DOJ: Fraud On The Taxpayer - Deputy Associate Attorney General Stephen Cox Delivers Remarks at the 2019 Advanced Forum on False Claims and Qui Tam Enforcement

New York, NY

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Monday, January 28, 2019

Thank you for that introduction, and thank you to the American Conference Institute and all of its sponsors for hosting me here today. 

I serve in the Office of the Associate Attorney General at the Department of Justice.  Our office oversees five litigating divisions, including the Civil Division, and I spend most of my time working with the Consumer Protection Branch and the Commercial Litigation Branch on enforcement.  Relevant to this audience, I’ve had the privilege of working closely with the Civil Fraud Section within the Commercial Litigation Branch that is responsible for investigating and litigating violations of the False Claims Act. 

The new Administration is two years old this month.  My plan today is to offer some thoughts about this Administration’s commitment to enforcing the False Claims Act and then describe some of the Department’s enforcement principles, policies, and perspectives that guide us.

Fraud on the Taxpayer
(I prefer to just call it stealin')

Let me begin by describing the Department’s commitment to fighting fraud on the taxpayer—and specifically our duty to responsibly enforce the False Claims Act to recover loss to the taxpayer and deter misconduct. 

The Act was passed during the Civil War to fight fraud on the Union Army, and it is sometimes called “Lincoln’s Law.”  As Assistant Attorney General Jody Hunt recently noted, there were crooked contractors defrauding the Union Army by selling sick mules, lame horses, sawdust instead of gunpowder, and rotted ships with fresh paint.  Lincoln’s Law was an answer to those problems one hundred and fifty years ago.

The Act fell into relative disuse over the years, but was revitalized in 1986 through amendments spearheaded by Senator Grassley.  For example, the 1986 amendments increased the incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.  Since the 1986 amendments, the False Claims Act has returned over $59 billion to the U.S. Treasury—over $42 billion of which came through qui tam actions filed by whistleblowers.

Today, we use the False Claims Act to fight not only contracting fraud, but also healthcare fraud, grant fraud, financial fraud, and many other types of fraud. 

Enforcing the False Claims Act is a top priority for the Department—not just for our office. 

Last month, we announced that the Department recovered approximately $2.8 billion this past fiscal year.  $2.5 billion involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.  This is the ninth consecutive year that the Department’s civil health care fraud settlements and judgments have exceeded $2 billion.

This year we settled a number of large and important cases.  We settled a case with Amerisource Bergen for $645 million involving improper repackaging and distribution of cancer drugs.  The Department’s position was that the company circumvented important safeguards designed to preserve the integrity of the nation’s drug supply.

We also settled a case with United Therapeutics Corporation for $210 million.  This case involved the use of a foundation as an illegal conduit to pay the co-pays of thousands of Medicare patients taking the company’s drugs.  We settled a similar case with Pfizer for $23.85 million to settle allegations that it was also improperly using a foundation to pay Medicare patient co-pays.  Co-pay requirements can serve as an important check on healthcare costs, including the cost of drugs, but these cases show how drug manufacturers can make an end-run around these requirements to facilitate increases in drug prices.

We settled a case with Toyobo for $66 million in a case involving the sale of defective Zylon fiber used in bullet proof vests that the United States purchased for federal, state, local, and tribal law enforcement agencies.  Defective Zylon can render bullet proof vests unfit for use and put our men and women in blue at unnecessary risk.

Another important case was the Deloitte & Touche settlement for $149.5 million.  Deloitte served as independent outside auditor for an originator engaged in a long-running mortgage fraud scheme involving loans insured by the Federal Housing Authority.  The allegations against Deloitte were that they knowing deviated from auditing standards and therefore failed to detect the fraud.

It is also worth highlighting cases where we pursued individuals because individual accountability remains a top priority for the Department.  The Department obtained $114 million in judgments against three individuals found to have paid kickbacks to doctors disguised as “handling fees” resulting in medically unnecessary tests that were billed to Medicare.

We also settled our case against Lance Armstrong for $5 million.  The allegations in that case were that his cycling team used performance enhancing drugs while making numerous false statements denying it and concealing the drug use during the U.S. Postal Service’s sponsorship of the team for the Tour de France.

