There has already been much commentary on the impact that President Trump and his administration will have on government enforcement efforts. Trump has made it clear that he intends to streamline government regulation of business in order to spur the economy. He’s also promised to dismantle Dodd-Frank, the law that started the SEC and CFTC whistleblower programs. If Trump succeeds in getting government off the back of businesses, then that will likely mean less enforcement actions against these businesses for running afoul of regulations that don’t fit into Trump’s plan.
However, Trump has also promised to cut waste in Washington. And that likely also means additional enforcement actions to punish companies stealing from the government. Although not yet in office, Trump has already warned Boeing and Lockheed Martin about the high cost of their airplanes, which are under government contracts. It is hard to envision a President attempting to control costs that doesn’t vigorously pursue government money lost to fraud.
So, here are five areas where we expect President Trump will vigorously pursue fraud and pay whistleblowers over the next four years.
1. Customs Fraud
Trump has promised to return manufacturing to America by imposing tariffs on companies that move production overseas. He has also floated high tariffs on goods from countries that don’t engage in fair trade, such as China. Higher tariffs on imports could bring about significant customs fraud, particularly if consumers won’t bear price increases for the goods in the marketplace.
Whistleblowers can report companies intentionally circumventing the payment of customs duties through the False Claims Act. With higher tariffs under the Trump Administration, the payout for whistleblowers reporting fraud in this area will likely increase. And President Trump will be eager to pursue them, as enforcement actions against companies manufacturing overseas will be popular with his base in the public.
If there is one area of enforcement actions in securities law that is likely to grow under President Trump, it is cybersecurity. Hacking has become a significant problem in society and one of the easiest ways to make money off of the information acquired is through insider trading in the stock market. SEC Chair Mary Jo White previously said that cybersecurity is the biggest risk to the financial system.
Even if Trump rolls back Dodd-Frank, it seems unlikely that he will ever give free reign to hackers to disrupt the market. As detection efforts get better, and foreign intrusions increase, more enforcement actions will be focused in on this area. Less regulation of business isn’t going to change the story here as the government seeks to create a business-friendly environment. And with a significant population of hackers overseas, Trump could easily use foreign intrusions here as justification for his protectionist agenda.
3. Government Procurement, Contracts, and Grants
Trump has big plans to increase spending on infrastructure and defense. For the nation’s roads, bridges, and rails, the spending boost is estimated to be $1 trillion. The estimate on the cost of his plan to strengthen the military is another $500 million to $1 trillion dollars.
With this increase in spending will come fraud, waste and abuse. When a company fraudulently bills the government for defective goods, the business is going to run afoul of the False Claims Act. And even if the government declines to intervene and prosecute the case, it will likely allow the qui tam relator to continue to pursue a recovery on its behalf.
4. VA Fraud
Trump has promised to protect our troops when they get home by ending the red tape and backlogs in the Department of Veterans Affairs. Whether he privatizes the system or brings in more contractors to fulfill portions of the mission of the VA, it’s going to take a major overhaul to reform the system. There have already been numerous articles in the media about fraud in the system, whether in disability fraud or by contractors claiming to be run by veterans. As Trump attempts to clean it up, it seems likely that more cases will come out of the woodwork here.
5. Prescription Drug Costs
Reform is coming here. As Trump vows to cut wasteful government spending, it has to include Medicare. This could take many forms: Reigning in health care spending could involve restrictions on drug pricing or even simply allowing Medicare to negotiate the prices it pays. Any plan to restrict profits will put pressure on the pharmaceutical industry and their sales representatives. As margins decline, some of them will take unscrupulous steps to sell their drugs and run afoul of the False Claims Act.