The Growing Importance of the Qui Tam Whistleblower Cases Under the False Claims Act

This is part 4 of my article on the False Claims Act. This part discusses the huge increase in federal dollars recovered in the past few years:

IV. Recent Recoveries and Other Developments In Qui Tam Litigation

A. An Explosion of Federal Dollars Recovered Since 1986, Under the False Claims Act

Over the past 20 years since the modern False Claims Act was established through the 1986 Amendments, the federal government’s recoveries of dollars have grown astronomically. The Department of Justice statistics reprinted in Appendix 2 tell the story:

In 1987, the government’s recoveries in qui tam cases totaled zero, presumably because the 1986 Amendments had just taken effect; and total recoveries under the False Claims Act were just $86 million. The following year, qui tam and other False Claims Act settlements and judgments began a steady climb upward, exceeding $200 million by 1989, and $300 million by 1991. By 1994, the government’s recoveries broke the $1 billion mark for the first time, with $380 million of that amount attributable to qui tam case recoveries alone.51

In 2000, the government recovered more than $1.5 billion, of which $1.2 billion was derived from qui tam actions. In 2001, the government recovered more than $1.7 billion, with almost $1.2 billion of that amount from qui tam cases. With the exception of 2004, in each year since 2000 the government has recovered more than a billion dollars per year under the False Claims Act, and qui tam actions were responsible for the lion’s share of those recoveries. For example, in 2003, government recoveries exceeded $2.2 billion, of which $1.4 billion derived from qui tam cases. Similarly, in 2005, of the government’s total recovery of $1.4 billion, $1.1 billion of that amount derived from qui tam cases.

Although the Justice Department has not released its fiscal year 2006 tabulation of the data shown in Appendix 2, it recently announced that 2006 was a record year in which it recovered more than $3.1 billion in settlements and judgment for fraud and false claims. (See Appendix 4). In announcing this record recovery, the Department paid tribute to the co-sponsors of the 1986 Amendments to the False Claims Act, Senator Charles Grassley of Iowa and Representative Howard L. Berman of California.

Of this record $3.1 billion in recoveries, 72% came from the health care field; 22% from defense; and 8% from other sources. Health care alone accounted for $2.2 billion in settlements and judgments, which included a $920 million settlement with Tenet Healthcare Corporation, the country’s second largest hospital chain. Defense procurement fraud amounted to $609 million in recoveries, which included a $565 million settlement with The Boeing Company.

It is interesting that, while defense procurement fraud both inspired the Act and was the largest source of recoveries at the time of the 1986 Amendments, health care has plainly become the leader, as health care costs have grown as a percentage of the federal budget. By industry, in 1987 the defense industry was the largest source of cases under the False Claims Act.52 The health care industry accounted for only 12% of cases under the False Claims Act in 1987; that percentage grew to 54% by 1997.53 Many health care fraud cases have addressed over-billing or up-coding, fraudulent cost reporting, billing for services not provided, and failure to furnish the required “quality of care.” 54
The breakdown of the Department of Justice statistics show that government recoveries in the health care field have grown from less than $2 million in 1988, to more than $1.8 billion in 2003. Although the amounts recovered rise and fall each year, from 2001 – 2005 government recoveries from the health care field exceeded $1 billion in four out of five years. The health care industry now consistently accounts for the vast majority of settlements and judgments obtained by the government for fraud and false claims.

48 31 U.S.C. § 3730(c)(3).

49 Even “non-intervened” cases sometimes result in substantial liabilities to defendants. For example, in United States ex rel. Franklin v. Parke Davis, Division of Warren Lambert, a relator pursued an action over the off-label marketing of Neurontin, and the government elected not to intervene. Ultimately, the defendant entered into a global settlement of $430 million, of which $152 million was to settle False Claims Act liability, and $38 million was to settle civil liabilities to the fifty states.

50 The “public disclosure” provision is as follows:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office Report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(A)

51 See Appendix 2.

52 C. Sylvia, supra, § 2:13, at 63.

53 Id. § 2:14, at 64; see Appendix 2.

54 C. Sylvia, supra,