I could tell you about many more cases, and you might hear about more throughout this conference.  But the point is that we just finished another big year demonstrating our commitment to False Claims Act enforcement.

Before I turn to certain principles we apply and reforms that we have brought about, I want to note that our work in the False Claims Act space not only protects the taxpayer, but it serves other important goals.  The taxpayer is not the only victim of fraud on the government.

When a company falsely certifies the quality of military equipment, it sends our brave men and women into harm’s way with less protection.  When medical providers submit false claims to Medicare, they often fail to provide adequate medical care to their patients.  Kick-back schemes not only defraud the government, they also drive up consumer costs, undermine competition, and may distort independent medical decision-making.   

By effectively enforcing the False Claims Act, we protect the taxpayer, we deter bad actors, we protect victims, and we level the playing field in the markets.

Now let me turn to some of the principles that guide the Department in False Claims Act enforcement.

Qui Tam Dismissals

Let me first start with an internal memo that has become known as the Granston Memo.  Last January, the Director of our Civil Fraud Section issued internal guidelines for our litigators in determining when it is appropriate in a qui tam case to exercise our dismissal authority under the False Claims Act. 

As I mentioned earlier, the success of the False Claims Act is due in large part to the qui tam provisions and the partnership between the federal government and whistleblowers.  Of the recoveries last year, more than $2 billion was recovered in qui tam cases.  

One of the reasons for this partnership is that whistleblowers are often uniquely situated to bring fraudulent practices to light—particularly in suits filed by corporate insiders, who have frequently disclosed complex corporate wrongdoing that the government would have been hard-pressed to understand and unearth without their assistance.  

Qui tam filings have been on the rise for many years.  The Department intervenes in only about 1 in 5 cases that are filed.  But even the other 4 in 5 cases consume Department time and resources – not only in investigating them initially, but also in terms of monitoring and participating in any ensuing litigation if the relator elects to proceed.

When relators litigate cases in which the Department declines to intervene, the relators essentially stand in the shoes of the Attorney General.  Because relators may not always have the same interests as the United States, we take very seriously our responsibility to monitor False Claims Act cases when we decline to intervene.  Indeed, the Department serves an important role as a gatekeeper. 

The Granston Memo is about our gatekeeping role.  Part of the reasoning behind the memo is that when qui tam cases are non-meritorious, abusive, or contrary to the interests of justice, they impose unnecessary costs on the Department, on the judiciary, and on the defendants.  Bad cases that result in bad case law inhibit our ability to enforce the False Claims Act in good and meritorious cases.  And from a resource perspective, when the Department’s resources are consumed for other things, we have less time to fulfill our priorities.  This is why we have instructed our lawyers to consider dismissing qui tamcases when they are not in our best interests.  This authority is an important tool to protect the integrity of the False Claims Act and the interests of the United States.

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The Granston Memo is not really a change in the Department’s historical position.  In fact, it reflects the factors that the Department has historically considered in deciding to dismiss a case.  But we did think it was important that all of our False Claims Act litigators had the benefit of understanding the Department’s practice so that the authority could be used more consistently.

It is true that this authority has been used sparingly.  In the past, in a given year, the Department might have dismissed a few cases—if it dismissed any at all—but since 2017, the Department has moved to dismiss about two dozen cases.  Our exercise of this authority will remain judicious, but we will use this tool more consistently to preserve our resources for cases that are in the United States’ interests.

Subregulatory Guidance

Second, I’ll address the Department’s reforms concerning the issue of rulemaking by guidance.  As you know, when an agency has statutory authority to issue regulations, it normally goes through the notice-and-comment process of rulemaking, which can be cumbersome and slow.  Sometimes agencies have instead taken a shortcut by issuing “guidance” in lieu of regulations, knowing that it will achieve a similar effect of changing behavior.

To be fair, subregulatory guidance documents can be helpful in educating the public about statutes, regulations, and legal developments.  But it is improper to try to use guidance to bind the public by imposing legal obligations beyond those already enshrined in existing statutes or properly promulgated regulatory provisions.  Put simply, agency guidance should educate, not regulate.  

