FCA settlement agreement

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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.

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A prominent FCA practitioner observed twenty years ago that while FCA settlements were common, it was impossible to find a standard settlement agreement, if there was such a thing, or a DOJ policy on point.¹ His words ring true today. While the FCA has become the Government’s principal anti-fraud weapon, little has been written about the process by which such settlements are negotiated or what they even say. This is surprising since most recoveries come from quiet settlements, not jury verdicts.

In “Negotiating False Claims Act Settlements,” a BRIEFING PAPER published by West, C&M attorneys Robert Rhoad, Jonathan Cone, and Rob Sneckenberg describe the key provisions in FCA settlement agreements and offer practical guidelines on negotiating a release to fit your company’s situation. While in some instances the Government may plant its feet firmly in the ground and refuse to negotiate a specific clause, there is still room for negotiation. The PAPER identifies critical clauses in FCA settlements that companies can negotiate—e.g., covered conduct, denial of liability, and scope of release—and other provisions that rarely change.

For interested readers, C&M maintains a database of FCA settlements that is publicly available on our website here.

¹ Brian Elmer, “False Claims Act Settlement Agreements,” 5 Crowell & Moring Business Crimes Update (Jan. 1994), http://www.crowell.com/Practices/White-Collar-Regulatory-Enforcement/articles/False-Claims-Act-Settlement-Agreements-Crowell-Moring-Business-Crimes-Update-Issue-No-5.