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Federal Fraud Recoveries Bounce Back in FY 2016

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The Justice Department announced on Wednesday it had recovered for taxpayers more than $4.7 billion through settlements and judgments from False Claims Act cases in fiscal year 2016. According to the announcement, it is the third highest annual recovery in False Claims Act history. It is also a substantial increase over last year’s total.

Of the $4.7 billion recovered, $2.5 billion came from health care fraud cases. An additional $1.7 billion came from settlements and judgments in cases alleging false claims in connection with federally insured residential mortgages.

A large number of recoveries came from contract fraud cases involving some of Uncle Sam’s most prominent suppliers of goods and services:

  • Boeing: $18 million to settle allegations that it overcharged the US Air Force for aircraft maintenance services at Boeing’s Long Beach, California, depot. (In 2014, Boeing paid $23 million for allegedly overcharging maintenance work at its depot in San Antonio, Texas.)
  • Centerra Services International: $7.4 million to resolve a lawsuit accusing the company of overbilling the Army for firefighting services in the Middle East
  • Computer Sciences Corporation: $1.35 million for billing the Defense Information Systems Agency for subcontract workers who lacked the required security clearances
  • Deloitte Consulting LLP: $11.38 million to resolve overbilling claims on a General Services Administration contract
  • DRS Technical Services: $1 million to settle charges that employees billed the Army for hours they did not work
  • L-3 Communications: $25.6 million to settle claims of selling the government defective weapon sights
  • Lockheed Martin: $5 million for allegedly misleading federal and state regulators about noncompliance with environmental regulations at the Paducah Gaseous Diffusion Plant in Kentucky
  • SRA International: $1.1 million for alleged false billing on military contracts
  • United Technologies: $11 million in penalties, interest, and disgorgement of profits for overcharging the Air Force for jet engines in the 1980s
  • URS Corporation: $9 million to settle allegations that a subsidiary defrauded the government into awarding it construction contracts that it was not eligible to receive. In a different case, URS paid $580,000 for allegedly overbilling labor rates on a bridge reconstruction project.

The False Claims Act is the government’s primary tool to redress fraud in the areas of health care, defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs. In 1986, Congress strengthened the Act by increasing incentives for whistleblowers to come forward with allegations of fraud. Most false claims actions are filed by whistleblowers in qui tam lawsuits. Since 1986, the government has recovered slightly over $53 billion, awarding more than $6.3 billion of that to the whistleblowers who filed the lawsuits—often at great risk to their careers.

On the same day the Justice Department announced its annual fraud recoveries, it also announced it had collected nearly $15.4 billion in civil and criminal cases in FY 2016, one-third less than last year’s total. This amount includes recoveries in all civil and criminal enforcement cases (including those involving the False Claims Act), fines imposed on individuals and corporations for violations of federal financial, health, safety, civil rights, and environmental laws, and collected debts owed to the federal government.

How will the False Claims Act fare under the Trump administration? At least one expert foresees very little change.

Taxpayers Against Fraud acting president Patrick Burns recently observed that Senator Jeff Sessions (R-AL), President-elect Trump’s choice for Attorney General, “has never winked at companies that harm American workers and consumers” and “understand[s] the value of whistleblowers and whistleblower laws when it comes to fighting corporate theft and crony capitalism.” He noted that Sessions has supported strengthening the False Claims Act and has a good relationship with Senator Chuck Grassley (R-IA), the law’s key champion in the Senate.

Burns’ prediction gives us hope that active enforcement of the False Claims Act—and billions of dollars in annual recoveries—will continue for years to come.

By: Neil Gordon
Investigator, POGO

Neil Gordon, Investigator Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.

Topics: Contract Oversight

Related Content: Contractor Accountability, Contractor Misconduct, Federal Contractor Misconduct, Waste, False Claims Act

Authors: Neil Gordon

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