The federal government has begun unleashing $2 trillion in economic stimulus in response to COVID-19. We can all hope that this money will be used to help bring this monumental crisis to a close. But history tell us that when the government coffers open, fraud, waste, and abuse quickly follow.

The government will, of course, be on watch for potential fraud. In fact, the Department of Justice just announced its first enforcement action, ordering a halt to a website offering a free Coronavirus vaccine; gullible consumers need only pay $4.95 for shipping and handling. While this scheme may sound like an old TV infomercial, there are a lot of scared, desperate people susceptible to this kind of scam. There will be hundreds or thousands more like it.

Consumer rip-offs and price-gouging may be in the news at the moment, but the real risk of large-scale fraud is yet come, as government money floods into the economy. The task of rooting out these scammers will not fall to the government alone. The government relies on ordinary folks to help protect taxpayers from fraud, and there are well-established avenues—with incentives and protections—available for individuals who report fraud. One of the most powerful is the False Claims Act (FCA).

The False Claims Act Is The Go-To Tool for Fighting Fraud. The FCA is one of the government's most important weapons to discover—and discourage—fraud committed against the federal government. Its qui tam provision allows private individuals—called "relators" or "whistleblowers"—to bring suit on behalf of the government and share in a percentage of the government's recovery, often 15% to 30%. Significantly, almost anyone can become a whistleblower under the FCA—whether a company insider or just a concerned observer.

The core requirement of any FCA action is that government money must be involved. Ripping off consumers through a fake vaccine scam doesn't qualify; nor does stock manipulation or failing to pay federal taxes. (Other laws prohibit these behaviors, and some federal agencies, like the SEC and IRS, have their own whistleblower programs.) The usual FCA case involves either a fraudulent request to the government for money, or money that is owed but fraudulently withheld from the government.

The FCA is uniquely suited to fight fraud arising out of the COVID-19 crisis. Its origin is linked to an earlier crisis that shook our nation and triggered enormous government spending: the Civil War. At that time, according to one contemporary observer: "For sugar [the government] often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the refuse of shops and foreign armories." As one story goes, the Union army purchased thousands of leather boots, only to discover—once soldiers marched across muddy fields and the boots began disintegrating—that the boots were made of cardboard. Another tells of Union soldiers opening up barrels of gunpowder only to find sawdust.

The False Claims Act Is Particularly Effective at Combating Health Care Fraud. In fiscal year 2019, the government recovered $3 billion under the FCA. Of that, $2.6 billion involved the health care industry and $2.1 billion resulted from suits brought by whistleblowers. (The remaining non-whistleblower recoveries resulted from government-initiated investigations.) Given that more than $100 billion of the stimulus will go to hospitals, nursing homes, and clinics, we can expect to see an uptick in FCA cases involving health care fraud.

In one recent case, a health care provider paid $195 million to settle allegations that the company encouraged physicians to prescribe highly addictive opioid painkillers for unapproved purposes. (The painkillers were approved for cancer patients only, but the company was encouraging prescriptions for non-cancer patients.) In another case, a company paid $500 million to resolve various claims including that it promoted the use of its drug product to physicians who, according to the Department of Justice press release, "were writing prescriptions … that were unsafe, ineffective, and medically unnecessary."

In still another case, a health care operator paid $48 million to resolve allegations that some patient admissions to its facilities were not medically necessary and that some of its facilities provided inaccurate information to Medicare to maintain their status as "inpatient rehabilitation facilities"—a designation that enabled the operator to earn a higher rate of reimbursement from Medicare.

More Patients Mean More Payments. Every day we see news reports that the number of people needing hospitalization for COVID-19 treatment is growing exponentially. And while the vast majority of hospitals and nursing homes will provide heaven-sent care, we know from experience that some will not, and even more providers will be less than scrupulous in their accounting. We know, for instance, that one of the most common health care abuses involves "up-coding"—or billing for more expensive services or procedures than were actually provided to patients. That results in insurers paying the provider—the doctor, hospital, nursing home, or clinic—more than they should have, and in cases where those insurers are government insurers like Medicare—an FCA violation.

The National Health Care Anti-Fraud Association (NHCAA)—a trade association composed of the largest private insurance companies—has provided a list of common health care frauds. That list includes: (1) billing for services that were never rendered; (2) upcoding; (3) performing medically unnecessary services; (4) misrepresenting treatments not covered by insurance as covered treatments; (5) falsifying patients' diagnoses and medical records to justify tests, surgeries or other procedures that aren't medically necessary; and (6) "unbundling" or billing for each step of a procedure as if they are separate procedures. This pandemic will undoubtedly result in more of these types of frauds.

