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00:00:00.640 Lincoln's Law is what the False Claims
00:00:02.960 Act case uh the False Claims Act itself
00:00:05.520 is normally known as. Um Lincoln it was
00:00:07.839 passed in the Civil War because people
00:00:09.679 at that at that era with the
00:00:11.599 communications that we had available to
00:00:13.360 us communication systems people would do
00:00:16.079 a contract for um horses and they would
00:00:19.359 send mules or they said spine beasts
00:00:23.039 which I think means uh they were in
00:00:25.199 pretty sad shape. They would send um
00:00:28.160 supposedly flour and it would show up
00:00:30.320 and it'd be infested with weevils. They
00:00:32.640 sent um uniforms that were made of like
00:00:35.600 coffee filter material, not actual like
00:00:39.120 paper basically. And by the time the
00:00:41.600 government got the goods, it was relayed
00:00:43.760 back to the, you know, DC that these
00:00:46.640 were bad goods though they were long
00:00:48.640 gone. So it was very difficult to catch
00:00:50.960 the fraudsters. So they they
00:00:52.879 specifically called it um it's actually
00:00:54.960 not thief, it's set a rogue to catch a
00:00:56.800 rogue. Um but set a thief to catch a
00:00:59.199 thief. If you'll you'll rat them out, we
00:01:01.920 will give you a share of what we
00:01:03.280 recover. And I say that to say most of
00:01:05.519 my relators are not participating in the
00:01:07.920 fraud. Um some of them have and they've
00:01:10.560 had changes of you know changes of heart
00:01:12.640 or their conscience has troubled them
00:01:13.920 the whole time. But but the first thing
00:01:16.240 many defendants want to say is well he
00:01:18.560 did it. You know it's like it doesn't
00:01:20.560 matter. That's the whole purpose of this
00:01:22.400 statute in its very inception. It's
00:01:24.960 based in English law where people, you
00:01:26.880 know, where the king didn't always talk
00:01:28.400 about bad communication uh back in the
00:01:31.040 day. They didn't, you know, was by
00:01:32.400 horseback. That was about the only thing
00:01:34.240 they could manage. And so you would have
00:01:37.200 um people who knew about a problem where
00:01:39.759 the crown was being robbed, taxes not
00:01:42.000 being paid, fill in the blank. and they
00:01:44.479 authorized people to bring a suit on
00:01:47.600 behalf of the king and themselves and
00:01:49.520 then receive a bounty for it. So this is
00:01:51.600 what it's modeled on. It's one of the
00:01:52.960 very few it in fact I think it's the few
00:01:55.600 rema the only remaining quon statute in
00:01:59.520 the United States. I don't know what
00:02:00.960 they have left in England right now and
00:02:02.640 there is a current constitutional
00:02:04.079 challenge going on to this. We settled
00:02:06.399 it 20 years ago. I don't think that I'm
00:02:08.878 not worried and we talk about that if
00:02:10.959 people have questions, but there is a
00:02:13.200 constitutional challenge going on
00:02:14.400 because it is really weird. You're
00:02:15.599 basically bringing a lawsuit as a
00:02:17.040 witness. You know, I saw this happen and
00:02:19.360 I'm telling you to decide what you want
00:02:21.280 to do about it.
00:02:22.959 um it went away pretty much you know it
00:02:26.480 it happened during Lincoln's era in the
00:02:28.959 40 in the 40s when we had all of the war
00:02:32.400 going you know a little bit of war
00:02:33.760 happening in the 40s and the as a result
00:02:37.519 the government was inundated with
00:02:39.519 lawsuits that they already knew about.
