Justice Department Obtains Record $5.69 Billion in False Claims Act Recoveries
The U.S. Department of Justice announced last week that it had obtained a record $5.69 billion in settlements and judgments from civil fraud cases brought under the False Claims Act (“FCA”) in fiscal year 2014. This brings the Federal Government’s total recoveries under the FCA in the past five years alone to $22.75 billion, which represents more than half of all FCA recoveries since 1986. And for the second consecutive year, over 700 whistleblower lawsuits were brought under the FCA’s qui tam provision, approximately twice the average during the years 2000-2009. The FCA’s qui tam provision allows a private citizen whistleblower (referred to as a “relator”) with knowledge of fraud against the federal government to file a lawsuit on behalf of himself and the United States. Whistleblowers can receive between 15-30% of any amount recovered by the Government, with nearly $3 billion in such rewards distributed this fiscal year alone.
The above recovery figures do not include additional state funds recouped under parallel state statutes or the amount of money saved as a result of the deterrent effects anti-fraud enforcement efforts have. Recoveries are stark under the FCA, which provides for treble damages, in addition to penalties. This means that the Government can recover from perpetrators not only any fraudulently obtained funds, but also the Government’s cost of investigation and prosecution. Consequently, government spending on FCA and other anti-fraud enforcement efforts can result in exponential returns. In fiscal year 2012, for example, the Obama administration announced an impressive return-on-investment for its health care fraud prevention program of more than 700% over the prior three years. And this was after approximately $439 million of the Government’s $4.9 billion fiscal 2012 recovery was paid to award the private whistleblowers who exposed this fraud.
The increased success of civil fraud cases under the FCA is attributable in large part to the Government’s renewed commitment to anti-fraud legislation and enforcement efforts since President Obama assumed office. In 2009, for example, the FCA was substantially amended for the first time since 1986. These amendments, signed into law as part of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), significantly expanded the scope of liability under the FCA, including by making it a violation to knowingly conceal, avoid, or decrease an obligation to pay money to the Government, thereby eliminating the need to show a false record or statement in certain circumstances. The definition of “obligation” was also expanded in response to courts that had construed the term too narrowly. In 2010, the Patient Protection and Affordable Care Act further strengthened the provisions of the FCA, including by weakening the public disclosure bar, a technical procedural requirement that defendants often use to evade liability. With these new amendments also came a heightened focus and prioritization of anti-fraud enforcement efforts by the Department of Justice.
The FCA is the primary vehicle through which the Government can redress fraud on U.S. taxpayers and recoup fraudulently obtained funds paid through Government contracts and programs. This past fiscal year, mortgage, housing, and health care fraud accounted for the largest recoveries. The Government recovered $3.1 billion from banks and other financial institutions in connection with federally insured mortgages and loans in the wake of the housing crisis. Another $2.3 billion was recovered in connection with fraud against federal healthcare programs, such as Medicare and Medicaid. Two of the biggest healthcare cases alleged violations by pharmaceutical companies Johnson & Johnson and Omnicare. Among other claims, these companies allegedly violated the Anti-Kickback statute, which now automatically gives rise to FCA liability following enactment of the 2010 Patient Protection and Affordable Care Act. Other FCA recoveries this year involved Government contracts spanning a range of industries, including IT products and services, wartime logistical support, software licensing and maintenance, and foreign agricultural subsidies.
Notwithstanding the above, there continues to be a backlog of FCA cases, with government investigations often taking two years or more to complete due to a lack of agency resources. The FCA’s success in recent years weighs in favor of even greater increases in FCA enforcement efforts, including the hiring of additional lawyers, investigative agents, and other anti-fraud enforcement personnel. It should also encourage more whistleblowers to come forward as they play a critical role in protecting the federal fisc against fraud and have been handsomely awarded accordingly for their efforts.
If you have information about fraud on the government, please contact the experienced False Claims Act lawyers at Tycko & Zavareei LLP to see if we can help.