We also know that the Department of Justice has already identified a type of fraud it expects to see soon: Medical providers that take patient information for COVID-19 testing and use that information to fraudulently bill for other tests or procedures.

Blue-Chip Companies and Universities Also Engage in FCA Scams. The search for effective treatments or a vaccine for COVID-19 is already underway—by government labs, big pharma, and research universities. It is not yet clear how much of the $2 trillion-stimulus will go into drug research, but it could be substantial. Unfortunately, even the most respected universities and pharmaceutical companies sometimes engage in improper activities.

In 2018, a major pharma company paid $625 million to resolve allegations that it improperly repackaged potentially contaminated oncology-supportive injectable drugs, which were sold to federal health care programs.That same year, a medical device manufacturer paid $33.2 million to resolve allegations that it sold a materially unreliable testing device that was intended to help doctors and nurses diagnose drug overdoses, assess acute coronary syndrome, and identify other serious conditions.And two of America's most respected pharmaceutical companies paid more than $233 million to resolve various claims that they set up bogus schemes—including funneling money through a non-profit foundation to pay patients' co-pays—to improperly inflate the price of drugs paid by Medicare in some cases by as much as 40%.

Given the anticipated influx of research dollars to fight COVID-19, we would not be shocked to see a company or university making false representations—relating to their ability to perform research—to qualify for funding. Nor would we be surprised to see a company use funding for an improper purpose or a university falsify or exaggerate the results of their research. We've seen this kind of conduct before. In 2019, Duke University paid $112.5 million to settle allegations that it falsified research data in grant applications to the National Institutes of Health and the Environmental Protection Agency. (The whistleblower, a former Duke employee, received nearly $34 million for his efforts.)

Fraud Will Not Be Limited To the Health Care Sector. Almost $350 billion of the stimulus will go to the Small Business Administration (SBA) with the intent to keep small firms afloat and to pay workers. That is in addition to another $500 billion intended for large companies, banks, and the airline industry. Call us cynical (rather than naïve), but we can only begin to imagine all the ways this money will be abused. As a recent Wall Street Journal editorial noted, the Inspector General (IG) of the SBA estimated an "improper payment rate" of 2.77% for loans made in fiscal year 2018 and 13.65% for disaster-relief loans made in fiscal year 2017. While not all of those improper payments arose from fraud, many undoubtedly did.

Existing FCA cases offer insight into what kinds of fraud we might expect arising out of the stimulus. In one case, a company and its subsidiary paid $66 million to resolve claims that the fiber they used to produce their supposedly bullet-proof vests for law enforcement agencies was so weak and defective that it could not stop a bullet 50% of the time. In another, a company responsible for servicing American Navy ships in foreign ports inflated its invoices, resulting in a $20 million FCA fine. And in still another case, an aluminum manufacturer paid $34.6 million to resolve claims that it falsified critical testing data about the consistency and reliability of its products, resulting in two failed rocket launches by NASA.

These kinds of cases will rise as the government begins purchasing enormous quantities of medical supplies and equipment. Last week, the U.S. Defense Logistics Agency signed an $84.4 million contract with medical manufacturers to produce 8,000 desperately needed ventilators. The Department of Health and Human Services, for its part, announced that it will purchase 500 million N95 respirators. More will follow. Most of the products the government procures will be responsibly produced and distributed. A small percentage, inevitably, will not.

Nor can we assume that those charged with the oversight of this war-level burst of activity will remain as pure as Cesar's wife. In 2018, one of the largest, most respected accounting firms paid $149 million for failing to properly audit a participant in an important government mortgage program.

Private Whistleblowers Can Help To Combat These Frauds in the Public Fisc. Fraudsters, of course, will inevitably find ways to abuse the federal fisc and dupe unsuspecting consumers. And while government watchdogs will certainly do their best to combat fraud and abuse, each of us can contribute to the fight as well. By keeping our eyes open, reporting fraud or suspicious activity, and encouraging others—particularly insiders—to report what they know to be improper, more money will flow to its intended purposes. The life-or-death battle against this virus means that many of us have not only the opportunity—but the responsibility—to be whistleblowers.

Steve Cohen and James Wiseman are attorneys at Pollock Cohen in New York, which focuses on False Claims Act cases and other matters protecting the public health and public fisc.