00:02:41.280 So they passed what became known as the
00:02:42.959 government knowledge bar. If the
00:02:44.239 government already knows about it you're
00:02:45.360 disqualified. And then they didn't
00:02:47.120 really very well define that and they
00:02:48.720 pretty much killed the statute. Um, it
00:02:51.120 was reawakened in the 80s. Did you if
00:02:54.000 you I remember as I was but a girl at
00:02:56.400 the time, I assure you. But I remember
00:02:58.080 the age of uh Reagan, we would hear
00:02:59.920 about these um $500 toilet seats and $60
00:03:04.080 hammers and all this nonsense. So, as a
00:03:06.959 reform on that, Chuck Grassley brought
00:03:08.879 forth the amendments to the um false
00:03:11.519 claims act and it exploded because first
00:03:14.480 we had the the typical kind of military
00:03:16.959 procurement cases, but then people
00:03:18.640 realized this is aimed at anybody who
00:03:21.440 does contracting with federal government
00:03:22.959 if they're defrauding the government
00:03:24.239 through contract. So, in the early 90s,
00:03:27.440 we had the first cases aimed at Medicare
00:03:29.920 and that is a huge spend for the US,
00:03:32.879 huge, our biggest spend by far. And when
00:03:35.200 once it was uh brought Medicare was
00:03:37.519 brought under it, we were off to the
00:03:38.720 races. And I've got a list of other
00:03:40.400 statutes there how it has been um dealt
00:03:42.959 with. It has since that uh renaissance
00:03:45.840 in the 80s. It's only been expanded.
00:03:47.920 It's never been contracted. But it is a
00:03:49.599 very volatile law. Like I said, we have
00:03:51.599 a constitutional challenge right now. I
00:03:53.519 don't think there's been I've been
00:03:54.560 practicing in this area for over 20
00:03:57.040 years. I will pause so that you can gasp
00:03:59.280 and say impossible. You know,
00:04:01.360 impossible, Julie.
00:04:02.799 We've been during that time, I don't
00:04:04.959 think I've gone two years in a row that
00:04:07.200 one of the three executive branches
00:04:09.200 hasn't acted actively on my statute,
00:04:11.280 making some of my cases better than they
00:04:12.879 were and some of my cases dead. So, it's
00:04:14.959 a very um unusual area of the law. And
00:04:17.600 if you want to go to the next slide,
00:04:19.440 I'll I'll tell you while you do that
00:04:20.880 that the uh this is why this is why it
00:04:24.160 keeps getting expanded. Um since fiscal
00:04:26.320 year 2010, annual recoveries have topped
00:04:28.400 two billion every year. And this is
00:04:30.240 basically found money coming back to the
00:04:32.000 government. This year we had um in the
00:04:34.479 past fiscal year we had over 1,400 cases
00:04:37.759 filed. That's the most that's ever been
00:04:39.280 filed. Uh two reasons for that. One I
00:04:42.960 would like to say is the civil cyber
00:04:44.560 fraud initiative that I promise we're
00:04:45.919 going to get to in just a minute. But
00:04:47.199 also um PPP loans and all of the car's
00:04:51.600 act funding that was kind of sprayed out
00:04:53.520 without any uh caution at all across the
00:04:55.919 country. So, that accounts for some of
00:04:58.000 that coming up, but we had 2.9 billion
00:05:00.160 recovered in um 2024. And that's
00:05:02.960 actually down a bit. And I've got the
00:05:04.560 statistics there. 83% of that was from
00:05:07.120 Queam cases. And I want to give you a
00:05:09.360 little inside baseball. People say kam,
00:05:12.400 people say quitam. People sometimes say
00:05:14.880 tom, but that's only if you want to
00:05:16.560 sound snoody. Um, it's Latin. So, just
00:05:20.160 like you would say quid proquo, not keo.
00:05:24.720 It's a it's a quu sound. Um, so now you
00:05:27.360 know and you can correct people. Um, so
00:05:30.000 83% of that came from quittam cases,
00:05:32.639 577% from healthcare fraud. That's
00:05:35.280 actually lower than in most years. Uh,
00:05:37.520 3% from defense procurement fraud. I'm
00:05:39.680 hoping to see that number go up as we
00:05:41.199 deal with these civil cyber fraud cases.
