Billions of Taxpayer Dollars Recovered Under False Claims Act

In Fiscal Year 2016, the Department of Justice (DOJ) recovered more than $4.7 billion from civil cases involving fraud and false claims against the government. This recovery of taxpayer dollars was due, in large part, to changes made to the False Claims Act 30 years ago.

The False Claims Act allows the government to recover money and property that was taken through false or fraudulent claims made against government programs and contracts in spending areas that include health care, defense, and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.

1986 Amendments to False Claims Act Made it a More Effective Tool

In 1986, Iowa Senator Charles Grassley led Congressional efforts to reform the False Claims Act, making it a more effective tool to prosecute false and fraudulent claims made against the government by increasing the incentives for whistleblowers who file lawsuits alleging false claims on behalf of the government. In the 30 years since the reforms were implemented, the federal government has recovered more than $53 billion taken from taxpayers through false or fraudulent claims. These recovery efforts benefit veterans, the elderly, and low-income families who are insured by federal health care programs; families and students who are able to afford homes and go to college thanks to federally insured loans; and all of us who are protected by the government’s investment in national security and defense.

Millions Awarded to Whistleblowers in Fiscal Year 2016

Most cases under the False Claims Act are filed by whistleblowers who have specific knowledge about how the government is being defrauded. If they prevail, the whistleblower can share in a "bounty" of the recovery that is usually between 15% ad 25% of any amount recovered, plus attorneys' fees. In Fiscal Year 2016 whistleblowers filed 702 qui tam lawsuits that netted the government $2.9 billion. Whistleblowers were awarded $519 million during the same time frame.

Restoring Assets to Federally Funded Healthcare Programs

Of the $4.7 billion recovered by the federal government, almost half ($2.5 billion) came from health care fraud that involved drug companies, medical device companies, nursing homes, laboratories, and physicians. This sum only reflects federal losses. In many cases, the DOJ assisted in the recovery of millions of dollars for state Medicaid programs. These recoveries restore valuable assets to federally funded programs like Medicare, Medicaid, and TRICARE, the health care program for service members and their families.

The largest recoveries this past year – $1.2 billion – came from the drug and medical device industry.

  • Drug manufacturers Wyeth and Pfizer Inc. paid $784.6 million to resolve federal and state claims that Wyeth knowingly reported false and fraudulent prices on two drugs used to treat acid reflux: Protonix Oral and Protonix IV. The government alleged that Wyeth (before it was acquired by Pfizer) failed to report deep discounts that were available to hospitals, as required by the government to ensure that the Medicaid program enjoyed the same pricing benefits available to the company’s commercial customers. To resolve the claims, Wyeth paid $413.2 million to the federal government and $371.4 million to state Medicaid programs.
  • Novartis Pharmeuciticals Corp. paid $390 million to resolve claims that it gave kickbacks to specialty pharmacies in return for recommending Exjade, an iron chelation drug, and Myfortic, an anti-rejection drug for kidney transplant recipients. The settlement includes $306.9 million for the federal government and $83.1 million for state Medicaid programs.
  • Tenet Healthcare Corp., a major hospital chain, paid $244.2 million to resolve allegations that four of its hospitals engaged in a scheme to defraud the United States by paying kickbacks in return for patient referrals. Tenet paid an additional $123.7 million to state Medicaid programs, and two of its subsidiaries pleaded guilty to related charges and forfeited $145 million, bringing the total resolution to $513 million.
  • Millennium Health paid $260 million to settle allegations that it billed Medicare, Medicaid, and other federal health care programs for excessive and unnecessary urine drug and genetic testing, and that it gave free items to induce physicians to refer expensive and profitable lab tests to Millennium, in violation of the Anti-Kickback Statute and Stark Amendment. The settlement included $214.8 million in alleged false claims against federal programs, $26 million in alleged false claims against state Medicaid programs, and $19.2 million in related administrative claims.
  • RehabCare Group Inc., RehabCare Group East Inc., and their parent company, Kindred Healthcare Inc. paid over $125 million to resolve claims that they induced skilled nursing homes to submit false claims to Medicare for rehabilitation services that were not reasonable, necessary, and skilled, or that weren’t provided at all. Cases involving nursing homes and skilled nursing facilities accounted for more than $160 million in settlements and judgments this past fiscal year.

Just as important, the vigorous pursuit of healthcare fraud prevents billions more in losses by deterring others who might try to cheat the system for their own gain.

Protecting Housing and Mortgage Consumers

Notable housing and mortgage claim settlements this year were with Wells Fargo ($1.2 billion) and Freedom Mortgage Corp. ($113 million). Both admitted they had originated and endorsed residential mortgages as eligible for federal insurance by the Federal Housing Administration (FHA) that did not meet requirements that are intended to reduce the risk of default. This put consumers at risk of losing their homes in foreclosure and increased the number of claims against the FHA when borrowers defaulted on their loans. By originating and endorsing ineligible loans for FHA insurance, the banks increased their mortgage profits at taxpayer expense while incurring little or no risk of their own.

Pursuing Fraud in Government Contracts

While the healthcare and mortgage industries dominated recoveries under the False Claims Act, the government successfully recovered $82.6 million from BP Exploration and Production Inc. (BP) related to the 2010 Deepwater Horizon well explosion and oil spill, and $25.6 million for defective holographic weapons sold by L-3 Communications EOTech Inc. to the Department of Defense. Likewise, Education Management Corp., the second-largest for-profit education company in the country, paid $52.6 million to resolve allegations that it unlawfully recruited students, engaged in deceptive and misleading recruiting practices, and falsely certified compliance with Title IV of the Higher Education Act and parallel state laws that prohibited such conduct.

The government also recovered $50 million from importers who sought an unfair advantage by knowingly evading or reducing their obligation to pay duties collected on imports of foreign goods. These duties are intended to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products. These recoveries both address lost duties and safeguard U.S. markets.

For more information about whistleblower lawsuits and the False Claims Act, contact the Kansas City whistleblower attorneys at Brady & Associates for a free and confidential evaluation of your case. Call us at (913) 696-0925, or complete our online information form.

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