Penalties Under False Claims Act Hit New Record

New York and New Jersey businesses that contract with the federal government should consider boosting compliance efforts related to the False Claims Ac. A new report suggests that running afoul of the FCA can be extremely costly.

In broad terms, the FCA imposes liability on any person who knowingly submits a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government. The FCA also imposes liability when false claims or statements are used to avoid having to pay money to the federal government. The law also contains qui tam provisions, which allow private persons to file suit for violations of the FCA on behalf of the government.

Although the FCA has been around since 1863, the government has recently stepped up enforcement and penalties. The Department of Justice recently announced that it secured $4.9 billion in settlements and judgments in civil cases under the FCA in the fiscal year ending Sept. 30, 2012. According to the DOJ, “This figure constitutes a record recovery for a single year, eclipsing the previous record by more than $1.7 billion, and brings total recoveries under the False Claims Act since January 2009 to $13.3 billion – which is the largest four-year total in the Justice Department’s history and more than a third of total recoveries since the act was amended 26 years ago in 1986.”

The DOJ report shows that whistleblower claims also reached record levels. A total of 647 qui tam suits were filed last fiscal year, resulting in the recovery of a record $3.3 billion. FCA liability was also concentrated in the health care and mortgage industries, both of which have been targeted by the Obama Administration’s anti-fraud efforts. With regard to health care fraud, recoveries exceeded $3 billion for the first time in a single fiscal year. Housing and mortgage fraud accounted for a record $1.4 billion.

The report signals that New York and New Jersey businesses, particularly those in the targeted industries, should conduct a thorough review of their FCA compliance activities. In addition, all companies contracting with the federal government should also make sure that they have procedures in place to properly handle whistleblower complaints before they result in costly qui tam lawsuits.

If you have any questions about the DOJ report or would like to discuss your company’s FCA compliance activities, please contact me, Jay Surgent, or the Scarinci Hollenbeck attorney with whom you work.