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False Claims Act Recoveries Continue to Soar

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On December 4, 2012 the Department of Justice announced that during the 2012 fiscal year, it recovered $4.9 billion in settlements and judgments in civil cases involving alleged fraud against the government.  That amount constitutes a record recovery for a single year, eclipsing the previous record by more than $1.7 billion.  Of that amount, $3.3 billion came from qui tam or whistleblower actions.

The False Claims Act qui tam provisions allow private citizens to file lawsuits alleging fraud claims on behalf of the government.  If the government prevails, the whistleblower, called a “relator” will receive up to 30% of the recovery.  In 2012, a record 647 qui tam suits were filed.  The vast majority of those actions involved health care fraud, particularly actions involving the pharmaceutical and medical device industry.  In addition to health care fraud, the Justice Department continued its very aggressive pursuit of financial fraud, including fraud in the housing and mortgage industries.

Much of the increase in the number of actions filed and the record recoveries can be attributed to the passage of the Fraud Enforcement and Recovery Act of 2009 which, along with the 2010 Affordable Care Act, provided additional inducements and protections for whistleblowers, and strengthened the provisions of the federal health care Anti-Kickback Statute.  The amendments made it much easier for qui tam relators to bring FCA actions and restricted some of the defenses historically relied upon by FCA defendants.

These record recoveries should be of significant concern to companies doing business directly with the government, that report to or make certifications to the government, or that receive government contracts or grants.  Businesses must be proactive in identifying vulnerabilities and putting systems in place to better manage government reporting and facilitate employee communication.  If a company is made aware of a pending claim it needs to seek experienced legal counsel immediately.  In many of these cases a large settlement is not a foregone conclusion; rather, the company may well have valid defenses
that should be investigated and pursued.