"They're always under seal when the government investigates them, so there will be a period of time before cases come to light," says Kenney. "But I do believe there's a lot of government interest in using the False Claims Act in order to try to recover funds from banks that have defrauded the federal government out of moneys."
Another attorney who works closely with the Justice Department on False Claims Act health care cases says, "I would be shocked if there weren't already dozens of cases filed against banks that the government is working on that we just haven't heard about."
Adam Feinberg, a defense attorney who chairs the litigation department at Washington, D.C.-based law firm Miller & Chevalier Chartered, says banks have been scrambling to prepare for potential claims.
"We're about to see a slew of this," says Feinberg. "Twenty years ago, health care fraud was not that big a deal. Now it is the single biggest use of the False Claims Act. Mortgage fraud is going to be the next big wave."Congress passed the False Claims Act, also known as the "Lincoln Law," in 1863 to recoup money from grifters who cheated the government on supplies during the Civil War. The law has been altered and expanded a few times since then, but still protects federal dollars that are distributed under false pretenses -- from defense companies that receive military contracts to health-care providers that receive funds from programs like Medicare and Medicaid. Cases originate in two ways: The Justice Department can start investigating a company of its own accord, or, more often, it's tipped off by whistleblowers. Those individuals, known as "relaters" in DOJ parlance, can sue a company on the government's behalf under what's known as a "qui tam" provision. They are eligible to receive as much as 30% of a recovery, if and when monetary settlements are reached. In theory, the False Claims Act protects not just federal grants, but money that has gone to support affordable housing or cover defaults on mortgage debt guaranteed by Fannie Mae (FNMA.OB), Freddie Mac (FMCC.OB) and other government-backed entities. Such subsidies represent the biggest cost to taxpayers stemming from the financial crisis. The Federal Housing Finance Agency estimates Fannie and Freddie will cost taxpayers $142 billion to $363 billion through 2013.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV