Federal Fraud: The Law and Recent Cases that Affect Our Lives

The offense of federal fraud encompasses a wide number of economic, often white-collar, crimes. But in short, a “fraud” is simply a criminal lie. It is a lie that is used to obtain some personal gain. We may often think of white-collar economic crimes as those offenses that happen in boardrooms and beach resorts and have little to do with our everyday lives. That is actually not the case.


Just a few short months ago, the credit agency Equifax demonstrated its own incompetence by failing to protect our most sensitive data. As a result, millions of people were exposed to the possibility of fraud. The federal fraud here would manifest as a hacker taking our personal information (identity theft) and then impersonating us (committing fraud) in order to take our money. Accordingly, federal fraud is something that touches everyone’s lives, now more than ever given our digital environment.Federal Fraud


Federal Fraud offenses can be broken down into three main categories: (i) violations of the Foreign Corrupt Practices Act; (ii) health care fraud; (iii) and securities and financial fraud.


The Foreign Corrupt Practices Act (FCPA)


Enacted in 1977, the FCPA prohibits the payment of bribes to foreign officials in exchange for obtaining or retaining business. The FCPA applies anywhere in the world, and covers publicly traded companies and their officers, stockholders, and agents.


The law was enacted as a result of U.S. Securities and Exchange Commission investigations in the mid-1970s that revealed that U.S. companies were often paying foreign officials bribes for business and influence. In many countries, that was the way business was conducted. However, the FCPA sought to put a stop to the practice to ensure public confidence in the integrity of the U.S. business system.


Some recent examples of FCPA cases are as follows:


  • Petroleos de Venezuela, S.A. (PDVSA): In this 2016 case, the owners of two U.S.-based energy companies paid more than $150 million in bribes to officials at PDVSA, which is Venezuela’s state-owned oil company. The bribes were meant to obtain assistance in getting the companies on bidding panels for PDVSA contracts, being awarded PDVSA contracts, and receiving payment priority on existing contracts. The penalty was that each defendant had to forfeit the money they made as a result of the bribes.


  • VimpelCom: The world’s sixth-largest telecommunications company, VimpelCom Limited; and VimpelCom’s wholly-owned Uzbeck subsidiary, Unitel LLC, conspired to make over $114 million in bribes to an Uzbeck government official over a period of six years. The bribes were meant to allow the companies to enter and continue operating in the Uzbeck market. Unitel ultimately paid an $800 million fine, and forfeited another $850 million from foreign bank accounts.


Health Care Fraud


Health care fraud has become a billion dollar industry for those who wish to take from the public coffers through programs such as Medicare. To combat those individuals and corporate entities that commit this type of federal fraud to the tune of up to $100 billion annually, the U.S. Government has created a cross-agency approach.


The U.S. Attorney General’s Office, in conjunction with the FBI, Health and Human Services Office of the Inspector General, and the Centers for Medicare & Medicaid Services, have a number of “strike forces” that aggressively investigate and prosecute health care fraud. Here are some recent case examples:


  • National Medicare Fraud Takedown: 2016 marked the year of the largest national health care fraud takedown in history. The Attorney General and Health and Human Services Secretary concluded an investigation that resulted in charges against 301 people (including 60 doctors and other medical professionals) for participation in Medicare and Medicaid fraud schemes involving about $900 million in false billings. In many cases, patients in need of care received no treatment, though the corrupt medical professionals got paid through Medicare or Medicaid.


  • United States v. Philip Esformes, et al.: Esformes and two conspirators were charged with a $1 billion scheme involving health care providers in the Miami area. The defendants allegedly gained access to Medicare and Medicaid beneficiaries through bribes, and then used the access to bill Medicare and Medicaid for unnecessary services. The defendants allegedly received kickbacks from health care providers so that the providers could bill for the unnecessary services. The case is pending trial.


Securities and Financial Fraud


This category covers a broad array of financial fraud including corporate fraud, government procurement fraud, investment fraud, telemarketing fraud, and insider trading, to name a few. Recent case examples of this type of federal fraud include:


  • Volkswagen: In September 2016, an engineer from Volkswagen pleaded guilty for his part in a 10-year conspiracy to defraud U.S. regulators and customers by putting software in diesel Volkswagen cars that would cheat U.S. emissions tests. Volkswagen agreed to pay a total of $4.3 billion in criminal and civil penalties.


  • Deutsche Bank: In 2016, two senior traders at Deutsche Bank were charged as part of the long-running manipulation of the London InterBank Offered Rate (LIBOR). In 2015, Deutsche Bank paid $775 million in criminal penalties in connection with the LIBOR scheme.


Federal fraud is a broad area of federal criminal law enforcement. Yet, the examples above indicate that fraud schemes have an impact, direct or indirect, on all of our lives. The National Medicare Takedown is significant because the money that was stolen from the Medicare/Medicaid coffers was ultimately stolen from the U.S. taxpayer. Further, the Volkswagen case shows that a company can defraud U.S. customers for the period of an entire decade.


If you or your company has been charged in a federal fraud matter, you need experienced legal counsel. Brandon Sample has the expertise and experience to aggressively challenge the government’s case in court. Call for a free consultation today.


Additional Resources