It rained, and the Union soldiers stood in it and watched their coats come apart.

Not tear. Not wear through. Dissolve. The contractor had pressed those coats out of wool scrap and glue, sold them to the Army at the price of new wool, and the first hard weather took them back to lint on the men's shoulders.

There's a word for that material. Shoddy. The war is what put it in the language as an insult, and it has been sitting in your mouth ever since, doing quiet duty for anything cheap, and you probably never knew you were quoting a fraud.

It wasn't only the coats. The sugar had sand in it. The gunpowder had sawdust. A syndicate bought carbines the government had condemned as unfit, at about $3.50 apiece, and sold the same weapons back to the government weeks later for $22, and the Army issued them to men who then had to fire them.

Everyone knew. That was never the problem.

Knowing and proving are two different jobs, and in 1863 the United States had absolutely nobody to do the second one. No FBI. No inspectors general. No investigative apparatus of any kind worth the name. A Treasury that could count the money going out the door and had no method whatsoever for learning where it went.

So in March of that year Congress did the only thing available to a government that cannot see. It hired the public.

The False Claims Act let any private citizen who knew about fraud against the United States sue the fraudster in the government's own name and keep half of whatever came back. The Latin is qui tam, clipped from a longer phrase meaning he who sues for the king as well as for himself. It's a medieval English device, older than the printing press, and the United States reached back six centuries for it because there was nothing else on the shelf.

That contract has never been closed. Last year it brought in $6.8 billion, the biggest year in its 163-year history. And the man running Lincoln's play most profitably right now lives in Cary, North Carolina, and did the whole thing from a laptop.

The Man With Two Spreadsheets

I've read the settlement papers in both of David Reed's cases. There is nothing clever in them, and that's what I can't get past.

I spent 20 years building fraud cases the expensive way. Warrants. Wires. Informants who lied to me all the time and then asked to be paid for it. Reed opened two websites.

The first was the SBA's public record of every Paycheck Protection Program loan. News organizations sued for that data in 2020 and won, so it's all out in the open. Borrower, amount, address.

The second was the SBA Franchise Directory, and I want to be honest that before this story I had never heard of it. Almost nobody outside franchise law has.

It matters because of a rule nobody read in the spring of 2020. PPP capped a borrower at 500 employees, and under the affiliation rules, a company that owns a dozen car dealerships generally has to count the people at all twelve together. There was an exception letting each rooftop count as its own little company. To use it you had to appear in that directory, with an identifier code proving you belonged there.

A number of large dealer groups counted separately anyway and took the money. Maybe they didn't know the rule. Maybe somebody knew and didn't want to be the person slowing down a payroll rescue in April 2020, and I have some sympathy for that version, which is a thing I don't often say in this newsletter.

Reed pulled both lists. He looked for names on the first that weren't on the second. That was it. That was the whole technique.

Then he sued them on behalf of the United States of America, and the federal courts treated him as its co-plaintiff. Garber Management Group in Michigan settled in February for just over $1.5 million. The Jeff Wyler Automotive Family in Ohio settled in April for about $2.1 million. His cut across the two runs somewhere near half a million dollars. There's a third case pending against Shottenkirk Automotive Group on the identical theory, and the filings suggest he isn't finished.

Nothing he touched was secret. The gap sat on a public server in plain view for five years, and the only scarce resource in the entire story was a person willing to look.

I don't know what Reed does for a living. The filings don't say and I didn't ask.

Reed Is Not the Story. The Industry Is.

Private citizens filed 1,297 new qui tam suits last fiscal year, past the old record of 979 set the year before. Three and a half new whistleblower lawsuits every day, weekends included. Of the $6.8 billion recovered, roughly $5.3 billion came from cases citizens started rather than cases the government found on its own.

Look at what that ratio actually says. Better than three quarters of the largest fraud-recovery year in American history was found by people who don't work for the government.

And more than 45% of all qui tam complaints filed since fiscal 2024 came from data miners. That's DOJ's own number. Nearly half the fraud cases now brought in the name of the United States begin with somebody running a query against a file the United States itself published.

Reed at least reads like a person. The industrial version is a New York lawyer operating a shell called GNGH2, which has been firing off PPP qui tams from public data since 2020 with no insider, no client, and no connection to any of it. The first six went badly. Five drew declinations and dismissals, one settled for $2.25 million. Then it found its range. Last year it pulled a $14 million settlement, another for $2.1 million, and a $21.6 million resolution against three related entities. Roughly $10 million in relator shares, with dozens of cases still in the pipe.

The defense bar calls these parasitic relators. No knowledge, no risk, no career to lose. Pure arbitrage on a public file.

