United States: DOJ Announces $3.7 Billion In FY2017 False Claims Act Recoveries

On December 21, 2017, the Civil Division of the US Department of Justice (DOJ) announced that it recovered over US$3.7 billion from civil False Claims Act (FCA) cases in fiscal year 2017, which ended on September 30. This amount, which includes both settlements and judgments, was the fourth highest annual recovery in FCA history. Yet DOJ recovered US$1 billion less in FY2017 than it did in FY2016—attributable primarily to a large drop in recoveries from government-initiated cases. Nonetheless, the numbers suggest that the change in presidential administrations has not slowed the initiation of FCA enforcement against companies and individuals in the healthcare, defense, and financial services industries.

Based on our analysis of DOJ's raw data for FY2017, healthcare cases continue to dominate the FCA docket, accounting for two-thirds of all FY2017 recoveries (US$2.5 billion), and exceeding US$2 billion for the eighth straight year1Defense-related recoveries significantly increased to US$220 million, with the federal government initiating 40 percent of all new defense-related FCA cases—the largest share in over 20 years. The government recovered another US$543 million from housing and mortgage fraud cases, which was only a third of what DOJ recovered the year before in similar cases.

The Big Picture

Of US$3.7 billion in total FCA recoveries, US$3.4 billion (93%) came from qui tam cases filed by private relators, making FY2017 the second highest year for qui tam recoveries. Relators filed 674 new qui tam cases—13 per week—and pocketed almost US$393 million in relator share awards.

Only US$266 million in recoveries came from cases brought by DOJ itself, without an underlying qui tam complaint. This was the lowest annual recovery from government-initiated cases since 2013.

Healthcare Cases Still Dominate Recoveries And New Filings

Nearly 67 percent of all FCA recoveries (US$2.5 billion) primarily involved the US Department of Health and Human Services. Most of this was from qui tam cases (US$2.4 billion), which yielded US$283 million in relator share awards. Just over a third of all healthcare recoveries (US$900 million) came from pharmaceutical and medical device cases.

Healthcare cases comprised over 68% of all new FCA matters (544 of 799)—the highest proportion ever. Of these new healthcare cases, 90 percent (491 of 544) were qui tam actions. DOJ brought another 53 new healthcare cases in FY2017, the third-highest annual number ever.

Defense-Related Recoveries And Government-Launched Cases Increased

Six percent of all FCA recoveries (US$219 million) primarily involved the Department of Defense, but this was a significant increase over last year's US$122 million in defense-related recoveries. And 40 percent of all new defense-related cases (19 of 47) were brought by the federal government without an underlying qui tam complaint—the highest proportion since 1994.

Housing and Mortgage Fraud Recoveries Dropped Significantly

In FY2017, DOJ recovered US$543 million from cases related to housing and mortgage fraud. This was only one-third of FY2016's record-setting recovery of US$1.6 billion from housing and mortgage fraud cases.

Individual Accountability

In FY2017, DOJ recovered $60 million directly from individuals, without joint and several liability with any corporate entity. DOJ's press release also named several individuals who agreed to be held jointly and severally liable for settlement payments with their corporations. This emphasis on singling out individual recoveries tracks the September 2015 memorandum issued by then-Deputy Attorney General (and later Acting Attorney General) Sally Yates. The "Yates Memo" emphasized DOJ's intent to focus on "individual accountability for corporate wrongdoing" through civil and criminal enforcement actions. Despite the change in presidential administration, the FCA data for FY2017 and recent remarks by current Deputy Attorney General Rod Rosenstein suggest that DOJ has not entirely abandoned the Yates Memo's guidelines.

Footnote

1 Slight inconsistencies exist between DOJ's raw data and its related press release. For example, the press release cites only 669 new qui tam actions in FY2017, while the raw data cites 674 new qui tam cases in FY2017. We have relied on DOJ's raw data for this analysis.

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