Elements of Fraud: The I-Stole-from-Her-But-Lied-to-Him Defense

In Claims, Fraud, Legal Interpretation, Supreme Court by Joseph Pull

An elementary principle of litigation is keeping an eye on the elements. A federal appellate court decided in August that the federal mail and wire fraud statutes allow a defendant to be convicted for engaging in a “scheme to defraud” even if the defendant’s deceptive statements were made to different people than the victims who actually lost their money.[1] The defendant had argued that the conduct he was accused of engaging in – lying to banks and credit card processors about unauthorized credit card charges, and using unauthorized credit card charges to obtain money from customers – was not wire fraud because he lied to different people than he stole from. The court’s decision to reject the I-stole-from-her-but-lied-to-him defense may seem obvious, but it’s a little more complicated than it looks. The reason requires an understanding of the legal principle of “elements.”

False Claims Act: the “Implied False Certification” Theory Gets More Definition

In Fraud, United States Supreme Court by Joseph Pull

The False Claims Act, or FCA, became federal law in 1863, in response to fraud by Civil War contractors providing (or not providing) goods for the Union war effort. More than 150 years later, the courts are still resolving big questions about its meaning. The FCA[1] creates punishing civil liability — including triple damages — for companies or individuals who submit “false or fraudulent” claims to the United States government.[2] It has a qui tam provision,[3] meaning an individual (called a “relator”) who discovers a violation of the FCA may sue the violator on behalf of the federal government. If the violator is found liable, the relator receives 15-30% of the proceeds of the lawsuit.[4] If an FCA violator is a large company, the amount at stake in a qui tam lawsuit can be very large. In 2009, a pharmaceutical company paid $1 billion to settle FCA claims concerning one of its drugs, yielding total qui tam payments of more than $102 million to six whistleblowers. That case was unusual. But FCA cases where the amount in controversy exceeds $1 million occur with some frequency. In another 2009 lawsuit, for example, three hospitals in St. Paul, Minnesota agreed to pay $2.28 million to settle an FCA claim. And in 2011, a Minnesota company agreed to pay $23.5 million to resolve an FCA claim. The two relators in that case received total payments of more than $3.96 million. With such high stakes, court decisions affecting the FCA, such as the June 16, 2016 Universal Health Services, Inc. v. Escobar[5] decision of the United States Supreme Court, can have big consequences. The specific issue in Escobar was the “implied false certification” theory.