Government Program Fraud, False Claims Act & Qui Tam Litigation Playbook

The Supreme Court of the United States’ recent decisions in Loper Bright Enterprises et al. v. Raimondo, 603 U.S. (2024) and Corner Post v. Board of Governors, Federal Reserve System, 603 U.S. __ (2024), may provide federal contractors with new arguments and opportunities to challenge agency regulations in litigation and bid protests.

On Feb. 22, 2024, the US Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics and announced that it obtained more than $2.68 billion in settlements and judgments in fiscal year (FY) 2023 from civil cases involving fraud and false claims against the government, a 21% increase over the prior year's recoveries. As such, FY 2023 was another strong year for FCA enforcement and marked the fifteenth straight year where recoveries exceeded $2 billion. This past fiscal year also saw records set in several areas, including the highest number of settlements and judgments in DOJ history and a record number of civil investigative demands (CIDs) issued in connection with investigating FCA claims, revealing highly robust FCA investigative activity in 2023, which could signal even greater FCA judgments and recoveries in future years.

The U.S. Department of Justice (DOJ) has vowed to hold accountable the individuals and entities who “knowingly and improperly sought PPP loans or forgiveness of those loans.” In furtherance of this promise, the DOJ has reached settlement with two companies and prosecuted two individuals, all of whom were suspected of fraudulently seeking relief from the Paycheck Protection Program (PPP).

The U.S. Department of Justice (DOJ) continued its health care fraud enforcement activity in June 2023, announcing two convictions and a national enforcement action involving charges against 78 individuals and over $2.5 billion in alleged fraud. This enforcement activity relates to efforts to defraud Medicare by billing for supplies that were not medically necessary, compounding drugs to maximize reimbursement from TRICARE, and other allegations of alleged health care fraud, telemedicine fraud, and opioid abuse-related schemes.

The U.S. Department of Justice (“DOJ”) announced several settlements related to False Claims Act (“FCA”) allegations this June. The settlements involved various types of health care entities, which shows the DOJ’s continued interest in pursuing FCA allegations across the health care industry.

On June 1, 2023, the Supreme Court of the United States issued its decision in the most-watched False Claims Act (FCA) case of the year. In United States ex rel. Schutte v. SuperValu Inc. (consolidated with United States ex rel. Proctor v. Safeway, Inc.),[1] a unanimous Court held that the question of scienter under the FCA turns on a person’s subjective beliefs, not what an objectively reasonable person may have believed—rejecting a standard that had been set by the Seventh Circuit and embraced by the Third, Eighth, Ninth and D.C. Circuits.

The Sixth Circuit Court of Appeals recently issued a key decision interpreting narrowly an important element of the Anti-Kickback Statute (AKS) and the interplay between the AKS and the False Claims Act (FCA). The court’s decision perpetuates a circuit split, now two to one, on whether the but-for causation must be proven to maintain an FCA action on an AKS-violation theory. While not ripe for Supreme Court review yet, the decision signals that this critical and controversial issue may ultimately need clarification from the high court.

On February 7, 2023, the U.S. Department of Justice (“DOJ”) released its annual False Claims Act (“FCA”) recovery statistics and announced that it had obtained more than $2.2 billion in settlements and judgments in fiscal year 2022 from civil cases involving fraud and false claims against the government.[1] The significant decrease in 2022 recoveries stands in stark contrast with DOJ’s near-record breaking fiscal year 2021 where it obtained more than $5.6 billion in settlements and judgments. That said, fiscal year 2022 marked the fourteenth straight year where recoveries exceeded $2 billion.

The decision in United States ex rel. Morsell v. NortonLifeLock Inc., No. 1:12-cv-00800 (D.D.C. Jan. 19, 2023), is a striking reminder of the strategic importance of pushing plaintiffs to prove FCA damages with reasonable certainty.

On July 20, 2022, the Office of Inspector General (“OIG”) for the Department of Health and Human Services issued a Special Fraud Alert (the “Alert”) on potential fraud schemes involving companies that provide telehealth, telemedicine, or telemarketing services (referred to collectively in the Alert as “Telemedicine Companies”).[1]

On July 26, 2022, the United States Court of Appeals for the Eighth Circuit issued a decision that creates a new circuit split on the question of what evidence is needed to prove that a violation of the Anti-Kickback Statute (AKS) renders a claim false or fraudulent under the False Claims Act (FCA).

On October 6, 2021, Deputy Attorney General Lisa O. Monaco announced a new Civil Cyber-Fraud Initiative, by which the Department of Justice (DOJ) will utilize the False Claims Act (FCA) as a tool to enforce cybersecurity standards required of federal contractors and grant recipients.

On September 8, 2021, the U.S. Department of Justice (DOJ) announced that it reached a $17 million settlement with BAYADA, a Moorestown, New Jersey-based home-health company, and certain of its affiliates (collectively referred to as BAYADA) for alleged violations of the False Claims Act (FCA) and Anti-Kickback Statute (AKS). The settlement resolves claims arising out of a qui tam complaint filed against BAYADA by the company’s former director of strategic growth alleging that the company billed federal payors for services tainted by alleged kickbacks.

On August 30, 2021, the U.S. Department of Justice (DOJ) announced that Sutter Health and several affiliates, including the Palo Alto Medical Foundation, agreed to pay $90 million to resolve claims that they violated the False Claims Act (FCA) by knowingly submitting inaccurate and unsupported information about the health status of individuals enrolled in Medicare Advantage (or Medicare “Part C”) plans in order to increase payments to Medicare Advantage Organizations with which they contracted, and ultimately themselves.

On August 26, 2021, the Department of Justice, the U.S. Attorney’s Office for the Southern District of Florida, and the Small Business Administration’s Office of Inspector General announced a $287,055 settlement resolving alleged violations of the False Claims Act related to a false loan application and misappropriated Paycheck Protection Program loan proceeds by All in Jets LLC owner, Seth A. Bernstein.

As we reflect on the past in order to prepare for the future, it becomes increasingly clear that 2021 will bring greater use of one of the government’s most powerful civil enforcement tools—the False Claims Act—to root out fraud and abuse involving government funds in myriad industries and in novel ways.

Earlier this year, the U.S. Department of Justice released its annual False Claims Act recovery statistics and announced that it had obtained more than $3 billion in settlements and judgments in fiscal year 2019 from civil cases involving fraud and false claims against the government.

On May 7, 2019, the Civil Division of the Department of Justice (“DOJ”) issued formal guidance to DOJ attorneys regarding factors to be considered in determining the nature and extent of cooperation credit to be awarded in connection with resolving False Claims Act (“FCA”) matters.

The U.S. Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics and announced that it obtained over $2.88 billion in settlements and judgments in fiscal year 2018 from civil cases involving fraud and false claims against the government.

Late last year, the U.S. Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics and announced that it obtained over $3.7 billion in settlements and judgments in fiscal year 2017 from civil cases involving government program fraud and false claims.