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Industries Impacted by Fraud

For Many U.S. Industries, Fraud is a Daily Occurrence

Of the $3.7 billion in settlements and judgments reported by the Department of Justice (DOJ) in fiscal year 2017 (October 1, 2016 – September 30, 2017) $3.4 billion were related to lawsuits filed under the qui tam provisions of the False Claims Act (FCA).

Qui tam suits are those filed by private citizens on behalf of the government. The filers of these claims are known as whistleblowers, and they are given a percentage of the recovery for relevant information they provide the authorities. During FY 2017, the government paid out $392 million to people who exposed fraud and false claims by filing a qui tam complaint.

“Because those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department’s recoveries this past year continue to reflect the valuable role that private parties can play in the government’s effort to combat false claims concerning government contracts and programs.”

Below are some of the more prominent types of fraud and noteworthy resolutions during fiscal 2017.

Health Care Fraud

Columbia Healthcare FraudThe DOJ pursues investigations that involve a variety of health care providers. Resolutions include the recovery and return of fraudulently gained assets to federally funded programs such as Medicare, Medicaid, and TRICARE. The department’s efforts prevent billions more in losses by discouraging others who might attempt to game the system to further their own interests.

The largest health care industry recoveries in fiscal year 2017, over $900 million, came primarily from the drug and medical device industry, with the help of whistleblowers. One important case which received a great deal of media attention involved the drug manufacturer Mylan Inc.. It paid about $465 million to resolve multiple allegations that it underpaid rebates owed under the Medicaid Drug Rebate Program associated with the company’s EpiPen product, dating back to 2010.

Elsewhere, Shire Pharmaceuticals LLC settled for $350 after Shire and its subsidiary, Advanced BioHealing (ABH), allegedly offered kickbacks to healthcare professionals to use or overuse its bioengineered human skin substitute. Those kickbacks included sweeteners for expensive customer recreation, unnecessary payment for medical supplies, purported speaking engagements, deceptive case studies and other financial incentives.

The DOJ noted sizable recoveries from the following health care firms.

Life Care Centers of America Inc. – $145 million to settle allegations that it prompted skilled nursing facilities to offer false claims for rehabilitation therapy services that were not sensible, needed, or skilled. This civil settlement was the biggest with a skilled nursing facility chain in the history of the FCA.

eClinicalWorks (ECW) – An electronic health records software vendor (and some of its employees) settled for $155 million in the wake of allegations that they falsely acquired approval for the company’s software by concealing aspects of the software that didn’t meet requirements. Additionally, ECW also allegedly gave illegal kickbacks to some customers to promote its software.

The DOJ also obtained more than $60 million in settlements and judgments with individuals under the FCA that did not involve joint and several liability with the guilty corporate entity in a number of healthcare legal proceedings, including some of those listed above.

Procurement Fraud

Portions of our country’s defense are annually outsourced to private corporations and contractors because it enhances our military capacity. Plus, our government spends billions of dollars on traditional defense department contracts. Both practices come with a number of business risks — notably, the increased possibilities for fraud. Other federal departments also rely on procurement from, and outsourcing to, private industry for their products, services and systems. All are opportunities for contractors to defraud the government, and for whistleblowers to stop them; 2017 was no exception.

In one such resolution, several defendants headed by Bechtel National Inc. settled for $125 million after they allegedly charged the Department of Energy for deficient nuclear quality materials, services, and testing, and then used the money from the contract to lobby Congress and other federal officials.

Housing and Mortgage Fraud

Fiscal 2017 saw total settlements and judgments of over $543 million in this fraud category.  Most notable was the September 2017 unanimous jury verdict in Houston, Texas, that Allied Home Mortgage Capital Corporation and Allied Home Mortgage Corporation violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which was passed after the 1988 S&L scandal. The award paid to the government totaled over $296 million.

Other similar complaints were adjudicated in fiscal 2017, or are progressing in that direction, many with the help of whistleblowers.

Recoveries in Whistleblower Suits

In fiscal 2017, the government paid out $392 million to people who exposed fraud and false claims by filing a qui tam complaint. Whistleblower claims filed through the False Claims Act have increased dramatically since amendments were passed in 1986 to strengthen the law and its protections of whistleblowers. This increase is a good thing for the American taxpayer.

“Because those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department’s recoveries this past year continue to reflect the valuable role that private parties can play in the government’s effort to combat false claims concerning government contracts and programs.”

Though fraud is most acute in healthcare, defense and securities, it is important for us to understand that any industry that is complex and profitable can be a breeding ground for fraud, abuse and waste. Whistleblowers are essential to the DOJ’s recoveries and to the deterrence of further fraud.

Whistleblowers truly provide a public service. For their efforts, they are given portions of recoveries and protection by provisions of the False Claims Act. Making the decision to come forward about fraud, abuse or waste is rarely an easy one. However, with the assistance of a whistleblower attorney, the process can be simplified. An experienced attorney can also improve a claim’s chances of success.

For a free, confidential evaluation of your case, contact the Louthian Law Firm today by filling out our online contact form.

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