00:05:43.039 And the remaining from other federal
00:05:44.560 agencies. So let's go ahead to the next
00:05:46.400 slide. Basically, the FCA is implicated
00:05:49.520 if someone lies to the government to get
00:05:51.360 money that they're not entitled to,
00:05:53.440 which is submitting a false claim is
00:05:55.440 what it's called. Or if you lie to help
00:05:57.039 someone else get money. So, you could
00:05:59.440 cause them to submit. So, when a doctor
00:06:01.199 tells a biller to load something into
00:06:03.280 the billing system that's false, he's
00:06:05.280 also guilty. He doesn't get away with it
00:06:07.120 by saying, "Well, I I didn't put it in
00:06:09.360 there. She did." But that doesn't work.
00:06:11.520 Or if you lie to keep money that you're
00:06:13.600 not entitled to keep, then that's a
00:06:15.199 reverse false claim, right? So, if you
00:06:17.360 lie so that you're not subject to a a
00:06:19.840 penalty that you would otherwise be
00:06:21.360 subject to, then that's a reverse false
00:06:23.440 claim. And the same thing goes if it
00:06:25.440 doesn't matter if you personally clicked
00:06:27.360 go on the billing or the keep it. It
00:06:29.680 it's if you cause that submission, then
00:06:31.520 you're liable for it. So, we can you can
00:06:33.520 see um we're go ahead and we'll go to
00:06:36.160 the next slide. And um you can see
00:06:38.720 anyone who does this is liable to the
00:06:40.880 government. This is straight out of the
00:06:43.039 statute for a civil penalty of not less
00:06:45.680 than fi 5 500,000 excuse me 5,000 and
00:06:49.600 not more than 10,000 as adjusted by the
00:06:51.600 inflationary act and I'm going to pause
00:06:54.319 there right now that is per claim
00:06:56.560 between 14,000 and $28,000 that you
00:06:59.919 would be paying per claim. So that's
00:07:01.520 every time you ask the government for
00:07:02.960 money on that contract, which in a you
00:07:05.840 know a grant that has four draw downs
00:07:08.080 in, you know, once a year, maybe that's
00:07:09.840 four four claims where you lied. But in
00:07:12.319 a a situation where you're doing um
00:07:14.800 monthly billing, you're doing it once a
00:07:16.400 month. If you're a doctor, you're doing
00:07:18.479 that constantly. You know, the the the
00:07:20.800 penalties would far outstrip the
00:07:22.400 damages, but then take a look at there.
00:07:24.479 That's that's the basic what you're
00:07:26.639 going to pay. And that's again if you
00:07:28.000 lose at trial plus three times the
00:07:30.479 amount of damages the government
00:07:31.759 sustains because of the act of that
00:07:33.599 person. So note that it's treble damages
00:07:37.759 um which is really statutoily consistent
00:07:40.880 with the fact that a relator who brings
00:07:42.960 the case can get up to a third of the
00:07:44.560 recovery themselves. So even if the
00:07:46.400 relator is given and again we're talking
00:07:48.800 about this is what happens if you lose
00:07:50.240 at trial then you're going to get the
00:07:52.720 government gets back three times. the
00:07:54.639 relator can get up to one of those times
00:07:56.319 and the government is still getting
00:07:57.360 double damages and it's all coming out
00:07:59.039 of the pockets of the bad guys which I
00:08:01.199 like. Um, this raises two questions or
00:08:04.160 this raises a question for cyber
00:08:05.440 security cases. What is the measure of
00:08:07.280 the damage? Right? So, if I build a
00:08:09.440 building out of Chinese steel, assuming
00:08:12.240 there's such a thing, I'm not an expert
00:08:13.599 on steel, but you know, if I build that
00:08:15.280 building out of non-American steel and I
00:08:17.840 still got a building out of it, how am
00:08:19.759 how have I been damaged? How are we
00:08:21.120 going to evaluate the damage to that?
