In latest edition of The Wright Toolbox:
DOJ Issues False Claims Act Report For Fiscal Year 2021
On February 1, 2022, the Department of Justice (“DOJ”) released its annual report on the False Claims Act (“FCA”) recoveries for the fiscal year 2021 in civil cases involving fraud and false claims against the government. The DOJ recovered $5.6 billion, the second highest total recovery since 2014. The total recovered in 2021 more than doubled the $2.2 billion recovered in 2020. Time will tell, but the large increase was probably related to a rebound from depressed activity due to COVID shut downs in 2020. In 2019, the DOJ recovered $3 billion in FCA actions, in 2018 total recoveries were $2.8 billion, in 2017 total recoveries were $3.7 billion and in 2016 total recoveries were $4.7 billion.
The FCA was originally enacted during the Civil War to protect against rampant fraud perpetrated against the United States military. The Department of Justice stated that it “has placed a high priority on rooting out and pursuing those who cheat government programs for their own gain.” Of the $5.6 billion in recoveries, $5 billion relates to matters that involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. False Claims related to PPP money found its way into the 2021 recoveries and will likely increase in 2022.
The FCA permits private individuals to assert False Claims Act claims in qui tam suits as “relators” or whistleblowers. Typically, the whistleblower actions comprise a substantial percentage of the FCA cases that are filed each year. In 2021, whistleblowers filed 598 qui tam suits, an average of 11 cases per week, and recovered over $1.6 billion. The government paid out $237 million to the individuals who exposed fraud and false claims by filing these whistleblower actions.
Among the 2021 recoveries were significant funds recovered for alleged procurement fraud. For example, the DOJ recovered under the FCA for falsified pricing data. Navistar Defense LLC paid $50 million to resolve allegations that it fraudulently induced the U.S. Marine Corps to enter into a contract modification at inflated prices for a suspension system for armored vehicles. Insitu Inc. paid $25 million to settle allegations that it knowingly submitted materially false cost and pricing data for contracts with the U.S. Special Operations Command and the Department of the Navy to supply and operate Unmanned Aerial Vehicles. In other cases, the DOJ pursued allegations that government contractors provided goods or services that did not comply with contract requirements. For example, United Airlines Inc. paid $32.1 million to resolve allegations relating to its execution of contracts to deliver mail internationally on behalf of the U.S. Postal Service. Cognosante LLC paid $18.9 million to resolve allegations that it used unqualified labor and overcharged the government for health care and IT services provided to federal agencies under two General Services Administration contracts. The DOJ also resolved matters involving allegations of kickbacks in government contracts.
The DOJ used its FCA announcement as an opportunity to remind everyone that it will be using the FCA in cyber enforcement matters. On October 6, 2021, the Deputy Attorney General announced the department’s Civil Cyber-Fraud Initiative to use the False Claims Act to combat new and emerging cyber threats. The DOJ will “pursue misrepresentations by companies in connection with the government’s acquisition of information technology, software, cloud-based storage and related services designed to protect highly-sensitive government information from cybersecurity threats and compromises.”
The threat of FCA exposure is always present and can come from multiple sources including disgruntled current or former employees, customers or vendors or “professional” whistleblowers who target certain industries and review publicly available information to generate claims. Compliance audits and operational reviews are important in protecting against FCA claims. Contact us to learn how to protect yourself from FCA exposure.
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The month of March is dedicated to the admirable women in our lives. Leaders, lawyers, thought provokers, barrier breakers, game changers, mentors — all titles that are synonymous with our women team members that take the courtroom floor, and those forging success behind the scenes. We appreciate each of you!Meet our women attorneys