False Claims Settlements in 2016 Top $4.7 Billion: Justice Department

December 15, 2016

The Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government in fiscal year 2016.

This is the third highest annual recovery in False Claims Act history, bringing the fiscal year average to nearly $4 billion since fiscal year 2009, and the total recovery during that period to $31.3 billion, according to the agency.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said the beneficiaries of the settlements include veterans, the elderly, and low-income families insured by federal health care programs; families and students with federally insured college loans; and taxpayers footing the bill for national security and defense.

Of the $4.7 billion recovered, $2.5 billion came from the health care industry including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians, according to the report. The $2.5 billion recovered in fiscal year 2016 reflects only federal losses.

The next largest recoveries came from the financial industry. Settlements and judgments in cases alleging false claims in connection with federally insured residential mortgages totaled nearly $1.7 billion in fiscal year 2016.

The False Claims Act is used by the government to redress false claims for government funds and property under government programs and contracts relating to various areas including health care, defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance and import tariffs.

In 1986, Congress amended the law by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.

Whistleblowers filed 702 suits in fiscal year 2016, and the department recovered $2.9 billion in these and earlier filed suits this past year. The government awarded the whistleblowers $519 million during the same period.

Health Care Fraud

The largest recoveries this past year – $1.2 billion – came from the drug and medical device industry. Drug manufacturers Wyeth and Pfizer Inc. paid $784.6 million to resolve federal and state claims that Wyeth knowingly reported false and fraudulent prices on two drugs used to treat acid reflux, Protonix Oral and Protonix IV. Wyeth paid $413.2 million to the federal government and $371.4 million to state Medicaid programs.

In another settlement against a drug company, Novartis Pharmaceuticals Corp. paid $390 million based on claims that the company gave kickbacks to specialty pharmacies in return for recommending Exjade, an iron chelation drug, and Myfortic, an anti-rejection drug for kidney transplant recipients. The settlement includes $306.9 million for the federal government and $83.1 million for state Medicaid programs.

Housing and Mortgage Fraud

The Department recovered more than $7 billion in housing and mortgage claims from January 2009 to the end of fiscal year 2016, including settlements and judgments totaling $1.6 billion this past fiscal year – the second highest annual recovery in the history of the federally insured mortgage program.

Notable tin the housing and mortgage areas were settlements with Wells Fargo for $1.2 billion and Freedom Mortgage Corp. for $113 million.

The agency also recovered $82.6 million in false claims from BP Exploration and Production Inc. (BP) arising from the April 2010 Deepwater Horizon/Macondo Well explosion and oil spill in the Gulf of Mexico.

The department pursued a variety of procurement fraud matters. For example, L-3 Communications EOTech Inc. and its parent company, L-3 Communications Corp., paid the United States $25.6 million for defective holographic weapon sites EOTech sold to the Department of Defense, Department of Homeland Security, and FBI. The defendants, including EOTech’s president, admitted knowing the sights failed to perform as represented in cold temperatures and humid environments, but delayed disclosing the defects to federal authorities for years.

Regarding for-profit schools and federal education funds, the second largest for-profit education company in the country, Education Management Corp., paid the U.S. $52.6 million to resolve allegations that it unlawfully recruited students, engaged in deceptive and misleading recruiting practices, and falsely certified compliance with Title IV of the Higher Education Act and parallel state laws that prohibited such conduct, as part of a $95.5 million global federal-state settlement.

Source: Department of Justice

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