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Big-time losses

The federal government is losing the war on waste. Tens of thousands of small fraud cases - adding up to $100 million or more in losses to the government each year - are slipping through the cracks of an overworked judicial system and an understaffed Justice Department.

If an unscrupulous individual or contractor makes up his mind to defraud the government of a few thousand dollars, chances are he will succeed.

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The present system simply does not work either to prevent or to punish most small-time fraud. Justice Department lawyers, who must prosecute fraud cases, go after the big fish in order to recover the most money. The smaller cases - usually under $100,000 - fall by the wayside.

The small-time crooks too often go unpunished and the money is uncollected. This leads to further dishonesty. The cheaters know just how far they can go in stretching the rules without interference from government prosecutors. Really unscrupulous individuals can take advantage of the situation over and over again.

The statistics on small-time fraud are shocking. A General Accounting Office study issued in 1981 showed that more than 77,000 fraud cases were detected over a three-year period, representing a loss to the government of $200 million. Only 12,900 - or about one-sixth - of those cases were referred to the Justice Department for possible prosecution, and only 39 percent of the referred cases were actually prosecuted.

More recently, statistics released by 18 federal inspectors general for fiscal year 1982 showed 8,600 cases referred for prosecution. Prosecution was declined in about 40 percent of those cases. Of the remaining cases, 2,300 resulted in convictions and fewer than 100 were settled out of court. And even when the government is successful in court, it rarely recovers the full amount of money it has lost.

To get out of this morass, we must change the way government handles smaller fraud cases. We must provide a mechanism for federal agencies to handle fraud cases in an administrative proceeding, instead of having to take each case to court - a kind of ''small-claims court'' within each agency. This would remove a tremendous burden from the courts and the Justice Department, and it would permit the expeditious and fair handling of alleged fraud cases that are now escaping prosecution. My legislation to accomplish these goals, the Program Fraud Civil Penalties Act, has been introduced in the Senate, with bipartisan cosponsorship.

The legislation fights fraud by automatically doubling the penalty against those found guilty of false claims. It also permits a fine of up to $10,000 for each count in a conviction. For example, if a contractor has inflated claims by

A pilot program along the lines of this bill has been set up in the Department of Health and Human Services, and it shows that this approach can work. Since the pilot project began in May, the department has recovered nearly In most instances, we are told, contractors are so nervous about the potentially large fines that they offer to settle quickly. I believe this deterrent effect would work well government-wide.

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The Senate Permanent Subcommittee on Investigations, which I chair, has held a number of hearings on program fraud against the government - including medicare/medicaid schemes, workers' compensation fraud, and overbilling by defense contractors. The hearing showed that in many cases, recovery of money defrauded has been difficult, if not impossible, for the federal government. This bill would change the frustrating system we have now.

The Senate Governmental Affairs Committee held a hearing on my proposal Nov. 15. I am hopeful that this Congress will take action on this badly needed legislation. The Program Fraud Civil Penalties Act would be a major reform in our governmental procedures, and it would put those who steal from the government on notice that they can no longer hide behind the system.

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