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That is why, in November 2017, former Attorney General Sessions announced that the Department will no longer issue any kind of binding sub-regulatory guidance.  In other words, the Department will no longer issue guidance documents that effectively bind the public without undergoing the notice-and-comment rulemaking process.

We hoped to serve as an example for other agencies to follow, and shortly after the policy was announced, then-Chairman of the Senate Judiciary Committee, Senator Grassley, sent a letter to the President praising the Attorney General’s policy and suggesting that other agencies follow its commonsense principles.

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Last January, in the affirmative civil litigation context (which includes the False Claims Act), then-Associate Attorney General Rachel Brand instructed Department attorneys not to use our affirmative civil enforcement authority to convert other agencies’ sub-regulatory guidance into rules that have the force or effect of law.  In other words, noncompliance with a nonbinding guidance document cannot be used to establish a violation of law.  This policy has been called the “Brand Memo.”  Its principles have been codified in the Justice Manual, and they apply not only in False Claims Act and civil enforcement cases, but also in criminal actions now.

Let me make a few points about how these principles might apply in False Claims Act cases.  As we have noted before, there are, of course, circumstances where it may be appropriate to rely on agency guidance, including to show the defendant’s awareness of an agency’s interpretation of a particular requirement or the agency’s views on the materiality of that requirement.  This is not to say that the guidance will carry the day—just because a company knows an agency’s nonbinding interpretation of the law does not mean it’s correct or that the company’s interpretation is unreasonable.

Some guidance documents may be relevant to professional standards that are incorporated into statutes.  For example, there are statutory and regulatory requirements that procedures billed to Medicare and Medicaid be medically “reasonable and necessary,” and there may be guidance documents discussing an agency’s non-binding views on what is medically reasonable and necessary.  The guidance document might be probative, even if it isn’t binding.  Of course, we must be careful not to run afoul of first principles.  Agency guidance cannot be dispositive on what a statute or regulation means—it is not a thumb on the scale—and it cannot create binding requirements.  But just like other statements of medical standards—such as professional standards from the medical industry or expert testimony—the guidance may have some probative value.  It’s not necessarily more probative than guidance from the industry, but it can have probative weight.

A particular guidance document may also be relevant if it is expressly incorporated into a contract or a certification.  For example, if a party and the government agree in a contract that compliance with some specified guidance document is required, the guidance document will be contractually binding on the party and noncompliance will be relevant under principles of contract law. 

Of course, all of these examples need to line up with the general principle that we’re not going to use “violations” of nonbinding guidance documents to establish a violation of law.  Guidance is not law.  It’s not binding.  And it shouldn’t be given the force or effect of law.

As I mentioned earlier, we hope that the Department’s policies on subregulatory guidance have been informative to other agencies, and we see evidence of that.  Last September, six of the banking regulators followed the Department’s lead and announced limits on the issuance and enforcement of sub-regulatory guidance.  In December, with similar principles in mind, the Department of Transportation issued an important memo clarifying and updating its procedures for guidance documents.   We hope other agencies follow suit.  These policies keep government restrained and promote the rule of law, fair notice, and due process. 

Piling On

Third, let me turn to a Department policy discouraging what we think of as “piling on.”  This policy was announced by the Deputy Attorney General last summer, and it applies across the board, including in False Claims Act cases. 

As you know, often the same conduct can violate multiple statutes.

When multiple law enforcement and regulatory agencies pursue a single entity for the same or substantially similar conduct, and then impose unwarranted and disproportionate penalties for that conduct, this is what we mean by “piling on.”  This can be seen as inconsistent with the concepts of fair play and the need for certainty and finality.

To avoid piling on, we are promoting coordination within the Department and with other agencies to apportion penalties and fines where appropriate. Under the same policy, we are also reminding our attorneys not to use our criminal enforcement authority for purposes unrelated to the investigation and prosecution of a possible crime. For example, we are not going to invoke the threat of criminal prosecution just to persuade a company to pay a larger settlement in a False Claims Act case or any other civil case.

