It’s time to examine the False Claims Act recoveries for the first half of the U.S. Government’s fiscal year 2015 since the calendar reads April. So far, the U.S. has recovered more than $1.2 billion under the federal False Claims Act, according to Taxpayers Against Fraud. That is down by more than 50% over last year but not a particularly big disappointment given the way last year started for the Department of Justice. It would have been hard to keep up the pace set by the Johnson & Johnson, JPMorgan and Suntrust settlements last year.
This year’s leading settlements under the anti-fraud law so far are DaVita ($389 million) in October and Supreme Foodservice GmbH ($146 million in civil lawsuits and $288.36 million in the criminal case) in December, and Metlife ($123.5 million) in February.
DaVita agreed to pay $350 million to resolve the allegations it paid kickbacks to induce referrals of dialysis patients. DaVita reportedly offered lucrative partnerships to physicians with patient populations suffering renal disease to induce referrals to their dialysis clinics. It also agreed to a civil forfeiture of $39 million for two joint ventures in Denver, Colorado. The whistleblower in the case reportedly received $65 million plus interest.
After DaVita, there’s been a handful of settlements for amounts in the $25 to $75 million range. Violations of the Stark Law and the Anti-Kickback Statute still seem to be key areas where health care companies are at risk of violating the law.
In descending order, settlements under the False Claims Act by health care companies include Community Health Systems ($75 million), OtisMed/Stryker ($41 million), Daiichi Sankyo ($39 million), Extendicare ($38 million), Dignity Health ($37 million), Organon ($34 million) and CareAll ($25 million).
There’s been a massive drop in the recoveries coming from housing and mortgage fraud. Through this point last year, the U.S. had already reached settlements under the False Claims Act totaling more than $1 billion between Suntrust and JPMorgan. So far this year, the only significant settlement we have seen announced by the DOJ in this area under the False Claims Act was the $123.5 million settlement with MetLife.
There’s also an agreement in principle between Morgan Stanley and the DOJ to settle an investigation into the Wall Street Bank’s mortgage practices for $2.6 billion. It’s too soon to allocate any portion of this settlement to the False Claims Act, but it could be a nice bump in the total when it is announced by the DOJ.
The U.S. has had another victory in this area – it just can’t be counted as a win for the False Claims Act. The federal government’s complaint that led to the $1.375 billion settlement with Standard & Poor’s, half of which went to the Federal Government, was brought under FIRREA. FIRREA was easily the big winner last year in the fight against fraud, eclipsing the False Claims Act for the first time ever.
The other big FIRREA case right now is the appeal between Bank of America and the Department of Justice over the $1.27 billion verdict in a whistleblower-initiated lawsuit. The False Claims Act allegations were dismissed two years ago but the case against the company under FIRREA remained. This case was specifically excluded from the massive $16 billion settlement last year and the Judge Rakoff denied a new trial in February.
The drop-off in the False Claims Act and FIRREA in this area could have been easily predicted. It was unlikely that the U.S. could repeat the $3.1 billion in federal funds it recovered under the False Claims Act or the staggering $11 billion under FIRREA. It was the first time that the DOJ used the FCA to recover more from mortgage fraud than it did from health care fraud.
The Supreme Foodservice settlement involved a payment of $288.36 million to resolve the criminal case in the Eastern District of Pennsylvania and $101 million to resolve the civil lawsuit under the False Claims Act. The company was accused of using a United Arab Emirates company it controlled to inflate the price of food and bottled water sold under the contract. The whistleblower in the case was to receive $16.16 million from the government’s settlement. A subsidiary of Supreme Group, Supreme Logistics FZE, agreed to pay $25 million to resolve allegations of false billings in food shipping contracts during Operation Enduring Freedom.
There have been a few other mid-sized settlements in government contracts. Office Depot ($68.5 million), Iron Mountain ($44.5 million) and Lockheed Martin Integrated Systems ($27.5 million) jumped off the list. Office Depot and Iron Mountain were both best price violations. LMIS involved over-billing for under qualified workers.
Adding up the rewards from some of the bigger cases to settle this year, relators have earned more than $160 million this year from bringing qui tam lawsuits. In FY2014, whistleblowers were paid $435 million by the Department of Justice. The FY 2015 awards so far include announced payments for:
DaVita: $65 million.
Office Depot: $23 million.
Community Health: 18.67 million.
Supreme Foodservice: $16.16 million.
Iron Mountain: $8.1 million.
OtisMed/Stryker: $7 million.
Dignity Health: $6.25 million.
Daiichi Sankyo: $6.1 million.
CareAll: $3.9 million
For additional information, please contact one of our Philadelphia False Claims Act attorneys.