What DOJ’s FY 2018 False Claims Act Recovery Statistics Reveal

Michael J. Slattery

The Department of Justice (“DOJ”) recently released its annual fraud statistics for FY 2018. The statistics reveal that False Claims Act (“FCA”) recoveries reached their lowest level since FY 2009. However, although total recoveries are down, this decrease is more a by-product of a down year in major health care and financial services recoveries, and we think it is too early to view these numbers as reflecting a sea change in enforcement.

The annual statistics published by DOJ on December 21, 2018 demonstrate that the Government recovered a total of $2.88 billion in qui tam and non-qui tam FCA judgments and settlements in FY 2018. This represents the lowest amount recovered since FY 2009, when the Government recovered nearly $2.47 billion. It also demonstrates a short-term trend in declining recovery. FY 2018 was the second straight year in which fraud recovery decreased. However, recent comments by the Trump administration’s nominee for U.S Attorney General likely indicate that no affirmative decision to decrease FCA actions will occur in the next few years.

The Number of New FCA Matters Decreased for The Second Straight Year, with Qui Tam Matters Representing the Large Majority of New Matters While Non-Qui Tam and Matters in Which the Government Intervened Yielded the Overwhelming Majority of the Funds Recovered

DOJ records a total of 767 new fraud matters in FY 2018. DOJ defines “new matters” as consisting of newly received referrals, investigations, and qui tam actions. This number represents a decrease from the 856 new matters recorded for FY 2016 and the 823 matters recorded for FY 2017. Indeed, except for the 754 new matters recorded in FY 2015, the 767 new matters recorded for FY 2018 represent the lowest number since 2011, when DOJ recorded 759 new matters.

The chart below demonstrates that, as in all previous years since DOJ first published its fraud statistics for FY 1987, qui tam actions in FY 2018 constituted the large majority—84 percent—of the new matters. However, as in all prior years since 1987, non-qui tam actions, and those qui tam matters where the Government intervened, yielded the overwhelming majority of the funds recovered by the Government. Contractors should therefore continue to be wary of fraud actions brought directly by the Government, and of qui tam actions in which the Government intervenes, as these cases are most likely to result in Government recovery.

Healthcare Continues to Provide the Greatest Amount of Fraud Recovery

The bulk of fraud recovery since FY 2015 continues to be realized in connection with the healthcare industry. In FY 2018 Health and Human Services (“HHS”)-related fraud constituted a larger portion of the total amount of annual fraud recovery (87.25%) than HHS-related fraud represented in the two preceding years (63% and 55.25%).

Fraud recovery relating to U.S. Department of Defense (“DOD”) contracts totaled $107.52 million, or 3.7 percent, of the total $2.88 billion recovered in FY 2018. This is down from 6.35 percent in FY 2017 but represents an increase from the 2.4 percent of DOD-related fraud recovery realized in FY 2016.

9.01 percent of the total fraud recovery realized by the Government in FY 2018 was recovered in connection with non-HHS and non-DOD contracts. This represents a sizeable decrease from the 30.62 percent of non-HHS and non-DOD fraud recovery obtained in FY 2017, and the 42.26 percent recovered in FY 2016.

Four Year Trends in Source of Annual Fraud Recovery Amounts

Thus, while the total amount of money the Government recovered due to fraud in FY 2018 was lower than in recent years, the largest percentage of this money continued to be recovered via matters brought directly by the Government, or in which the Government intervened, and (since FY 2015) in fraud relating to HHS and DOD contracts.

Will Fraud Recovery Decline or Increase in FY 2019?

It is possible, though unlikely, that fraud recovery may decline in 2019 if William Barr is confirmed as the new U.S. Attorney General. In July 1989, as a member of DOJ’s Office of Legal Counsel, Mr. Barr drafted a memo titled Constitutionality of the Qui Tam Provisions of the False Claims Act, in which he argued that the qui tam provisions of the FCA were unconstitutional, since they violated:

  1. the separation of powers doctrine, since they infringe on the President’s discretion whether to prosecute a claim, and the authority to control the conduct of litigation brought to enforce the Government’s interests;
  2. the Constitution’s Appointments clause, by permitting any relator—rather than duly appointed government officers—to initiate and conduct litigation on behalf of the United States, to enforce the rights of the United States; and
  3. the Constitution’s Article III standing doctrine, since relators cannot demonstrate “injury in fact,” which is required to invoke federal judicial power.

Time alone will tell whether Mr. Barr will allocate DOJ resources to permit the Agency to intervened in FCA qui tam suits. Mr. Barr’s most recent public comments on the issue indicate that he will do so, and that DOJ will continue to realize a significant portion of its annual fraud recovery (62.2 % in FY 2018) from intervening in FCA whistleblower suits.

Barr reiterated his dim view of the qui tam provisions in 2001, when participating in the George H.W. Bush Oral History Project at the Miller Center of the University of Virginia. Barr stated, “I felt then [i.e., in 1989], and feel now, that [the qui tam provisions are] an abomination and a violation of the appointments clause under the due powers of the President as well as the standing issue of the Supreme Court.” However, during his January 15, 2019, confirmation hearing, Barr softened his views regarding the FCA qui tam provisions. In response to questions posed by Senator Chuck Grassley, Barr expressly noted that the Supreme Court has upheld the constitutionality of the FCA qui tam provisions, and stated that he no longer considered them to be an abomination. Barr further stated that, if confirmed as Attorney General, he would not take any actions to undermine the FCA or its whistleblower provisions, and would diligently enforce the law.