That is why we have this thing called referrals to other law enforcement divisions outside DOJ, like SIGTARP and FinCEN.  Or, there is that special circumstances provision of the Act which allows the Attorney General to intervene if there are other ongoing investigations, not that I know anything, but just saying, considering the Detroit Land Bank Authority just got a bunch of new subpoenas sent to its contractors, that ended up going to its former attorney Rebecca Camargo, who just so happens to be the attorney for the contractors.

The most prominent example of this policy in action was a $680 million Foreign Corrupt Practices Act settlement in June with Société Générale, a global financial services institution based in Paris, for FCPA violations in Libya and for LIBOR manipulation.  This was handled by the Department’s Criminal Division, which is not supervised by our office, but the Department’s press release made clear that it credited $292 million that the firm paid to the French Authorities, an amount equal to 50% of the total criminal penalty otherwise payable to the United States.

But let me give you one example in the False Claims Act context:   In November, the Department announced a global resolution with three South Korea-based fuel companies for their involvement in a decade-long bid-rigging conspiracy that targeted contracts to supply fuel to U.S. military bases in South Korea.  This was a global resolution of criminal Sherman Act violations, civil claims under the Clayton Act, and civil claims under the False Claims Act.  I can tell you that the Antitrust Division’s criminal and civil sections and the Civil Division’s Fraud Section worked together effectively with the policy in mind so that they could reach coordinated global settlements that were equitable and proportionate to the defendants’ conduct, and they were careful not to impose fines, penalties, or damages that are unnecessarily duplicative of each other.

Cooperation Credit

Finally, let me turn to the issue of cooperation and policy initiatives of relevance to the False Claims Act. 

As the Deputy Attorney General has made clear in other contexts, and as senior officials from our office and the Civil Fraud Section have echoed in the False Claims Act context, the Department is committed to rewarding companies that invest in strong compliance programs and who cooperate with our investigations into wrongdoing. 

In November of 2017, the Department announced a corporate enforcement policy that takes voluntary disclosure, cooperation, and compliance into account in criminal cases.   This policy was, in a sense, a culmination of the FCPA Pilot that was announced in early 2016, but the corporate enforcement policy has been applied in criminal cases outside the FCPA space. 

In November of 2018, the Deputy Attorney General announced changes to Department’s policies on awarding cooperation credit based on, for example, whether a company identifies the individual wrongdoers.  Much ink has been spilled about the changes, and I won’t go into each and every one of them.  But for this audience I would like to focus on one change in particular relating to civil cases.

There is no longer an “all or nothing” approach to awarding credit for cooperation in civil cases.  You don’t have to boil the ocean in an effort to identify every employee who played any role in the conduct in order to receive any credit for cooperating.  If a corporation wants to earn maximum credit, it must identify every individual person who was substantially involved in or responsible for the misconduct. But when a company honestly does meaningfully assist the government’s investigation, our civil attorneys now have discretion to offer some credit even if the company does not qualify for maximum credit.

In announcing these changes, the Deputy Attorney General gave a False Claims Act example:  “A company might make a voluntary disclosure and provide valuable assistance that justifies some credit even if the company is either unwilling to stipulate about which non-managerial employees are culpable, or eager to resolve the case without conducting a costly investigation to identify every individual who might face civil liability in theory, but in reality would not be sued personally.”

In short, the policy changes return discretion to our civil lawyers to resolve each case consistent with relevant facts and circumstances.

That is if there is intervention.

Last June, then-Acting Associate Attorney General Jesse Panuccio made clear that False Claims Act investigations are no exception to the Department’s policy of incentivizing cooperation.  Corporate defendants can receive a more favorable resolution for cooperating with our False Claims Act investigations – from voluntary disclosure, which is the most valuable form of cooperation, to other efforts such as sharing information gleaned from an internal investigation and making witnesses available.    He also made clear that we will reward companies that invest in strong compliance measures.

As you know, strong compliance programs are good for business and fair competition, they raise awareness of legal obligations, they mitigate risk of legal jeopardy, and they promote reporting up.  When there’s been a case of overbilling Medicare or Medicaid, for example, we want you to know that having an effective and robust compliance program in place is something we will consider at the outset in determining whether it was a mistake or an anomaly or whether there was a knowing violation.  And that in turn will inform whether a False Claims Act case is merited, or whether pursuing another remedy is appropriate to make the government whole.   

