On December 21, 2017, the United States Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics for fiscal year (FY) 2017. The press release measures the DOJ’s total haul at $3.7 billion. Although this is a significant piece of news in its own right, we analyze these statistics each year for any potential trends. (See our post on the 2016 statistics, here, and our full analysis of the 2016 statistics in Robert T. Rhoad’s West Year-In-Review conference brief, available here.) And this year, like the years before it, the trendlines have been far from uninteresting.
Here are our key takeaways from this year’s numbers:
- Are these numbers fake news? Maybe. The DOJ statistics show us only what the DOJ wants us to see. In this vein, we have noticed that the DOJ has a tendency to adjust previous year recoveries by a few million here and a few million there. We previously considered these adjustments not noteworthy, explained by clerical errors, post-judgment interest calculations, rounding errors, etc. This year, we noticed such adjustments throughout the report, and did not think much of it, but then noticed a $750 million difference in the total recoveries for FY 2015 non-DOD/non-HHS recoveries as reported this year versus last year. This is troubling because FY 2015 should have been just as closed by the end of FY 2016 as it would have been by the end of FY 2017. Based on this significant discrepancy, and the many minor discrepancies in the figures reported each year, we think it is high time for the DOJ to explain where these numbers are coming from. The DOJ uses these numbers to tout the “return on investment” from pursuing members of the defense, health care, and financial services industry in FCA cases. To the extent these numbers are overstated, it is in the public interest for all citizens to know why. By way of example, we provide the following comparison of the numbers reported for FY 2015 non-DOD/non-HHS recoveries in 2017, versus the numbers reported for FY 2015 non-DOD/non-HHS recoveries in 2016.
- Non-Qui Tam Settlements and Judgments are Down. In both DOD and HHS cases, cases filed by DOJ have been less successful in 2016 than 2015. This trend has continued into 2017. This figure bodes well for entities defending FCA lawsuits against the DOJ. It suggests that despite vigorous enforcement efforts, defendants are faring well.
- DOD Qui Tam Filings Are Down, But Government Initiated Cases Are Up. This is an interesting trend. DOD recoveries are typically less than HHS recoveries, but the DOJ appears to have pursued more cases against defense contractors year-over-year since 2015. Although this might be concerning to those in the defense industry, we note that the trendline on Non-Qui Tam Settlements and Judgments is down. In other words, although the DOJ may be pursuing recoveries in the defense industry with increasing vigor, DOJ’s increased efforts has not resulted in increased success.
- Non-DOD/Non-HHS Filings Are Down Overall. It has been almost a decade since the financial meltdown of 2008. Most of the false certification cases against financial institutions arising out of activity that occurred during the subprime mortgage crisis have, at the very least, been filed—many have been settled or have otherwise concluded. It is no surprise, therefore, that the total number of non-DOD/non-HHS cases continue to go down since many of those cases have, at least during the last decade, targeted financial institutions.
Below you will find the numbers for all recoveries, which we have reprinted directly from the DOJ’s statistics. These are the numbers reported this year. As mentioned earlier, the DOJ has made adjustments to these numbers year-over-year, so the numbers reported this year for 2016 and 2015 may be different from those reported in 2016.