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Government Overpayment

By John N. Joseph and Matthew T. Newcomer

It is not fraud when the government mistakenly overpays businesses who participate in government programs or otherwise receive federal funds. Of course, it's illegal to make a false statement for the purpose of retaining mistaken payments, and responsible businesses understand that. A false statement made to retain an overpayment is a “reverse false claim” in violation of the False Claims Act (FCA).

Many businesses may not yet realize, however, that the Fraud Enforcement and Recovery Act (FERA), enacted in May, 2009, and the Patient Protection & Affordable Care Act (PPACA), enacted in March, 2010, have profoundly expanded the scope of reverse false claims. Federal prosecutors can now charge a reverse false claim based upon a business's knowing retention of an overpayment even when no affirmative step is taken to hide the overpaid funds. The new legislation creates, in essence, a “passive” reverse false claim. Companies participating in federal programs and their executives may increasingly find themselves under investigation for possible violation of the criminal false claims act and other federal fraud statutes.

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