We also want you to know that, if there’s a problem, the Department welcomes and will reward companies that make voluntary disclosures and provide meaningful, candid assistance in False Claims Act investigations.

The Department has significant discretion under the False Claims Act to resolve cases in a way that provides a material discount based on cooperation while still making the government whole.  Stay tuned on this front.

Oh, I shall be watching.

*        *        *

It is a privilege working at the Department of Justice on False Claims Act enforcement, and you should know that our lawyers are committed to exercising the Department’s enforcement discretion consistent with the rule of law. 

I hope that my remarks today have given you a better understanding of how we do our work, so that you can feel more confident that you know the rules of the road and the priorities of the Justice Department.

Thank you.

Voting is beautiful, be beautiful ~ vote.©

DEPARTMENT OF JUSTICE RECOVERS $3 BILLION IN FALSE CLAIMS CASES IN FISCAL YEAR 2010 $2.5 BILLION HEALTH CARE FRAUD RECOVERY LARGEST IN HISTORY MORE THAN $27 BILLION SINCE 1986

DEPARTMENT OF JUSTICE RECOVERS $3 BILLION IN FALSE CLAIMS CASES IN FISCAL YEAR 2010 $2.5 BILLION HEALTH CARE FRAUD RECOVERY LARGEST IN HISTORY MORE THAN $27 BILLION SINCE 1986

