The Department of Justice obtained a record $5.7 billion in recoveries from civil cases involving fraud and false claims against the government in fiscal year 2014, thanks mainly to significant settlements reached in the financial services and healthcare industries.
The record amount represents the first time the agency has exceeded $5 billion in cases under the False Claims Act (FCA), and brings total recoveries from January 2009 through the end of the fiscal year ending Sept. 30 to $22.7 billion—more than half the recoveries since Congress amended the FCA 28 years ago to strengthen the statute and increase the incentives for whistleblowers to file suit. “In the past three years, we have achieved the three largest annual recoveries ever recorded under the statute,” Acting Associate Attorney General Stuart Delery said in a statement.
The bulk of recoveries—$3.1 billion—came from the financial industry for its part in the misconduct that led to the housing and mortgage crisis. Broken down, this amount includes:
$1.85 billion from Bank of America;
$614 million from JP Morgan;
$428 million from SunTrust Mortgage; and
$200 million from U.S. Bank.
This brings recoveries for civil fraud and false claims against federal housing and mortgage programs from 2009 through the end of fiscal year 2014 to $4.6 billion, according to the Justice Department. Additionally, the $2.3 billion in health care fraud recoveries in fiscal year 2014 marks five straight years the Justice Department has recovered more than $2 billion in cases involving false claims against federal health care programs, particularly Medicare and Medicaid.
The pharmaceutical industry accounted for a substantial part of the $2.3 billion in health care fraud recoveries. For example, Johnson & Johnson and its subsidiaries, Janssen Pharmaceuticals and Scios, paid $1.1 billion to resolve False Claims Act claims relating to the prescription drugs Risperdal, Invega and Natrecor. According to the allegations, J&J promoted the drugs for uses not approved as safe and effective by the Food and Drug Administration.
Other Fraud Recoveries
In addition to mortgage fraud and healthcare fraud, the Justice Department also aggressively pursued fraud in government procurement and other federal programs in fiscal year 2014.
Under one significant settlement, for example, Hewlett-Packard paid $32.5 million to resolve claims involving a contract for IT products and services with the U.S. Postal Service. In another significant case, Boeing paid $23 million to settle alleged false claims for labor on aircraft maintenance contracts with the U.S. Air Force.
The government also filed lawsuits against a number of government contractors, including Kellogg, Brown & Root (KBR) and two foreign subcontractors Technip and JGC. According to the charges, these companies, together with engineering services provider Snamprogetti, funneled $180 million in bribes from 1995 to 2004 to government officials in Nigeria as part of a multinational joint venture to develop a liquefied natural gas plant in the country.
Of the $5.7 billion in federal recoveries in fiscal year 2014, nearly $3 billion related to whistleblower claims filed under the FCA. As recoveries increased, so have whistleblower awards; from 2009 to the end of fiscal year 2014, the government paid awards in excess of $2.47 billion.