The US Department of Justice (DOJ) has released their 2016 report on just how much they have recovered under the False Claims Act (FCA).
As a reminder in October 2015, there was a groundbreaking court case that revised the interpretation of the False Claims Act to cover federal contracts.
Overall, the DOJ recovered more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government in fiscal year 2016 ending Sept. 30. That’s the third highest annual recovery in FCA history, bringing the fiscal year average to nearly $4 billion since fiscal year 2009, and the total recovery during that period to $31.3 billion.
Of the total amount, $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians. This is the seventh consecutive year the Department’s civil health care fraud recoveries have exceeded $2 billion.
Next came recoveries came from the financial industry with settlements and judgments in cases alleging false claims in connection with federally insured residential mortgages totaled nearly $1.7 billion in fiscal year 2016 – the second highest annual recovery in this area.
The FCA is the vehicle the government uses to recover government funds under government programs and contracts relating to such varied areas as 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.
Although health care and mortgage fraud dominated fiscal year 2016 recoveries, the DOJ also pursues fraud wherever it is found in federal programs and contracts, including procurement fraud matters.
L-3 Communications EOTech Inc. and its parent company, L-3 Communications Corp., paid the United States $25.6 million for defective holographic weapon sites EOTech sold to the Department of Defense, Department of Homeland Security, and FBI. The defendants, including EOTech’s president, admitted knowing the sights failed to perform as represented in cold temperatures and humid environments, but delayed disclosing the defects to federal authorities for years. Besides compensating the government for critical funds lost through fraud, such settlements ensure that the terms of contracts supporting the nation’s defense and security agencies are enforced, and keep other contractors from acting fraudulently in the future.
As more and more federal contracts are awarded to small businesses, the government is focusing on identifying and prosecuting small business certification fraud. As demonstrated by a number of recent cases, the DOJ has increased their efforts to identify and punish false certifications made in connection with SBA programs and is using the FCA to do so. So small businesses who are interested in getting government contracts (and therefore federal dollars), and those large businesses who team with them, need to understand the penalties of the FCA.
The bottom line is that the FCA covers a wide range of actions, including procurement fraud, and contractors need to be aware that the DOJ pursues these false claims aggressively and metes out harsh judgements/settlements to the maximum extent possible.