“Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act. In this episode, hosts Mana Lombardo and Jason Crawford interview Will Chang, a partner in the firm’s Health Care and White Collar & Regulatory Enforcement groups and a former trial attorney at the DOJ Criminal Division, Fraud Section, on health care fraud and FCA issues.
This week’s episode covers DOJ, IDIQ, and GAO case law news, and is hosted by partner David Robbins. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.
Are we experiencing a shift towards a higher bar for pursuing False Claims Act Cases? Department of Justice guidelines may signal a new direction from the last two decades of DOJ FCA enforcement history through policies that reign in relators and articulate some boundaries for cases pursued by DOJ. Meanwhile, Escobar progeny continues to develop and refine the materiality requirement under the FCA. Join us on May 17, 2018, at 8:30 AM Eastern, as Crowell & Moring attorneys Brian Tully McLaughlin, Mana Lombardo, Jason Crawford, and Nkechi Kanu lead a discussion highlighting recent developments impacting FCA investigation, enforcement, and litigation under the False Claims Act. Specific topics include:
- DOJ Enforcement Trends and Developments: What They Mean for Investigation and Litigation Strategy
- The Continuing Emphasis on Materiality in the Wake of Escobar
- Case developments and impacts
On December 21, 2017, the Department of Justice announced that it recovered more than $3.7 billion in settlements and judgments from civil False Claims Act (FCA) cases in Fiscal Year 2017. The FY 2017 figures reflect the government’s continued trend of annually amassing multi-billion dollar recoveries under the FCA. This recovery is the fourth largest total in thirty years, and the eighth consecutive year that recoveries have exceeded $3 billion.
At the industry level, DOJ reported $2.47 billion in recoveries from the health care sector, and $220 million from defense companies. The largest health care industry recoveries in FY 2017 came from the drug and medical device industry. In the procurement fraud arena, the bulk of the recovery came from two large settlements, one involving charges to the Department of Defense and the other involving charges to the Department of Energy. The government collected approximately $1 billion from the remaining industries, including national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.
The change in presidential administration appears to have had little effect on FCA activity. DOJ continued its pursuit of individual owners and executives of private corporations under the FCA. It entered into numerous settlements wherein individuals agreed to joint and several liability with their company. DOJ also obtained over $60 million in FCA settlements and judgments with individuals that did not involve joint and several liability with the corporate entity. Also, the number of new FCA actions in FY 2017 remained high with relators bringing 674 new qui tam matters and DOJ initiating 125 matters on its own. Of the $3.7 billion recovery, $3.4 billion related to suits initiated by whistleblowers, and over $3 billion of that came from suits where the government either intervened or otherwise pursued the matter. These numbers are consistent with the prior five years and suggest that the FCA will remain an active area for investigations and litigation in 2018.
Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. This latest edition is hosted by partner David Robbins and includes updates on GAO’s Whistleblower Protections Pilot Program, the latest from the House of Representatives, and a DOJ FCA matter.
Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without, with the latest edition hosted by partners David Robbins and Peter Eyre and including updates on DOJ Fraud Section guidance, GSA OIG’s report on 18F, and an interesting Fourth Circuit decision. Click on one of the options listed below to listen.
On February 8, 2017, the Department of Justice Fraud Section posted a new guidance document on its website entitled, “Evaluation of Corporate Compliance Programs” (“Compliance Guidance”). This Compliance Guidance, comprised of a number of topics and questions, comes a little over a year after the Fraud Section hired Hui Chen as its resident compliance expert. Tapping into her experience as both a prosecutor and a compliance professional at several large multinational companies, Ms. Chen has commented that an effective compliance program requires a whole-company commitment, and has emphasized the importance of leadership and key stakeholders in the compliance process. Her vision is evident in the Fraud Section’s recently released Compliance Guidance, which provides some insights into the mindset of prosecutors tasked with corporate investigations. The Compliance Guidance itself references two of the ten “Filip Factors,” an enumerated set of factors used by prosecutors in making charging decisions related to corporate entities. Although the Compliance Guidance cautions that the Fraud Section does not use a “rigid formula” to assess a company’s compliance program, the guidance provides a detailed list of compliance-focused sample topics and questions that the Fraud Section believes are relevant to its analysis.
On February 14, the Fourth Circuit issued an opinion in United States ex rel. Michaels v. Agape Senior Cmty. Inc. addressing only the first of the two issues that the district court had certified for interlocutory appeal: (1) whether the Department of Justice (DOJ) possesses an unreviewable veto authority over proposed settlements and (2) whether statistical sampling, the analysis of data from a subset of the population of interest in order to make projections across the population of claims at issue, is an appropriate methodology for establishing liability and damages in False Claims Act (FCA) cases.
In its decision, the Fourth Circuit became the third circuit to affirm that the DOJ has absolute, unreviewable authority to veto settlements in qui tam cases where it has declined to intervene. However, notwithstanding that the name of the defendant corporation is derived from the Greek word for love, the Fourth Circuit’s decision (on Valentine’s Day) not to opine on the statistical sampling issue showed no love for those that hoped that the court would bring needed clarity on the permissibility of statistical sampling in FCA cases. Instead, as the authors predicted in a recent Law360 article, the Fourth Circuit dismissed the interlocutory appeal as “improvidently granted” because the panel viewed statistical sampling as an evidentiary issue, rather than a pure question of law.
Effective August 1, the penalty range for violations under the civil False Claims Act nearly doubled, pursuant to a Department of Justice interim final rule published on June 30th. In a “Feature Comment” published in The Government Contractor, C&M attorneys analyze how the dramatic increase in FCA penalties impacts the landscape of litigation. The article first explains the background of the recent law and DOJ’s new rule. Next, it assesses how the increased penalties are likely to lead to an increase in FCA suits, including in cases where actual damages may be low or even nonexistent. It then discusses how the increased penalties range provides leverage to the Government (and potentially relators, too) in FCA settlement negotiations where contractors find themselves daunted by potentially gargantuan fines. Finally, it provides an analysis on constitutional challenges to exorbitant FCA penalties under the Eighth Amendment’s Excessive Fines Clause, and assesses how litigation may be prolonged by post-judgment challenges to the heightened penalty amounts.
On April 12, the DOJ and FTC issued a joint statement titled “Preserving Competition in the Defense Industry,” which reiterates the analytical framework for reviewing defense industry mergers and acquisitions set forth in the DOJ/FTC 2010 Horizontal Merger Guidelines, and emphasizes that the antitrust agencies will continue to give substantial weight to the DOD’s own internal assessment of such transactions – highlighting the need for companies in the defense industry to adopt a coordinated strategy when pursuing strategic transactions. According to the accompanying press release, the agencies “thought it timely to reinforce [the] message” that they remain “committed to preserving competition for current and future defense procurement … [i]n light of recent speculation about possible future consolidation,” an indication to companies considering defense industry mergers and acquisitions that the cognizant oversight agencies are likely to remain active in reviewing such transactions.