And I'd defend the practice on the merits, because the fraud is real whoever finds it, except for one thing. The 15 to 30% share was written in 1986 to compensate an insider for the destruction of a working life. Somebody who loses the job, the references, the marriage, six years. It was never designed as a return on a database query. Both now collect at the same rate.

Then Washington Opened a Service Window

On the last day of April, the Civil Division announced a program called FOCUS. It stands for Fraud Oversight through Careful Use of Statistics. Somebody plainly worked backwards from the acronym, and having spent years inside agencies that did exactly the same thing, I'm going to let that one go.

Strip the branding off and this is what it is. DOJ will now meet with professional data miners before they file anything. Bring your methodology to the Civil Fraud Section. Walk them through the query. Find out whether your theory survives contact with people who know the program rules, before a single document goes to a courthouse.

The deputy assistant attorney general who announced it said qualifying data miners could become the Department's strongest and most effective partners in the war against fraud.

Partners.

The Justice Department looked at the swelling crowd of civilians filing fraud cases from their kitchen tables using public data, and it did not shoo them off. It built them an intake process. This is no longer a government tolerating outsourced fraud detection. It's a government onboarding suppliers, running a pre-bid conference, and telling the good ones how to write a proposal it can accept.

And Sharpened the Kill Switch

Three months before FOCUS, in January, the same official stood in front of a conference room full of defense lawyers and said four words that nobody outside that room noticed.

"(c)(2)(A) is back."

That's a citation to the subsection of the False Claims Act that lets the government move to dismiss a whistleblower's case over the whistleblower's objection. Not settle it. Kill it. The relator can stand up in open court and object, and it ends anyway. The Supreme Court confirmed the government holds that power in 2023, and for years afterward DOJ used it about half a dozen times a year.

This administration has used it 25 times.

Same twelve months as FOCUS. And read the stated targets: meritless claims, and allegations already publicly disclosed or already sitting inside a government investigation. That is a nearly exact description of a case assembled by querying a public database.

So the Department opened a front door for data miners and quadrupled the rate at which it throws them out the back, in the same year, under the same official.

I've turned that over more than I'd like to admit, and I don't think it's hypocrisy. I think it's what happens to every organization that outsources a function and then discovers it can't control the supply. Justice is drowning in filings it never solicited. FOCUS is quality control at the front of the line. The kill switch is quality control at the back. Both are the behavior of a buyer, not a prosecutor.

If you are planning to file something, understand what that makes you. You are not a citizen bringing a case. You're a vendor in a market with one customer, and the customer just started auditing.

The People Who Still Pay Full Price

Whistleblowers were paid $330 million last year. Against $5.3 billion, that's 6.2%. The 10-year average payout is $438 million. So in the single biggest recovery year in the history of the statute, the people who brought the cases took home less money than usual.

DOJ declines to take over roughly four out of five qui tam suits. A judge on the Eleventh Circuit put it at 80% from the bench in December and nobody in the room disputed him. Declined cases mostly die quietly, years later, having paid the relator nothing at all.

Then there's the waiting, which nobody prices in until they're inside it. The two former sales reps behind last year's $1.64 billion judgment against Janssen filed their case twelve years before it landed, and it is still on appeal today. The IRS whistleblower program pays generously when it finally pays and takes an average of 10.87 years to do it. That's not my estimate. That's the number the IRS publishes about itself.

Four senior deputies in the Texas Attorney General's office reported their own boss to the FBI. All four were fired. They litigated about five years and won $6.6 million between them, and even then the money had to wait on a legislative appropriation before anyone saw a dollar. One of them was a former Texas Ranger who ran the office's law enforcement division. That is a career that ended at the top of itself.

The checks are compensation. They are not profit, and none of the people I've met describe them as a win. Meanwhile a shell company in New York collects the same percentage for running a query, and goes home, and sleeps fine.

You May Be the Fish

I've been writing to the readers who might want to collect a bounty. Now I'm writing to the ones who have one on them and don't know it.

If you took a PPP loan, an EIDL loan, or any pandemic-era federal money for a business, your paperwork is public, permanent, and being read right now by strangers with software and a direct financial interest in your mistakes. Reed's method isn't proprietary. It's two browser tabs.

The certifications you initialed at speed in April 2020, while trying to keep people employed, are checkable by anyone. So are your affiliation calculations, your headcounts, and your size standards. If you bill Medicare or Medicaid, hold a federal contract, or have ever certified cybersecurity compliance to an agency, those filings are in the same open water. The cyber attestations are the newest and softest target on the board.

And civil liability does not require anyone to prove you meant to defraud. Reckless disregard is enough. The damages come in triples.

The False Claims Act reaches back six years, and ten in some circumstances. Loans written in 2020 stay actionable into roughly 2030. Nothing about that spring is behind you yet.

Field Manual

First three if you're holding information. Last two if you took the money. Most of you are standing on one end or the other, and a few of you are on both.