Top 4 Surprises About 2014’s False Claims Act Cases

Each year the Government gets ripped off to the tune of billions of dollars, and
healthcare fraud sits first chair. This past year has been no exception; the Government
closes out its fiscal year on September 30, so we can now see that in
2014, medical fraud cases once again dominated the list of False Claims
Act cases, resulting in 90 of the some 140 settlements or verdicts over
the fiscal year. Most of these cases were brought by whistleblowers who
refused to let American taxpayers get ripped off.

But the list also contained some surprises. I’m a lawyer who regularly
represents whistleblowers, and here is my view of the top four surprises
about FCA cases this year.

(The Government will come out with official figures later. I’m basing
this on an informal roundup of the cases over the past year.)

1. The list has surprisingly few defense contractor fraud cases.

Typically defense contractor fraud comes in a distant second to medical
fraud, but this year the Government had just a couple of handfuls of those
cases. The remaining cases relate to fraud in a wide array of situations,
ranging from defective products to nuclear reactors to DBEs, in keeping
with the enormous variety of contracts awarded by Government entities
and agencies each year.

2. The Government was not afraid to take on cases about substandard goods
and services.

One of the trends that surprised me was the large number of cases where
the defendant was accused of providing the Government with substandard
or non-complying services. For years the wisdom in the qui tam field has
been that, so long as the Government got something for its money, it rarely
was interested in getting into an argument over whether the goods or services
it got were “good enough.” The traditional thinking has been
that these cases are harder to prove and more subjective. However, this
year nearly 10% of the cases had allegations that the products or services
that the Government received were defective, did not meet the contract
specifications, or were simply not up to snuff. The fact that the Government
accepted and resolved so many cases in the area is encouraging for whistleblowers
who have believed the Government did not care about these types of cases,
even when the defendant’s conduct involved very serious fraud.

3. Thinking about DBE fraud? Think again. The Small Business Administration
and DOJ are getting serious about stopping it.

The data also shows that the Government took – and settled or tried
– a surprising number of
DBE fraud cases. Government agencies set aside some contracts for smaller businesses,
as well as for disadvantaged businesses, which is supposed to mean businesses
that are owned and operated by minorities (MBEs), women (WBEs), veterans
or individuals who are disadvantaged in some other specified manner. The
Small Business Administration and the Department of Justice have clearly
gotten serious about stopping big companies that set up fake companies
that get lucrative contracts with the Government – and then hand
those contracts over to the bigger companies. I tallied 5 cases involving
allegations about small business, DBE, WBE or MBE fraud.

4. Ditto with Customs Fraud.

The Government also tackled customs fraud, taking on companies that intentionally
undervalued their imports or claimed the goods were made in countries
that are entitled to import goods with a lower tariff. DOJ resolved a
surprisingly high four customs cases in 2014.

Of course, not everything about 2014’s FCA case list was a surprise.
Roughly a dozen cases related to the old fraud stand-by: billing for work
that the company simply did not do. While most of the FCA cases involved
overbilling of some sort, some two dozen involved the classic types of
overbilling, such as billing for employees who were not working or double billing.