This past January, the U.S. Department of Justice (DOJ) celebrated the 25th anniversary of the 1986 Amendments to the False Claims Act (FCA). The DOJ used this time to tout its use of the FCA in recovering more than $30 billion, and to describe its future enforcement efforts. In a recent speech, U.S. Attorney General Eric Holder stated that the DOJ is committed to “aggressively utilizing” the FCA to “eradicate the scourge of fraud from some of government’s most critical programs.”
When looking to the recent successes under the FCA, we see how popular and vital it remains as a tool of the government in retrieving monies spent on false claims. In fact, in the past three years, the DOJ has seen its highest amount of recoveries since the FCA was amended 25 years ago. Since January 2009, the DOJ has recovered $8.8 billion under the FCA, amounting to the largest three-year total in the Act’s history.
In what may be a sign of the times, Holder stated that the DOJ will continue to aggressively pursue those who would take advantage of their fellow citizens in this time of financial uncertainty. The DOJ has specifically targeted health care fraud, with $6.6 billion of the amounts recovered since January 2009 being directly related to health care fraud recoveries.
It is clear from Holder’s remarks that this recent increase in civil and criminal FCA actions will continue to be litigated for the foreseeable future. Another factor in the rising popularity of FCA claims seems to lie in the record high number of actions filed by whistleblowers—638 in the past year alone. It seems that employees of companies that deal with government funding are becoming increasingly aware of the power of the FCA.
However, this increased popularity seems to be persuading some courts to give a more thorough review into the damages portion of a relator’s claim to determine that the government suffered actual damages.
One example of this can be seen in United States ex. rel. Bunk v. Birkart Globalistics GmbH & Co., et al., a case decided in February by the U.S. District Court for the Eastern District of Virginia. This case dealt with a U.S. Department of Defense contract for the transportation of military household goods between U.S. military installations in Europe. The relators claimed that the winning bidder colluded on pricing with fellow bidders, and the jury agreed.
However, the district court declined to impose per-claim statutory penalties of more than $50 million when it found 9,000 “false” claims but no damages. The court held that imposing such a disproportionate penalty would violate the Eighth Amendment’s Excessive Fines Clause. As a result, the relators recovered neither damages nor penalties.
While this decision serves as a stern warning to relators that the overzealous bringing of an action where false claims occurred without proof of actual harm or tangible impact will not be rewarded, the number of whistleblower cases being filed continues to rise. Because of the potentially severe consequences of an adverse verdict in a false claims case, companies should make the regular review and update of policies, procedures and compliance programs a high priority.
