Government Contracts Update

In years past, many believed a transition from a Democrat-controlled government to a Republican-controlled government would mean an easing of compliance standards and a shift away from enforcement actions. However, rooting out fraud has long been a bipartisan effort, and although the Trump administration signals some relief in the form of a regulatory rollback, there have been several signals indicating that the federal government may continue its recent year-over-year trend of record False Claims Act (FCA) recoveries.

FCA Enforcement Is No Longer Solely Within the Government's Discretion

With respect to the FCA, although the government certainly has the ability to swing this stick, a closer look at the data suggests that relators are truly behind the record FCA recoveries. In fact, under the Obama administration, relators' cases increased by approximately 66% as compared with the 8 years prior under the Bush administration. During the same 8-year comparison, the number of DOJ-initiated cases remained nearly the same. This means that although a new administration can certainly shape DOJ's focus, unless relators are limited in a meaningful manner, FCA enforcement actions are likely to occur, regardless of the administration.

DOJ Statistics Bush Administration(2001-08) Obama Administration(2009-15)
Qui tam cases 2,930 4,404
DOJ-initiated cases 809 848

Trump's Cabinet Nominees' Comments Indicate No Let-up in Enforcement

As has been well publicized, President Trump's various cabinet nominees are working their way at varying speeds through their confirmation hearings. During the course of this process, several have given their thoughts on enforcement issues, which do not suggest reining in qui tam relators or a de-emphasis of enforcement. In fact, the opposite may be the case.

Perhaps the most important view is that of U.S. attorney general nominee Sen. Jeff Sessions (R-AL). In his opening remarks at his confirmation hearing, he addressed the need to curb "waste, fraud, and abuse":

[T]his government must improve its ability to protect the United States Treasury from waste, fraud, and abuse. This is a federal responsibility. We cannot afford to lose a single dollar to corruption, and you can be sure that if I am confirmed, I will make it a high priority of the Department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims.

Furthermore, in response to Senate Judiciary Committee Chairman Charles Grassley's (R-IA) question of whether he would "pledge to vigorously enforce the False Claims Act," Sen. Sessions stated:

I think [the qui tam provisions of the False Claims Act] are valid and an effective method of rooting out fraud and abuse… It has saved this country lots of money and probably has caused companies to be more cautious because they can have a whistleblower that would blow the whistle on them if they try to do something that's improper.

Sen. Sessions also suggested that should he be confirmed, his Department of Justice would likely follow the principles of the September 2015 Yates Memo, which renewed the government's effort to hold culpable corporate executives individually accountable in False Claims Act cases.

In addition to Sen. Sessions, Rep. Tom Price (R-GA), nominee for the post of Secretary of Health and Human Services (HHS), underscored his own intentions to root out fraud. Responding to a question posed by Sen. Orrin Hatch (R-UT), Rep. Price stated that HHS could be more focused on "bad actors," using real-time information to do a "much better job of not just identifying the fraud … but ending fraud." Last year, more than half of the $4.7 billion recovered in 2016 in civil settlements and judgments stemmed from healthcare fraud recoveries ($2.5 billion).

Pre-Freeze Hiring of Investigators and Auditors

Finally, although a hiring freeze was put in place across the federal government on January 23, prior to that freeze, and even before the inauguration (dating back to December), several federal agencies hired hundreds of veterans, following a special hiring preference. It is our understanding that these hires were largely for investigative and auditing positions with the IRS and various offices of inspectors general. Such a large hiring of investigators and auditors seems to suggest an intention to increase greater review and audit of those particular agencies, and of their contractors and grant recipients.

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Given the foregoing, federal contractors and grant recipients should remain mindful of their compliance obligations and vigilant regarding their operations and the conduct of their subcontractors and subawardees.