https://www.mondaq.com/unitedstates/government-contracts-procurement--ppp/1464832/a-false-claims-act-year-in-review-and-a-look-forwardpart-i
*In this two-part article, the authors review the basic elements of the civil False Claims Act, its qui tam provisions, recent Department of Justice enforcement statistics and a number of recent False Claims Act developments. In particular, this first part begins by briefly reviewing the basic elements of the civil False Claims Act (FCA), its qui tam provisions, and recent Department of Justice enforcement statistics. It then discusses the Supreme Court's decisions regarding the government's authority to dismiss* qui tam *actions under 31 U.S.C. § 3730(c)(2)(A), and the correct pleading standard required to prove scienter. The conclusion of this article, to be published in the next issue of* Pratt's Government Contracting Law Report, *will review Biden administration actions relating to the FCA, the status of proposed amendments to the FCA, the growing FCA enforcement against private equity firms, ongoing FCA enforcement against pandemic relief fraud, and rising FCA scrutiny on required cybersecurity measures as well as the increased FCA enforcement on higher education institutions.* The civil False Claims Act (FCA)1 was enacted in 1863 in response to allegations of fraud in Civil War procurements. The FCA has since become the government's weapon of choice to combat fraud, waste, and abuse in government contracting. The FCA makes it unlawful for a person to knowingly: (1) present or cause to be presented to the government a false or fraudulent claim for payment, or (2) make or use a false record or statement that is material to a claim for payment.2 A person acts "knowingly" under the FCA if he or she acts with "actual knowledge, deliberate ignorance or reckless disregard of the truth or falsity of information."3 Mistakes and ordinary negligence, however, are not actionable under the FCA.4 The FCA provides for up to treble damages and as of February 12, 2024, penalties of between $13,946 and $27,894 per violation. Violators are also subject to administrative sanctions, including potential suspension, debarment, or program exclusion from participating in government contracts. The FCA has a lengthy statute of limitations of no less than six years and, in some cases, up to 10 years after a violation has been committed. The FCA permits private citizens, known as qui tam relators, to bring cases on behalf of the government. In qui tam cases, the complaint and a written disclosure of all relevant evidence known to the relator must be served on the U.S. Attorney for the judicial district of the court where the case was filed as well as on the U.S. Attorney General. The qui tam complaint is then ordered sealed for a period of at least 60 days, and the government is required to investigate the allegations contained therein and decide whether to intervene. If the government declines to intervene, the relator may proceed with the complaint on behalf of the government. The complaint must be kept confidential and is not served on the defendant until the seal is lifted. Relators may receive a "whistleblower bounty" of between 15 and 25 percent of the recovery if the government intervenes in their cases and between 25 and 30 percent if the government declines. JUSTICE DEPARTMENT REPORTS MORE THAN 1,200 NEW FCA CASES AND BILLIONS OF DOLLARS IN RECOVERIES Figure 1 charts new FCA cases per year, which shows a steady increase in qui tam-driven cases.5 Well over 700 FCA cases have been filed each year for the past 14 years and a high percent of those cases have been qui tam cases. Many qui tam cases remain under seal for years pending an intervention decision by the Department of Justice (DOJ). In 2023, there was a high-water mark in new FCA cases brought by both the government and qui tam relators for a total of 1,212, likely linked to the expenditure of substantial federal funds related to pandemic relief and the ever increasing budgets tied to federal healthcare and other procurement programs. This uptick started back in 2020 during the beginning of the COVID-19 pandemic and related federal stimulus. In 2020, 2022, and 2023, the government also filed more new FCA cases than in prior years, showing the FCA remains a high priority for enforcement. The DOJ collected over $2.68 billion in settlements and judgments in 2023, a slight increase from 2022 FCA monetary recoveries of $2.2 billion, but still trending downwards from prior years when there were more individual big settlements. Nonetheless, in 2023, DOJ pulled in 543 settlements and judgments, the highest number in a single year since the FCA amendments in 1986. Figure 2 shows annual recoveries by the government in FCA cases and compares recoveries coming from qui tam cases where the government declined to intervene versus non-qui tam cases or qui tam cases where the government intervened.6 Consistent with recent trends, DOJ reported recoveries ($1.8 billion) in 2023 mostly came from settlements and judgments from the healthcare industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians. DOJ reported that additional 2023 recoveries reflected its focused attention on new enforcement priorities such as pandemic relief programs and cybersecurity requirements in government contracts and grants. To view the full article please click here. * Scott F. Roybal is a partner at Sheppard, Mullin, Richter & Hampton LLP and a member of its Governmental practice group. He handles government contract disputes, investigating and litigating qui tam False Claims Act cases and related whistleblower actions, and defends individuals and corporations in a wide range of civil and criminal fraud investigations. Jennifer Le is a senior associate within the firm's Governmental practice group who works on matters involving the government, including disputes, litigations and investigations. Both are residents in the firm's Los Angeles office and may be reached at [email protected] and [email protected], respectively. Footnotes 1. 31 U.S.C. § 3729 et seq. 2. 31 U.S.C. §§ 3729(a)(1)(A)–(B) (2009); U.S. ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 1017 (9th Cir. 2018). 3. 31 U.S.C. § 3729(b). 4. United States v. Sci. Applications Int'l Corp., 626 F.3d 1257 653 F. Supp. 2d 87 (D.D.C. 2009). 5. DOJ Office of Public Affairs, Fraud Statistics—Overview (February 22, 2024). 6. See footnote 1 above.
