Host Jonathan Porter welcomes Boston-based litigator Bob Peabody to the show to discuss the Department of Justice’s use of the False Claims Act to pursue civil actions in connection with CARES Act fraud. Programs established by the U.S. government to assist individuals and businesses impacted by the Covid pandemic have been the locus of a breathtaking volume of fraud, with some estimates reaching to over $200 billion in fraudulent disbursements. 

During the early days of the pandemic, the government prioritized access to funds over program design and rigor, which quickly injected over $2 trillion of much needed money into the economy but also introduced the perfect conditions for fraudsters to submit phony applications. As the pandemic subsided, the Department of Justice has ramped up efforts to identify fraud and recover funds—and one its most important tools has been the False Claims Act.

Jonathan and Bob explore why a civil remedy is being applied to cases where there is blatantly criminal behavior and how whistleblowers and data miners play an important role in bringing Covid fraud to light. The conversation also discusses conduct that is less blatantly criminal or not criminal at all and how FCA works in these instances, including the concept of “reckless disregard” and how it serves as a means for prosecutors to work around the FCA’s scienter requirement.

Jonathan and Bob also address how FCA liability can emerge due to conduct unrelated to the loan application process per se. They recount an instance where allegations of Medicaid fraud—a matter that led to a settlement—boomeranged into a massive FCA claim due to the representations made by the lender while drawing down Covid relief funds that were initially forgiven by the government. 

Finally, the conversation addresses financial institutions’ exposure to FCA liability under the theory that they should have exercised greater diligence in making loans. Recent cases highlight how DOJ is pursuing not just borrowers, but lenders as well, especially via qui tam litigation against both the institution and executives, demonstrating that the book is still open on Covid-related fraud enforcement. 

Jonathan Porter | Full Biography

Jonathan focuses on white collar criminal defense, federal investigations brought under the False Claims Act, and litigation against the government and whistleblowers, where he uses his experience as a former federal prosecutor to guide clients in sensitive and enterprise-threatening litigation. At the Department of Justice, Jonathan earned a reputation as a top white collar prosecutor and trial lawyer and was a key member of multiple international healthcare fraud takedowns and high-profile financial crime prosecution teams. He serves as a vice chair of the American Health Law Association’s Fraud and Abuse Practice Group and teaches white collar crime as an adjunct professor of law at Mercer University School of Law.

Robert Peabody | Full Biography

Based in Boston, Bob represents companies and management in healthcare, securities, tax, labor and corporate fraud matters. Much of his practice is focused on the healthcare industry—including allegations of illegal kickbacks, off-label marketing matters, and alleged Medicare and Medicaid fraud, among other regulatory enforcement matters. He also handles a range of financial and commercial fraud matters investigated by the Departments of Justice, Treasury, and Health and Human Services, as well as the Center for Medicare and Medicaid Services. Bob also represents financial executives facing SEC scrutiny, including cases involving insider trading, accounting fraud, and market manipulation. Bob also has represented colleges and universities in internal investigations involving Title IX allegations.

Before transitioning to white collar defense and internal investigations, Bob served as a state and federal prosecutor for 15 years. He has broad familiarity with the state and federal courts, having prosecuted more than 60 jury trials, as well as having made numerous arguments before the First Circuit Court of Appeals.