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

On October 22, 2024, the Department of Justice announced a False Claims Act (FCA) settlement related to a government contractor’s failure to adhere to certain cybersecurity requirements. Specifically, Pennsylvania State University (Penn State) has agreed to pay US$1.25M to resolve allegations that it violated the FCA by failing to comply with cybersecurity requirements in fifteen contracts or subcontracts involving the Department of Defense (DOD) or the National Aeronautics and Space Administration (NASA). The DOJ announcement is available here: https://www.justice.gov/opa/pr/pennsylvania-state-university-agrees-pay-125m-resolve-false-claims-act-allegations-relating.

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).

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.

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.

Recently, the U.S. Department of Justice issued a memorandum and interim final rule, which effectively revoked elements of the “Brand Memorandum” and reinstated the use of federal guidance documents in False Claims Act cases.

On April 21, 2021, the Department of Justice (“DOJ”) and the U.S. Attorney’s Office for the Eastern District of California announced a second settlement resolving alleged violations of the False Claims Act (“FCA”) based on false statements made by a company and its chief executive officer in connection with the company’s loan application under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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 (“FCA”)—to root out fraud and abuse involving government funds in a myriad of industries and in novel ways. 

The U.S. Court of Appeals for the Third Circuit’s decision in U.S. v. Care Alternatives that a subjective medical judgment can be deemed false for purposes of establishing liability under the False Claims Act,[1] as well as a potential U.S. Supreme Court decision on this issue could have wide-ranging implications for companies doing business with the government in myriad industries and contexts, well beyond health care.

To address the economic impact of the COVID-19 crisis, Congress has allocated nearly $660 billion to the U.S. Small Business Administration (“SBA”) in forgivable loans to eligible small businesses, non-profits, and certain tribal entities. 

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.