DOJ False Claims Act Stats Show Growth in Recoveries in 2019, Continued High Level of Qui Tam Actions Filed

The U.S. Department of Justice (DOJ) recently announced that in Fiscal Year 2019 (FY2019),¹ total settlements and judgments in False Claims Act (FCA) cases rebounded back over the $3 billion mark after dipping to $2.9 billion in FY2018. The Department’s annual statistical overview of FCA-related fraud actions² showed nearly three-quarters of recovered funds, or $2.2 billion, came from qui tam actions—lawsuits initiated by private whistleblower plaintiffs, or “relators.”  The overwhelming majority (some 87 percent) of qui tam recoveries, in turn, were in actions where the DOJ intervened or otherwise pursued the action.

Assistant Attorney General Jody Hunt was quoted as saying that the recoveries “demonstrate the high priority this administration places on deterring fraud against the government and ensuring that citizens’ tax dollars are well-spent.”³ Hunt characterized FCA successes as “a testament to the tireless efforts of the civil servants who investigate, litigate, and try these important cases as well as to the fortitude of whistleblowers who report fraud.”⁴

Relators’ share awards experienced a third straight year of decline since FY2016, though, totaling $271.9 million in FY2019. A relator’s entitlement is based on various factors. In the three most common situations contemplated by the statute, a relator is entitled to 25–30 percent of funds recovered in qui tam actions where the Government did not intervene, 31 U.S.C. § 3730(d)(2); 15–25 percent where the Government did intervene, 31 U.S.C. § 3730(d)(1); and up to 10 percent where the claim is based primarily on information already publicly available via a criminal proceeding, congressional hearing, government report, or other public disclosure, 31 U.S.C. § 3730(d)(1).

Health care fraud continued to constitute the lion’s share of FCA recoveries: Settlements and judgments in relation to U.S. Department of Health and Human Services (HHS) contracts accounted for $2.6 billion, or 85 percent of all settlements and judgments obtained under the statute in FY2019. Procurement fraud recoveries in relation to U.S. Department of Defense (DOD) contracts, however, more than doubled, from $107.5 million in FY2018 to $252.2 million in FY2019. The quarter-billion dollars marked the highest procurement fraud recovery total since FY2015, and the third highest in the past decade. Non-HHS/DOD fraud recoveries totaled $196.8 million, or around 6 percent of the total.

A total of 636 new qui tam suits were filed in FY2019; this represented a slight decline from the 646 filed in FY2018, but marked the ninth consecutive year with over 600 qui tam actions filed. Meanwhile, DOJ-initiated FCA actions increased to 146, from 123 in FY2018.

The rise in FCA qui tam actions since the 1986 False Claims Act amendments, which sought to foster such whistleblower suits, has been dramatic. In 1987, only 30 qui tam actions were filed. Qui tam cases first broke the 100 barrier in 1992, and throughout the 1990s and early 2000s typically numbered between 300 and 500 each year.

Two major statutory amendments roughly a decade ago further expanded potential FCA liability: (1) the Fraud and Enforcement Recovery Act of 2009 (FERA), which removed the presentment requirement for 31 U.S.C. § 3729(a)(1)(B) (formerly § 3729(a)(2)) and, among other changes, in effect extended the statute of limitations by adding an automatic relation-back provision for claims asserted by the government in cases where it intervenes, 31 U.S.C. § 3731(c); and (2) the Affordable Care Act of 2010 (ACA), with its relaxation of the public disclosure bar, which had previously precluded relators who lacked “direct and independent knowledge of the information on which the allegations are based” from bringing actions under the FCA, 31 U.S.C. § 3730(e)(4)(B) (2008), and now merely required relators to “ha[ve] knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions,” 31 U.S.C. § 3730(e)(4)(B).

These amendments marked another inflection point in FCA litigation. In the preceding decade, 2000-09, qui tam actions had averaged 373 per year; the following decade, 2010-19, saw the average rocket up to 665—an increase of 78 percent. Health care fraud qui tam actions led the increase, rising by 98.7 percent, from 227 per year in the preceding decade, to 451 per year in the decade just ended—essentially doubling from 2000-09 to 2010-19. Meanwhile, DOJ-initiated actions also rose, from 89 per year to around 129 per year, a substantial but more modest increase of 44.9 percent. All told, for the decade just completed, nearly 8,000 FCA actions were filed. Over that span, filings have averaged 129 DOJ-initiated and 665 qui tam actions per year, for a combined annual total of 794.

The involvement of the DOJ continues to be crucial to FCA outcomes: Over the past decade, 93.8 percent of FCA recoveries have come either in cases brought by the DOJ, or in qui tam actions where the DOJ intervened. In military contract cases, that proportion is even higher, at 95.3 percent. Qui tams make up 84 percent of all FCA actions filed, but around 72 percent of FCA recoveries.

Among prominent recoveries highlighted by the DOJ in FY2019 were $500 million from Reckitt Benckiser Group plc as part of a $1.4 billion settlement of criminal and civil liability related to marketing of an opioid addition treatment drug; $195 million from Insys Therapeutics to settle civil allegations of kickbacks to induce practitioners to prescribe an Insys drug; $162 million from a quintet of South Korean companies to resolve allegations they colluded to raise fuel prices charged to the U.S. military there; $35 million from Hydro Extrusion Portland Inc. to resolve civil liability related to invoicing of NASA and DOD for non-contract-compliant supplies of aluminum extrusions possibly implicated in NASA rocket crashes, as well as for related criminal claims; and $27 million from Northrop Grumman Systems Corporation to resolve alleged labor-cost overbilling under U.S. Air Force battlefield communications contracts.⁵