DOJ recently announced that it recovered $5.7 billion under the False Claims Act in fiscal 2014. The staggering haul bested the previous record of $4.9 billion set in fiscal 2012, and easily surpassed DOJ’s $3.8 billion take in fiscal 2013. DOJ’s record-breaking tally is even more remarkable because, for the first time in recent memory, the financial industry was the leading source of civil recoveries, paying out more than $3.1 billion. At the same time, 2014 could prove a unique year in that DOJ’s focus was heavily weighted towards cracking down on alleged fraud relating to federal housing and mortgage programs. Regardless, 2014 reaffirms that DOJ will continue to innovate ways to use the FCA as an all-purpose enforcement tool.
There’s no question that the False Claims Act is a significant revenue source for Uncle Sam. Since 1987, DOJ has recovered approximately $44 billion through civil FCA litigation. Of that total, approximately half has been recovered since 2009. While the DOJ has ramped up enforcement, it has also intensified its scrutiny of traditional targets such as health care and defense contracting, and sought out new areas to deploy the FCA, such as IT products and services and federal housing and mortgage programs. What this all means is clear: DOJ continues to take a muscular approach to using the False Claims Act, and no matter what industry you’re in, if you do business with the federal government, you need to be aware of the FCA.
As with anything, there is no one size fits all solution. But we thought this would be a good opportunity to quickly go over some best practices. First, be sure that you comply with all contractual requirements to the letter. This may seem obvious but given the watered down materiality requirements that were installed by the Fraud Enforcement and Recovery Act (FERA), which amended the FCA in 2009, virtually any non-compliance, no matter how insignificant, could form the basis of a False Claims Act suit. Second, if you subcontract out your performance obligations, remember that you can be held liable for the submission of a false claim if the sub provides goods or services that do not conform to contractual requirements. Again, this may seem obvious, but the False Claims Act has a not-so-funny way of making prime contractors pay dearly for any oversight by a sub. Third, make sure you have staff dedicated to ensuring compliance with federal contracts. When it comes to the FCA, it’s always better to be proactive than reactive.
And with that, may your 2015 be merry, bright, and FCA-free.