States News Service

WASHINGTON

The following information was released by the U.S. Department of Justice: The Department of Justice secured $3 billion in civil settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2010, Tony West, Assistant Attorney General for the Civil Division, announced today. This includes $2.5 billion in health care fraud recoveriesthe largest in historyand represents the second largest annual recovery of civil fraud claims. Moreover, amounts recovered under the False Claims Act since January 2009 have eclipsed any previous two-year period with $5.4 billion in taxpayer dollars returned to federal programs and the Treasury. Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $27 billion. "Under Attorney General Eric Holders leadership, our aggressive pursuit of fraud under the False Claims Act has resulted in the largest two-year recovery of taxpayer dollars in the history of the Justice Department," Assistant Attorney General West said. "Nowhere is this more apparent than in our success in fighting health care fraud. Since January 2009, the Civil Division, together with the U.S. Attorneys offices, commenced more health care fraud investigations, secured larger fines and judgments, and recovered more taxpayer dollars lost to health care fraud than in any other two-year period." Fighting fraud committed against public health care programs is a top priority for the Obama Administration. On May 20, 2009, Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services (HHS), announced the creation of a new interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. These efforts not only protect the Medicare Trust Fund for seniors and the Medicaid program for the countrys neediest citizens, they also result in higher quality health care at a more reasonable price. The record health care fraud civil recoveries of $2.5 billion announced today made up 83 percent of the years total civil fraud recoveries. HHS reaped the biggest recoveries, largely attributable to its Medicare and Medicaid programs. Recoveries were also made by the Office of Personnel Management, which administers the Federal Employees Health Benefits Program, the Department of Defense for its TRICARE insurance program and the Department of Veterans Affairs, among others. Assistant Attorney General West noted that since January 2009, the Civil Division, together with the U.S. Attorneys offices, set a two-year record for health care fraud enforcement efforts, recovering $4.6 billion in taxpayer funds under the False Claims Act from health care providers and others in the industry, and securing 25 criminal convictions as well as more than $3 billion in fines, forfeitures, restitution and disgorgement under the Food, Drug and Cosmetic Act (FDCA). The False Claims Act cases successfully resolved this year not only included payment schemes implicating federal health care programs, but also wartime and other government procurement contracts; grants for small businesses, bullet-proof vests for law enforcement, and other purposes; federally insured mortgages; federal and Indian mineral leases; and many other federal programs. Assistant Attorney General West commended the substantial efforts of the Civil Divisions career attorneys, the U.S. Attorneys Offices, and the federal and state agencies that investigate and support False Claims Act prosecutions, remarking that "their dedication and the cooperation we enjoy allow us to bring all of our resources to bear in combating fraud against both the federal and state governments." Most of the cases resulting in recoveries were brought to the government by whistleblowers under the False Claims Act, the federal governments primary weapon in the battle against fraud. In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to revise the statutes qui tam (or whistleblower) provisions, which encourage whistleblowers to come forward with allegations of fraud. Assistant Attorney General West paid tribute to the 1986 amendments sponsors, saying: "Without their foresight, these recoveries would not have been possible." He also expressed his gratitude to Senator Patrick J. Leahy, Chairman of the Senates Judiciary Committee, and to Senator Grassley and Representative Berman for their support of the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes. Of the $3 billion in settlements and judgments obtained in fiscal year 2010, over $2.3 billion was recovered in lawsuits filed under the False Claims Acts qui tam provisions. Under these provisions, whistleblowers (known as "relators") many of whom face considerable personal risk in coming forward with allegations of fraud are entitled to recover between 15 and 30 percent of the proceeds of a successful suit. In fiscal year 2010, relators were awarded $385 million. Since 1986, when the qui tam provisions were strengthened by Congress, recoveries in qui tam cases have exceeded $18 billion, and relators have obtained more than $2.8 billion in awards. Assistant Attorney General West also applauded Congress passage this past year of the Affordable Care Act (ACA), which included additional provisions to aid the Government in redressing fraud on the nations health care system, and to promote incentives for whistleblowers to disclose fraud to the government. Among many other changes, the ACA amended the False Claims Acts public disclosure provision and strengthened the provisions of the federal health care Anti-Kickback Statute. Fiscal year 2010 also saw records for several types of health care fraud. A $2.3 billion settlement with Pfizer Inc. marked the largest health care fraud settlement in history. The $2.3 billion includes $669 million recovered under the federal False Claims Act, $1.3 billion in criminal fines and forfeitures, and $331 million in recoveries for state Medicaid programs and the District of Columbia. (These latter two amounts are not included in the total health care fraud recoveries announced today, which are limited to the federal governments civil recoveries.) In addition, a $108 million settlement with The Health Alliance of Greater Cincinnati and one of its former member hospitals, The Christ Hospital, was the largest ever under the health care Anti-Kickback Statute for the conduct of a single hospital. The largest fiscal year 2010 False Claims Act recoveries came from the pharmaceutical and medical device industries, which accounted for $1.6 billion in settlements, including the $669 million from Pfizer Inc., $302 million from AstraZeneca, and $192.7 from Novartis Pharmaceutical Corporation. In addition to the civil health care fraud recoveries under the False Claims Act, the Civil Divisions Office of Consumer Litigation (OCL) brings civil and criminal actions for violations of the FDCA. Together with their partners in the U.S. Attorneys Offices around the country, OCL pursues such matters as the unlawful marketing of drugs and devices, fraud on the FDA, and the distribution of adulterated products. In fiscal year 2010, those efforts yielded more than $1.8 billion in criminal fines, forfeitures, restitution and disgorgement, the largest health care-related amount under the FDCA in department history. Since January 2009, OCL has successfully pursued cases resulting in 25 criminal convictions and more than $3 billion in fines, forfeitures, restitution and disgorgement. In addition, the Civil Division continues to play a leading role in the Financial Fraud Enforcement Task Force, created last November by President Obama to improve the federal governments efforts to investigate and redress consumer and financial fraud. The Civil Division, in conjunction with its partners on the task force, is aggressively pursuing all manner of financial fraud schemes, including mortgage fraud, non-war related procurement fraud, and fraud involving the Troubled Asset Relief Program, the American Recovery and Reinvestment Act and other economic stimulus funds. False Claims Act recoveries in these cases accounted for 11 percent of fiscal year 2010 recoveries, with $327.2 million in settlements and judgments. The Civil Division also pursues fraud claims related to contracts in support of the wars in Iraq and Afghanistan. During fiscal year 2010, the Civil Division recovered $10.6 million in these cases. To date, settlements and judgments in procurement fraud cases involving the wars in Southwest Asia total $137.2 million. Of this amount, $114.7 million has been recovered since January 2009.

