The United States Department of Justice Releases FY2023 False Claim Act Recoveries

In late February 2024, the United States Department of Justice (“DOJ”) announced that it had achieved the “Highest Number of Settlements and Judgments in History” under the federal False Claims Act. In particular, the DOJ reported recoveries in excess of $2.68 Billion in Fiscal Year 2023 (“FY 2023”). Dating back to 1986, total recoveries now exceed $75 Billion. These numbers alone evidence the fact that, as the DOJ put it: “The False Claims Act remains one of our most important tools for rooting out fraud, ensuring that public funds are spent properly, and safeguarding critical government programs.”

Notably, a reported 543 settlements and judgments during FY 2023 involved whistleblowers, which “comprise[d] a significant percentage” of False Claims Act cases. Recoveries in these cases reportedly accounted for $2.3 Billion of the total recoveries in FY 2023. This further underscores the power of the federal False Claims Act which “Congress strengthened” in 1986 “by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.”  As the DOJ noted, whistleblowers “typically receive[] a portion of the recovery” in successful cases, “ranging between 15% and 30%.”

A substantial portion of the total FY 2023 recovery reportedly related to various forms of health care fraud. However, the DOJ highlighted various instances of government procurement fraud as well. One government contractor “paid $377 million to resolve allegations that it improperly billed its government contracts for costs incurred in its non-governmental commercial and international contracts.” Another government contractor “agreed to pay $21.8 million to resolve allegations that in contract proposals for equipment provided to the military, [it] included the cost of certain items, such as nuts and bolts, twice.”  Another government contractor reached an $8.1 million settlement of allegations that it “failed to comply with certain contractual manufacturing specifications.” In another case, an individual and her company paid almost $8 million “to resolve allegations that they knowingly provided false information to the [Small Business Administration] relating to . . . eligibility for federal set-aside contracts intended for small businesses owned and controlled by socially and economically disadvantaged individuals.”

We frequently write about the False Claims Act and the need to diligently implement compliance measures to mitigate against risks of exposure on jobs involving state or federal funds. But this is because the risks of liability are high, and the potential bases for exposure are wide. Given the complexities of construction projects – at both the federal, state, and local levels – there are often various ways in which a given contractor might run afoul of an applicable False Claims or False Statements statute. Sounds policies, regular training, appropriate enforcement, prompt action, and diligence in executing contractual and legal obligations, are among various keys in protecting against risks of exposure. Since each contractor, each contract, and each project is unique, contractors are advised to take appropriate actions to ensure compliance with applicable state and federal False Claims and False Statements statutes.

UCANE Construction Outlook, March 2024 | Legal Corner