The U.S. government and whistleblowers brought an increased number of False Claims Act (“FCA”) cases – as well recovered a larger amount in settlements and judgements – in the fiscal year 2016, as compared to 2015. In 2016, the U.S. Department of Justice recovered $4.7 billion in settlements and judgments, the third highest annual recovery ever for the department in the FCA’s history.
Under the FCA, anyone who knowingly presents a false or fraudulent claim to the government for payment or approval or knowingly makes or uses a false record or statement material to a false or fraudulent claim is civilly liable to the federal government. Anyone found to have violated the FCA must pay a civil penalty of between $10,781 and $21,563 for each violation, in addition to three times the damages the government sustains as a result of the violation.
The FCA enables private citizens to act as private attorneys general who can file lawsuits on behalf of the government and themselves – known as qui tam actions – if they know about fraudulent claims or statements made to the government. In 2016, relators filed 702 qui tam actions, up from 639 in 2015. Settlements and judgments for FCA cases totaled $2.9 billion in 2016, which includes amount recovered from cases that were filed that year and in prior years. The DOJ can intervene in a qui tam case or choose to decline intervention. If the government chooses to intervene in the case and is successful, the relator can receive up to 25 percent of the proceeds of the action or settlement of the claim, and if the government does not intervene in the case and the relator is successful, he or she can receive up to 30 percent of the proceeds. In 2016, relators received $519 million in settlements and awards of FCA cases. Relators recovered significantly more for cases in which the U.S. government intervened.
The U.S. government also filed 143 FCA cases in 2016, up from 110 in 2015. It recovered $1.8 billion on non-qui tam actions in 2016, more than twice of what was recovered for those types of cases in 2015.
While the DOJ continued to pursue procurement fraud actions, the largest portion of the $4.7 billion recovered in 2016 – $2.5 billion – came from cases involving the health care industry. The cases dealt with allegations of fraudulent drug pricing, the payment of kickbacks for recommending particular drugs or for patient referrals, and excessive and unnecessary testing which defrauded the Medicare and Medicaid programs. Claims relating to housing and mortgage fraud also represented a large percentage of the amount recovered for FCA claims in 2016.
In September 2015, the DOJ issued a memorandum regarding its commitment to using the FCA and other civil remedies to address fraud committed by individuals, in addition to corporations. As a result, 2016 saw several individuals held personally liable for false claims.
Although the DOJ recovered the largest portions of the amount recovered for FCA claims from those in the health care and housing industries, government contractors must still remain diligent in ensuring any representations they make to the government in support of requests for payment are not false or fraudulent in any way. Failure to do so can lead to massive liability for penalties and damages not just for the company, but for the individuals involved, as well.
