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DOJ Announces Record-Setting Year for Fraud Recovery

It’s the holiday season again: the time of year when the Department of Justice (DOJ) announces its annual False Claims Act (FCA) fraud recovery statistics. For fiscal year 2014, the DOJ secured a record $5.69 billion in settlements and judgments in civil FCA cases—a dramatic increase over last year’s total of $3.8 billion and the first time the annual recovery has exceeded $5 billion. Since 1986, when Congress strengthened the FCA, more than $44 billion has been reclaimed from companies and individuals who committed fraud against the federal government.

The FCA, which dates back to the Civil War, is the government’s primary tool in recovering funds stolen from federal programs: Medicare and Medicaid, contracts and grants, housing programs, disaster relief loans, and agricultural subsidies.

The lion’s share of FY 2014 recoveries came from housing and mortgage fraud cases. Financial institutions such as Bank of America and JP Morgan Chase paid the federal government $3.1 billion to settle allegations of improper mortgage lending practices that triggered the 2008 global financial crisis. Health care fraud cases, which usually comprise the largest share of annual FCA recoveries, accounted for $2.3 billion. A substantial part of that came from pharmaceutical giant Johnson & Johnson’s historic settlement resolving federal and state claims of improperly marketing its prescription drugs and paying kickbacks to health care providers.

As for contract fraud-related cases, there were several notable recoveries this past year (most of these companies are in our Federal Contractor Misconduct Database):

  • Boeing: $23 million to settle claims of submitting false labor charges on C-17 Globemaster aircraft maintenance contracts
  • Hewlett-Packard: $32.5 million for allegedly overbilling the U.S. Postal Service
  • McKesson: $18 million to resolve allegations that it improperly set temperature monitors used in shipping vaccines under a contract with the Centers for Disease Control and Prevention
  • MPRI: $3.2 million to settle claims of submitting false labor charges on a contract to support the Army in Afghanistan
  • Northrop Grumman: $11.4 million for allegedly overbilling for employee costs on federal contracts
  • Samsung: $2.3 million to settle charges of misleading federal agencies about the country of origin of its products

According to the DOJ, nearly $3 billion of the $5.69 billion was recovered in lawsuits filed by whistleblowers under the qui tam provisions of the FCA, which entitles them to a share of the recovery. These whistleblowers—who put their personal and professional lives at great risk by filing suit—were awarded a total of $435 million. We are certain this will elicit howls of outrage from the Chamber of Commerce, which has been trying to gut the FCA for years.

Although the DOJ noted that more than 700 qui tam lawsuits were filed last year, we were disappointed that it neglected to report the current backlog of pending FCA and qui tam lawsuits. We blogged back in October that, as of January 2011, more than 1,300 lawsuits were under seal and stuck in legal limbo while the government decides whether or not to intervene. Nearly two months later, the DOJ still has not responded to our request for more recent numbers.