Section 8 Fraud: Side Payment Cases
The False Claims Act provides that any person who “knowingly presents . . . a false or fraudulent claim for payment or approval” to the United States is liable on each such claim for a civil penalty of not less than $5,500 and not more than $11,000, plus three times the amount of damages sustained by the United States. In addition, any person who violates the FCA is liable for costs and attorney fees. (31 U.S.C. § 3729(a).)
The FCA defines the terms “knowing” and “knowingly” as meaning, with respect to information, that a person “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.” (31 U.S.C. § 3729(b).)
The FCA defines a “claim” as “any request or demand . . . for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee or other recipient for any portion of the money or property which is requested or demanded.” (31 U.S.C. § 3729(c).)
Acceptance of Section 8 “side payments” constitutes a violation of the FCA. (Coleman v. Hernandez, 490 F.Supp.2d 278 (D. Conn. 2007).) In Coleman, a tenant who was eligible for a Section 8 rent subsidy entered into a rental agreement with a landlord, fixing the tenant’s total rent at $1,550 per month. The housing authority approved the rental agreement, which provided that the housing authority would pay the landlord $1,530 per month, and the tenant would pay $20 per month. Pursuant to Section 8 rules, the landlord was prohibited from charging the tenant any additional payment.
In Coleman, the landlord charged the tenant an additional rent payment of $60 on six separate occasions. The court held that these requests for “side payments” constituted six separate false claims under the FCA. (490 F.Supp.2d at 281.)
The FCA has a six-year statute of limitations. (29 U.S.C. § 3730).