Abbott, B. Braun, and Roxane Pharmaceuticals to Pay $421.2 Million to Settle False Claims Act Cases

Pharmaceutical Manufacturers to Pay $421.2 Million to Settle False Claims Act Cases

In Past Two Years, Civil Division & U.S. Attorneys Have Recovered More Than $9 Billion in Cases Alleging False Claims and Fraud Against the Government

WASHINGTON —   Abbott Laboratories Inc., B. Braun Medical Inc. and Roxane Laboratories Inc. n/k/a Boehringer Ingelheim Roxane Inc. and affiliated entities have agreed to pay $421 million to settle False Claims Act allegations, the Justice Department announced today. These settlements resolve claims by the United States that the defendants engaged in a scheme to report false and inflated prices for numerous pharmaceutical products knowing that federal healthcare programs relied on those reported prices to set payment rates.  The actual sales prices for the products were far less than what defendants reported.

The difference between the resulting inflated government payments and the actual price paid by healthcare providers for a drug is referred to as the “spread.”  The larger the spread on a drug, the larger the profit for the health care provider or pharmacist who gets reimbursed by the government.  The government alleges that Abbott, Roxane and Braun created artificially inflated spreads to market, promote and sell the drugs to existing and potential customers.  Because payment from the Medicare and Medicaid programs was based on the false inflated prices, the government alleged that the defendants caused false claims to be submitted to federal healthcare programs, and as a result, the government paid millions of claims for far greater amounts than it would have if Abbott, B. Braun and Roxane had reported truthful prices.

These significant settlements are a part of the Attorney General’s aggressive effort to combat fraud on the federal treasury, said Assistant Attorney General for the Civil Division Tony West.  Since January of 2009, the Justice Department’s Civil Division and the U.S. Attorneys around the nation have recovered more than $9 billion in cases alleging false claims, fraud against the government, and violations of the Food, Drug and Cosmetic Act.   Cases alleging fraud or false claims against government health care programs are the largest portion of these recoveries, and during this period the Justice Department has opened more health care fraud cases, secured larger fines and judgments, and recovered more dollars lost to health care fraud than in any other period: more than $5 billion. Criminal fines, forfeitures, restitution and disgorgement under the Food, Drug and Cosmetic Act have yielded another $3 billion, again a record number.

Roxane is paying $280 million to resolve claims against it and related entities (Roxane Laboratories Inc., Boehringer Ingelheim Corp. and Boehringer Ingelheim Pharmaceuticals Inc.).   The United States intervened and filed suit against Roxane on Jan. 18, 2007.  The United States alleged that Roxane reported false prices for the following drugs:  Azathioprine, Diclofenac Sodium, Furosemide, Hydromorphone, Ipratropium Bromide, Oramorph SR, Roxanol, Roxicodone and Sodium Polystyrene Sulfonate.

Abbott is paying $126.5 million to resolve the claims against it in two qui tam cases.  In the first, the United States intervened and filed suit against Abbott in May 2006.  This case initially was filed in the Southern District of Florida before being transferred for pre-trial proceedings to pending multi-district litigation in the District of Massachusetts.  In this case, the United States alleged violations by Abbott of the False Claims Act with respect to its pricing of  dextrose solutions, sodium chloride solutions, sterile water and vancomycin.  Dextrose solutions, sodium chloride solutions and sterile water are generic, water-based solutions primarily used to facilitate the intravenous infusion or injection of other drugs.  Vancomycin is a powerful, intravenous antibiotic.  The second lawsuit was filed by a whistleblower, and involved Abbott’s pricing of the drug erythromycin, an oral antibiotic.

B. Braun Medical Inc., a U.S. subsidiary of German pharmaceutical company, B. Braun Melsungen AG, has agreed to pay $14,744,000 to resolve allegations that it caused the Medicaid program to pay inflated amounts for 49 of its drug products.  These products included water-based solutions used to facilitate the intravenous infusion of other drugs and for fluid replacement, including dextrose solutions, sodium chloride solutions, sterile water and lactated ringers solution.  They also included  intravenously administered nutritional solutions and a variety of other intravenously administered drugs.