00:08:22.960 And in in the case of cyber security, if
00:08:26.319 you the first thing a lot of people want
00:08:28.160 to say when I speak is, well, we haven't
00:08:30.879 had a breach. And to which because I've
00:08:33.279 been a cyber plus one for a long time, I
00:08:34.958 say that I bet you don't have audit
00:08:36.320 logs. And I'm almost always right. Um
00:08:39.279 maybe you haven't had a breach. Maybe
00:08:40.640 you just don't know you have don't have
00:08:41.919 a breach because your cyber security is
00:08:43.360 that poor. Um, and what we're talking
00:08:45.839 about is that uh one middle band on the
00:08:49.279 wonderful chart that Scott showed us
00:08:50.959 about CMMC. And then if you looked below
00:08:53.440 that, it also referenced DAR 7012,
00:08:56.240 right? So the DARS have been around a
00:08:58.480 lot longer than the um CMMC has. And
00:09:02.480 just as a pause for those of you who are
00:09:03.920 involved, you know, if you've been I
00:09:05.680 think CMMC involves a third-party audit,
00:09:09.120 which means that the um seuite suddenly
00:09:12.720 should be paying attention, right? What
00:09:15.440 when it came out that you would now be
00:09:17.120 signing certifying your cyber security
00:09:19.680 compliance with NIST 8171
00:09:22.720 for covered defense information, you
00:09:24.880 started signing, your company started
00:09:26.640 signing for that if you're doing
00:09:27.839 business with the government January
00:09:29.440 1st, 2018. So about seven years ago,
00:09:31.839 you've been saying you're compliant. So
00:09:34.160 yeah, they're CMMC. And if you're not
00:09:36.080 CMMC compliant, meaning that you're not
00:09:38.080 going to pass that CMMC test, you've
00:09:40.399 been lying for seven years. And that's
00:09:42.480 that may have been an unknowing lie. And
00:09:44.959 again, you got to know it. Uh that may
00:09:47.440 be your defense. I didn't know. But
00:09:49.200 there is a concept of you should have
00:09:50.640 known because I asked you, are you doing
00:09:52.320 it? And you said yes. You signed. So I
00:09:55.279 the the day for this was seven years
00:09:57.200 ago. And I I stress that because
00:10:00.560 CMMC's novelty um has a lot of people
00:10:03.680 kind of scrambling and I think uh that
00:10:06.240 leads to people then whining about not
00:10:08.800 wanting to to do the spend. But my
00:10:11.040 friend, you've been saying this was
00:10:12.640 already done. It needs to be a top
00:10:14.000 priority. Um the civil money penalty I
00:10:16.959 have up there that it has been adjusted
00:10:18.320 for inflation now and it's mandatory if
00:10:21.120 you lose at trial. Um and I've talked
00:10:23.440 already kind of about what a claim is.
00:10:24.880 So if we want to go on to the next
00:10:26.079 slide, I'll tell you the um that's why a
00:10:28.640 lot of these cases settle. Um government
00:10:30.640 typically tries to settle the cases on a
00:10:32.640 double damages instead of a triple
00:10:34.079 damages posture. And that ought to be
00:10:36.320 very attractive to you if you're in a
00:10:37.920 bad case. So um milit this is considered
00:10:40.959 generally military procurement fraud.
