December 16, 2014
The US Justice Department recently announced its whistleblower program designed to catch and recover money from fraud against the government had its most successful year to date. The department recovered $5.59 billion in settlements and judgments for the 2014 fiscal year. Previous year’s recoveries never amounted to more than $5 billion. The total amount of recovery since the program began in 2009 is nearly $23 billion.
The money is recovered under the False Claims Act (FCA), which prohibits individuals and organizations from submitting or causing to be submitted false or fraudulent claims to the government. Most of the cases filed under the FCA are considered whistleblower cases and are filed by private citizens doing so on behalf of the federal government. These whistleblowers could be entitled to up to 30% of the recovery amount in an award.
In many cases, the claims are filed by current or former employees of companies that are committing fraud. Of the nearly $5.7 billion recovered this year, about $3 billion was related to whistleblower lawsuits and filers received approximately $4.5 million in awards.
Banks and Mortgage Lenders Make Up Large Portion of Claims
A large portion of the whistleblower claims were related to banks and other financial institutions dealing with mortgages and other loans. Of the total recovered, just over $3 billion was from lending institutions. Several individual settlements for hundreds of millions of dollars involving major financial institutions were cited.
The second most common area where fraud was reported was health care. Recoveries from health care fraud in 2014 added up to $2.3 million. It was the fifth year in a row the Justice Department recovered amounts totaling more than $2 million related to health care fraud cases and the second straight year in which the department set a new record for recoveries under the FCA for health care fraud.
Justice Department officials believe the Health Care Fraud Prevention and Enforcement Action Team is the cause of the heightened recovery amounts in recent years. The team, known as HEAT, is an interagency task for that coordinates efforts the Justice Department and Department of Health and Human Services.
Of the $2.3 billion total, the pharmaceutical industry and cases involving hospitals and home heath services providers accounted for the majority of the recovery money. The department recovered nearly $2 billion in cases alleging false claims for drugs and medical devices under federally insured health programs and, in addition, returned $745 million to state Medicaid programs. These cases include recoveries from GlaxoSmithKline LLC (GSK) and Merck, Sharp & Dohme (Merck) – two of the three top settlements this year.
Enforcing Action against Fraud Continues to be a Priority
In addition to health care and mortgage recovery, the Justice Department also pursues fraud that occurs in government procurement and various other federal programs. Some of these cases have resulted in eight-figure settlements.
The Justice Department has made FCA claims one of its main priorities. The goal is to ensure companies – financial, health care, and otherwise – have strong compliance programs and abide by the rules of those programs. In a statement issued December 4, 2014, Attorney General Eric Holder stated:
“Today’s announcement underscores the Obama Administration’s ongoing commitment to recover losses, to prevent fraud, to bring abuses to light, and to hold accountable those who violate the law and exploit some of the government’s most critical programs. Thanks to the dedicated work of attorneys, investigators, analysts, and support staff at every level of the Justice Department – along with our state and local partners across the country – we have secured the largest annual recovery in the Department’s history. By aggressively investigating allegations of waste and pursuing those who would take advantage of the most vulnerable members of society, I’m confident that we will continue to build on this historic progress in the months and years ahead.”