In the latest Weekly Wright Report:
- DOJ Issues False Claims Act Report For Fiscal Year 2020- read now
DOJ Issues False Claims Act Report For Fiscal Year 2020
The Department of Justice (“DOJ”) recently released its annual report on the False Claims Act (“FCA”) recoveries for the fiscal year 2020. The DOJ announced that it obtained more than $2.2 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year, that ended Sept. 30, 2020. The total recovered amount has been falling for the past few years. For example, 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. Lower collections were to be expected as a result of the pandemic and the impact on the judicial system.
The FCA was originally enacted during the Civil War to protect against rampant fraud perpetrated against the United States military.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 $2.2 billion in recoveries, $1.8 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.
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 2020, whistleblowers filed 672 qui tam suits and recovered over $1.6 billion; 72% of the total recoveries in 2020. The government paid out $309 million to the individuals who exposed fraud and false claims by filing these whistleblower actions.
Among the 2020 recoveries were significant funds recovered for alleged procurement fraud. For example, major federal contractors Bechtel National Inc., Bechtel Corporation, AECOM Energy & Construction, Inc., and their joint venture Waste Treatment Completion Company, LLC agreed to pay over $57 million to resolve allegations that they submitted false claims to the U.S. Department of Energy by charging inflated labor hours and by billing for work not actually performed to construct and maintain the Hanford Waste Treatment Plant. In another case, a contractor agreed to pay $37 million to resolve both its criminal and civil liability for engaging in a bribery scheme to steer government contracts for training simulators to the company. In that matter, the President and Chief Executive Officer of the company separately agreed to pay $500,000 to resolve his personal civil liability for the alleged scheme.
In some cases, the department pursued allegations that government contractors provided goods or services that did not comply with contract requirements. For example, a contractor agreed to pay $27 million to resolve allegations that it fraudulently induced the Army and the U.S. Defense Logistics Agency to award wartime contracts for food and trucks by falsely certifying compliance with United States sanctions against Iran. In another matter, a steel supplier for naval submarines, paid over $10 million to resolve allegations that it produced and sold substandard steel components for installation on U.S. Navy submarines. The government alleged that the company produced castings that failed lab tests and did not meet the Navy’s standards, and that its Director of Metallurgy falsified test results to hide the failures.
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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