00:10:43.120 This has generally been the cyber
00:10:44.800 security cases we've had so far have
00:10:47.040 been now there have been two settled
00:10:49.440 under personal um health information or
00:10:53.120 uh the sensitive data that we've spent
00:10:55.279 the first part of the program talking
00:10:56.720 about uh one a a contractor in Florida
00:11:00.959 who was holding data for the Florida uh
00:11:04.720 Medicaid equivalent so children mostly
00:11:07.440 had the children's data it was not even
00:11:09.600 running on it was on a end of life
00:11:12.800 operating system and needless to say it
00:11:15.360 was hacked and uh all that data gotten
00:11:18.720 out and my husband likes to say the
00:11:20.480 difference between security and privacy
00:11:22.240 is you can restore security but you can
00:11:24.480 never restore privacy once a private
00:11:26.640 private information has gotten out you
00:11:29.360 know you're stuck and that that's the
00:11:31.120 the harm that we have to really focus on
00:11:33.680 here military information um I'm not
00:11:36.320 appreciative of the fact that if you
00:11:38.240 don't have proper cyber security and
00:11:39.680 you're doing government contracting
00:11:41.279 you're handing over what we've worked
00:11:43.519 hard for to foreign threat actors. And
00:11:46.480 it's it's absolutely true. I I should
00:11:48.959 have put a slide in with a picture. Our
00:11:51.120 F-22 is so much like the FJ at in China
00:11:56.160 that the error that was made in the
00:11:58.800 coating of the pilot's canopy is
00:12:01.600 replicated. Like there is no question
00:12:03.760 that was stolen and built. And I mean it
00:12:06.240 if you are in this industry, you you may
00:12:08.399 know that already, right? But the
00:12:10.399 government at large, the civil side of
00:12:12.240 the of the fence has been going, "Oh,
00:12:14.160 wait. This is bad." And hence we have
00:12:15.920 CMNC. Hence, we're seeing enforcement.
00:12:18.560 And and to that government knowledge
00:12:20.160 thing, the government decided to make it
00:12:23.680 very clear that this was material to its
00:12:26.720 contracts and that you are expected to
00:12:28.320 abide by it through the civil cyber
00:12:30.079 fraud initiative. So the bottom line is
00:12:32.240 that DCIS is very focused on matters
00:12:34.800 that affect the health, safety, welfare,
00:12:37.040 and mission readiness of war fighters
00:12:38.880 and combat units. So let's go to the
00:12:40.880 next slide. And um this is the civil
00:12:43.839 cyber fraud initiative. This was the day
00:12:45.360 it was momentous in my marriage. I
00:12:46.959 always know I got a call from Will. He's
00:12:49.680 like, "We're finally going to overlap."
00:12:51.200 And I was like, "Impossible,
00:12:53.680 but this is not going to be material."
00:12:55.360 But um Lisa Monaco in October announced
00:12:59.600 that they're going to do the CCFI. Um
00:13:01.839 the CCFI will combine their expertise in
00:13:04.720 civil fraud enforcement and procurement
00:13:07.760 and cyber security to combat these cyber
00:13:09.760 threats. And we're going to use the FCA
00:13:11.920 to pursue cyber security related fraud.
00:13:14.720 And if you knew anything about what the
00:13:16.639 FCA was, that was a bomb. if you didn't,
00:13:20.240 and most cyber people do not, it didn't
00:13:23.279 it didn't make nearly the splash that
00:13:25.839 CMMC coming out did. So, we can go to
00:13:28.399 the next slide.
00:13:32.399 Thank you. So, there's the CCFI and
00:13:35.279 important safety tip. Brian Moon
00:13:37.440 identified three ways that you could vi
00:13:40.000 you could violate the FCA under this,
00:13:41.920 which would be knowing failure to comply
00:13:43.600 with cyber security standards. That's
00:13:45.600 just you have a standard, you know, you
00:13:47.839 don't comply with it. you're on the
00:13:49.200 hook. You've lied to the government.
00:13:50.959 Knowing misrepresentation,
00:13:53.120 that's telling the government you've
00:13:54.880 done it. Now, most people think of the
00:13:56.720 third one, you don't report a cyber
00:13:59.040 incident. Well, yes, that's a case, but
00:14:02.079 it doesn't have to go to that level. You
00:14:03.600 may never have had a breach and you're
00:14:05.120 still liable under this statute, which
00:14:06.639 is pretty um kind of hard for people to
00:14:09.440 get their head around because they
00:14:10.480 think, well, then what's your damage?
00:14:12.320 But my friend, there's no damage
00:14:14.000 provision, no element in the FCA of
00:14:16.320 damages. Remember, you're going to be on
00:14:17.680 the hook for those at least those
00:14:19.279 penalties. And we're trying to quantify
00:14:21.760 what damage you may have done by not
00:14:23.600 properly following