I want to laugh when people buy into corporate propaganda. Don't you just love people who believe in a "trickle down" theory will actually trickle down to them. I also laugh when the oil companies cry that OPEC is charging too much and Exxon posts multi-Billion dollar profits. Do you believe them? How about the insurance industry that cries about how lawsuits are killing them, and turn around and post multi-billion dollar profits year after year. Corporations spin this propaganda until the average American believes it. Isn’t it Amazing?
The new spin from Beck/Herman legal bloggers for the Drug and Device Law blog
claims that The False Claims Act is a "stealth tax". I was shocked by this sentiment when I came across their post “By Litigation - A Dubious Proposal To Expand False Claims Act Liability”. I am not sure what they are reading, but the last time I read the act, the purpose of the act was to catch companies and individuals that are ripping off the Federal Government. How anyone can refer to the False Claims Act as a Stealth Tax is an act of spin that is worth memorializing.
The Beck/Hermann post acts as if the poor company is being looted by pirates instead of realizing that it is the pirates who are being brought to justice. So, don't let the “spinmeisters” confuse you. What would you prefer, letting the poor companies continue to rip off your tax dollars so they can get richer and richer while you pay more and more in taxes?
If you are new to qui tam and the False Claims Act, it is a piece of legislation that involves privately owned companies doing business with the Federal Government that are caught defrauding the government. If found guilty, the private business must pay back the money stolen from the government, plus three times the stolen amount, plus attorney fees, plus costs, plus a fine. The goal of the False Claims Act is to send a warning message to the corporate community that stealing from the government does not pay.
Tough love, right? But it makes sense. If you are caught defrauding the government, you should pay up. Not pay back, but really pay up. A company needs to be penalized hard because it is easy and sometimes profitable (until caught) for a company to defraud the government. So much so, that many companies do it every year. However, it does not make it right for companies to make “billions” of dollars from defrauding from our government. Now, how does the government get the money to pay these defrauders? TAXES. How else?
Is it a "stealth tax" to get money back from companies that stole it in the first place? Isn't that absurd! Yes, there is severe punishment as well. But is that the "stealth tax"? Of course not. Taxes are not punishment. They are the social compact investment in the infrastructure of our nation. Some people may believe we need less infrastructure. Some people want more. That is not the issue. The issue is that we have a solid foundation of representative government that works when the people at the top are honorable and working for the people. (That is a whole other issue I simply can't digress into here). Taxes are simply not punishment and the False Claims Act has nothing to do with taxes.
The fact that the False Claims Act rewards Whistleblowers with between 15% and 30% of the take is not relevant to the act itself because the government uses the False Claims Act all the time without whistleblowers. However, private whistleblowers are awesome. They dig out the fraud and the report it to the authorities. For this, they usually lose their job, lose their homes, and lose their standing in the professional community. They turn their lives upside down. Then 7 years later when the case settles, most of them get a small payout of about 16% (that is a common statistic used for the typical payout) of whatever the government collects. Yes, collects. Not "sues for", collects, which can be hundreds of millions shy of the original fraud claim. Why would anyone do it, If there were no hope for the whistleblower to recover anything,. Who would report the fraud? The intent of the law is to motivate people with money to report fraud.
What happened last year was that the Supreme Court changed the rules. They created a situation where the company doing the fraud could set up a fall guy companies to act as subcontractor intermediaries. These subcontractors would then dilute the fraud between the layers of corporate chaos and by the time, you get to the underlying fraud scheme it is so diluted and mixed up that no fraud charges can be made. The new law cleans up that loophole. Nothing more then a stopgap to a great fraud scheme that our very literal Supreme Court felt they could not stop without a change in the law.
Sorry for the rant, but the position that this is a "Tax" is so absurd as to deserve both the sarcasms and the diatribe.
Off the soapbox till next time: I would love to know your thoughts on this. Drop me a line or post a comment on the Whistleblower Law Blog.