“Ensuring that citizens’ tax dollars are protected from fraud and abuse is among the department’s top priorities,” said Acting Assistant Attorney General Brian Boynton of the Justice Department’s Civil Division. “The False Claims Act is one of the most important tools available to the department both to deter and to hold accountable those who seek to misuse public funds.”
Of the more than $5.6 billion in settlements and judgments reported by the Department of Justice this past fiscal year, over $5 billion relates to matters that involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. The amounts included in the $5 billion reflect recoveries arising from only federal losses, and, in many cases, the DoJ recovered additional amounts for state Medicaid programs.
In 1986, Congress strengthened the act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblower cases, also known as “qui tam” actions, comprise a significant percentage of the False Claims Act cases that are filed. If the government prevails in a qui tam action, the whistleblower can receive a portion of the recovery ranging between 15 percent and 30 percent. Whistleblowers filed 598 qui tam suits in fiscal year 2021, which ended Sept. 30, 2021.
Health Care Fraud
Health care fraud was once again the leading source of the department’s False Claims Act enforcement actions this past year. The department’s health care fraud enforcement efforts restore funds to federal programs such as Medicare and Medicaid. The Justice Department says its vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might try to cheat the system for their own gain.
According to the DoJ, opioid abuse remains a serious problem, with tens of thousands of Americans dying from opioid overdoses each year. Civil enforcement actions against those responsible for triggering and fueling the opioid epidemic are a critical part of the department’s ongoing efforts to address this crisis.
Consistent with this focus, the largest False Claims Act settlements in the past year resulted from significant resolutions with prescription opioid manufacturers Indivior and Purdue Pharma. As part of a $600 million global resolution of criminal and civil liability, the Indivior companies agreed to pay $209.3 million to the federal government to resolve civil allegations that the companies, among other things, promoted the opioid-addiction-treatment drug Suboxone to physicians who were writing prescriptions that were not for a medically accepted purpose and were often diverted.
As part of a global resolution of criminal and civil liability, Purdue agreed to a bankruptcy claim for $2.8 billion in October 2020 to resolve civil allegations that the company promoted its opioid drugs to health care providers it knew were prescribing opioids for uses that were medically unnecessary and that often led to abuse and diversion.
Another important priority for the department has been investigating and litigating a growing number of matters related to the Medicare Advantage program, also known as Medicare Part C. This year, Sutter Health, a California-based health care services provider, paid $90 million to resolve allegations that it knowingly submitted unsupported diagnosis codes for certain patient encounters, resulting in inflated payments to be made to the Medicare Advantage Plans and Sutter Health. In addition, Kaiser Foundation Health Plan of Washington, formerly known as Group Health Cooperative (GHC), paid $6.3 million to resolve allegations that it submitted invalid diagnoses and received inflated payments as a result.
Procurement Fraud
In the past year, the department also pursued a variety of fraud matters involving the government’s purchase of goods and services. In some cases, the department pursued allegations that government contractors falsified pricing data. For example, Navistar Defense LLC paid $50 million to resolve allegations that it fraudulently induced the U.S. Marine Corps to enter into a contract modification at inflated prices for a suspension system for armored vehicles known as Mine-Resistant Ambush Protected vehicles. In another case, Insitu Inc. paid $25 million to settle allegations that it knowingly submitted materially false cost and pricing data for contracts with the U.S. Special Operations Command and the Department of the Navy to supply and operate Unmanned Aerial Vehicles.
In other cases, the department pursued allegations that government contractors provided goods or services that did not comply with contract requirements. For example, United Airlines Inc. paid $32.1 million to resolve allegations relating to its execution of contracts to deliver mail internationally on behalf of the U.S. Postal Service. In another case, Cognosante LLC paid $18.9 million to resolve allegations that it used unqualified labor and overcharged the government for health care and IT services provided to federal agencies under two General Services Administration contracts.
The department also resolved matters involving allegations of kickbacks in government contracts. For example, Level 3 Communications LLC paid $12.7 million to resolve allegations that the owner of two subcontractors paid kickbacks to Level 3 senior managers in return for favorable treatment. The United States also alleged that Level 3 managers misstated compliance with woman-owned small business subcontracting requirements and knowingly obtained protected competitor bid information on the government contract to gain an advantage in bidding on task orders. In another example, Schneider Electric Buildings Americas Inc. paid more than $9 million to resolve allegations that one of its senior project managers solicited kickbacks from subcontractors and that the company fraudulently charged the government for design costs by disguising those costs and spreading them across unrelated pricing components.
Other Fraud Recoveries
The judgments and settlements announced during fiscal year 2021 reflect the diversity of fraud recoveries arising under the False Claims Act. For example, the United States leases federal lands for the production of natural gas in exchange for the payment of royalties on the value of the gas produced. The department recovered $6.15 million from oil and natural gas exploration and production company Devon Energy Corp. to resolve allegations that it underpaid and underreported royalties for natural gas from federal lands in Wyoming and New Mexico.
Stargate Apparel Inc., Rivstar Apparel Inc., and the chief executive officer of both companies paid $6 million to resolve allegations that they engaged in two schemes to fraudulently underpay customs duties owed to the United States in connection with the garments that they brought into the country.
Concept Schools NFP, agreed to pay $4.5 million for allegedly engaging in non-competitive bidding practices in connection with the Federal Communications Commission’s E-Rate Program, which subsidizes eligible equipment and services to make internet access and internal networking more affordable for needy public schools and libraries.
Guild Mortgage Company paid $24.9 million to resolve allegations that it failed to maintain quality control programs to prevent and correct underwriting deficiencies and to self-report materially deficient loans insured by the Federal Housing Administration.
Another common category of fraud and false claims were suits related to improper use of funds provided by the government as part of several COVID-19 relief programs. Many of those civil suits are still in process.
Recoveries in Whistleblower Suits
Of the $5.6 billion in settlements and judgments reported by the government in fiscal year 2021, over $1.6 billion arose from lawsuits filed under the qui tam provisions of the False Claims Act. During the same period, the government paid out $237 million to the individuals who exposed fraud and false claims by filing these actions.
“Industry insiders are uniquely positioned to expose fraud and false claims and often risk their careers to bring these schemes to light,” said Acting Assistant Attorney General Boynton. “Our efforts to protect taxpayer funds benefit from the courageous actions of these whistleblowers, and they are justly rewarded under the False Claims Act.” 
Joseph McCafferty is editor & publisher of Compliance Chief 360°