsuits.


6 MD HEALTH GEN § 2-601 et seq. 7 Id. 8 More fully, “qui tam pro domino rege quam pro se ipso in hac parte sequitur.” 3 Blackstone, Commentaries on the Laws of England, p 161.


Trial Reporter / Summer 2011 23


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