The state of False Claims Act litigation

by Walter Olson on February 26, 2014

The docket keeps expanding and Legal NewsLine is out with a story quoting me and others:

…“In recent years, you’ve seen some pushback from the business community, but given the record of congressional expansion, they’ll be doing pretty well if they can just keep Congress from expanding it further,” said Olson, who also founded and still runs the popular blog Overlawyered.com. …

The Department of Justice announced in December that it secured $3.8 billion in settlements and judgments from civil cases involving fraud against the government in 2013. According to the office, the amount represents the second largest annual recovery of its type in history and brings total recoveries under the False Claims Act to $17 billion since January 2009….

Olson explains that the business community’s growing discontent over the False Claims Act includes concerns over incentives for whistleblowers. In many cases, the whistleblower either participated in the misconduct, or knew about the misconduct but failed to inform their company.

He adds that in worse cases, whistleblowers intentionally ignored misconduct so damages would pile up and result in a “better bounty.”

“These are all incentives that are at odds with the wish that employees be ethical and loyal to their employers, and are also sometimes at odds with the object of minimizing fraud,” Olson said.

Much more, including more quotes from me, at the link; related Peter Hutt interview piece.

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"Lawsuit Accuses Whistleblower Law Firm Of Coaching Employee To Steal Documents" - Overlawyered
02.28.14 at 10:15 am

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1 Allan 02.26.14 at 4:13 pm

I have an idea: companies should stop defrauding the government.

We should be glad that the government is recovering ill-gotten gains. On the other hand, maybe there should be a “clean hands” requirement. That is, if it shown (with a higher than the preponderance standard) that the whistleblower participated in the fraud, perhaps the payout should be less.

I would note that the article has a much broader focus than Mr. Olson’s blurb implies. That is an observation, not a criticism. I think Mr. Olson’s editorial choice was well-considered.

2 DEM 02.27.14 at 11:31 am

Allan, the “fraud” involved in these cases is often far afield from what we normally associate with fraud — i.e., simple, intentional lies. These cases often involve hypertechnical allegations under the government’s byzantine payment systems, Medicare’s PPS most of all.

And these settlements are not admissions of fraud. Often, they are all but coerced by the DOJ, since the companies at issue derive large percentages of their revenue from government sources and can ill-afford to have prolonged litigation battles with their customer. The DOJ playbook is to allege a massive fraud, threaten to throw its unlimited resources behind the prosecution, and then claim victory when the target settles for some small percentage of the potential exposure in an effort to rid itself of the sheer cost and distraction.

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