In Fiscal Year (“FY”) 2015, the Department of Justice (“DOJ”) raked in $3.6 billion in settlements and judgments from civil actions filed under the False Claims Act (“FCA”). This marks the fourth consecutive year that the United States’ recovery under the FCA exceeded $3.5 billion. This trend suggests that aggressive enforcement of the FCA is here to stay.
As a refresher, Congress enacted the FCA to combat rampant fraud during the Civil War. Since then, the FCA has become the federal government’s most power tool to detect and prevent fraud, waste, and abuse. In accordance with 31 U.S.C. §§ 3729 et seq., the FCA imposes civil liability upon any individual or corporation who knowingly submits, or causes the submission of, a false or fraudulent claim to the United States. The FCA also sets forth “qui tam” provisions, which permit private citizens (referred to as “relators”) to initiate a lawsuit under the FCA on behalf of the United States as a “whistleblower” (31 U.S.C. § 3730(b)). Under these provisions, a relator is entitled to recover a proportional share of any FCA damages obtained by the United States.
The United States’ $3.6 billion recovery in FY 2015 marks the lowest amount of FCA damages claimed by the United States since FY 2011. This figure also indicates a steep drop from the United States’ record-breaking year in FY 2014, in which the DOJ recovered approximately $5.8 billion in FCA damages. While many factors may have contributed to the decline in FCA recovery, it is noteworthy that the number of new civil actions initiated under the FCA (both non-qui tam and qui tam actions) in FY 2015 dropped to its lowest point since FY 2010.
Regarding specific industries/sectors particularly affected in FY 2015, the DOJ provided the following interesting statistics:
- Fraud in the healthcare industry accounted for approximately 54% of the FCA damages for FY 2015, equating to roughly $1.9 billion. This marks a continuing trend in which FCA actions relating to the Department of Health and Human Services dominated the United States’ total take for yearly FCA damages.
- During FY 2015, the United States also recovered approximately $1.1 billion in FCA damages from federal government contractors, including $600 million in settlements and judgments from Department of Defense (“DOD”) contracts. This is a marked increase in DOD-related FCA recovery from FY 2014, during which the United States recovered approximately $69 million in FCA damages.
- Relators in qui tam actions also saw a substantial gain in their proportional share of FCA damages awarded in FY 2015. During FY 2015, qui tam relators were awarded $597 million in FCA damages, which rose from $444 million in FY 2014 (i.e., approximately 34%).
- In response to Deputy Attorney General Sally Quillan Yates’ memorandum (the “Yates Memo”), issued on September 9, 2015, the DOJ also reported that it recovered more than $2 million in FCA damages from individuals. Through the Yates Memo, the DOJ announced a policy to increasingly target individuals involved in fraudulent activities.
Although FY 2015 marked the first decline in the recovery of FCA damages since FY 2011, it is likely that FCA enforcement activities will continue to be a prominent focus of the DOJ in years to come. These trends should serve as a sobering reminder to federal government contractors of the United States’ aggressive prosecution of FCA actions.