“With these settlements, the Department of Justice has now recovered more than $1.8 billion from pharmaceutical manufacturers arising from similar unlawful drug pricing schemes. By offering their customers one price and then falsely reporting a greatly inflated price to the lists the government uses when determining how much to pay for the drugs, we believe pharmaceutical companies created an incentive for the purchase of their drugs, since buyers could obtain government payment at the inflated price and pocket the difference,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Taxpayer-funded kickback schemes like this not only cost federal healthcare programs millions of dollars, they threaten to undermine the integrity of the choices health care providers make for their patients.”

“Some pharmaceutical manufacturers have asserted that a culture within the industry gave them license to manipulate the system to suit their interests. This is not the case,” said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts. “When manufacturers report drug pricing information that they know will be relied upon by government health care programs, they are obliged to report honest prices. It is unlawful to do otherwise.”

 “Abbott, B. Braun and Roxane have agreed to pay more than $421 million to the United States to settle allegations that they engaged in a scheme to artificially inflate prices for numerous pharmaceutical products,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida. “This practice came to light thanks to an alert South Florida whistleblower.  As a result, hundreds of millions of dollars that were being siphoned off have now been recovered and will be used to provide services as intended – to the sick and elderly who need them.  We encourage other whistleblowers who have information about potential wrongdoing to come forward and help us stop fraud and abuse in our health care industries.”

 “The Office of Inspector General (OIG) has played a significant role in identifying the shortcomings of reported drug prices including ‘Average Wholesale Price’. In dozens of reports over many years, OIG has monitored drug price reporting practices and identified excessive Medicare and Medicaid payments resulting from these practices,” said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. “These settlements with Abbott, B. Braun and Roxane underscore OIG’s longstanding commitment to protect patients and taxpayers against artificially inflated drug prices.”

The settlements resolve allegations brought by a whistleblower under the qui tam provisions of the False Claims Act.  The False Claims Act suits were filed by a Florida home infusion company, Ven-A-Care of the Florida Keys Inc., and its principals.  The False Claims Act allows for private persons to file suits to provide the government information about wrongdoing.  Under the statute, if it is established that a person has knowingly submitted or caused others to submit false or fraudulent claims to the United States, the government can recover treble damages and $5,500 to $11,000 for each violation of the statute.  If the government is successful in resolving or litigating its claims, the whistle blower who initiated the action can receive a share of between 15 percent to 25 percent of the amount recovered.  As part of these settlements, the Ven-A-Care whistleblowers will receive approximately $88.4 million.

           

The cases were handled by the Justice Department’s Civil Division, the U.S. Attorneys’ Offices for the District of Massachusetts and the Southern District of Florida and the Office of Inspector General of the Department of Health and Human Services. 

These settlements are part of the government’s emphasis on combating health care fraud.   One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $4.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $5.8 billion.

DOJ: Happy False Claims Decade 2020 - The End Of Medicaid Fraud In Child Welfare & Its Trafficking Tiny Humans

Much love.

Here is to the end of trafficking tiny humans.

#maytheheavensfall

Qui tam pro domino rege quam pro se ipso in hac parte sequitur

The Department of Justice obtained more than $3 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2019, Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division announced today.  Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $62 billion.

“The significant number of settlements and judgments obtained over the past year demonstrate the high priority this administration places on deterring fraud against the government and ensuring that citizens’ tax dollars are well spent,” said Assistant Attorney General Hunt.  “The continued success of the department’s False Claims Act enforcement efforts are a testament to the tireless efforts of the civil servants who investigate, litigate, and try these important cases as well as to the fortitude of whistleblowers who report fraud.”

"Recover our children."

 Of the more than $3 billion in     settlements and judgments  recovered by the Department of Justice this past fiscal year, $2.6 billion relates to matters that involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.  This is the tenth consecutive year that the department’s civil health care fraud settlements and judgments have exceeded $2 billion.  The amounts included in the $2.6 billion reflect only federal losses, but in many of these cases the department was instrumental in recovering additional millions of dollars for state Medicaid programs.

In addition to combating health care fraud, the False Claims Act serves as the government’s primary civil tool to redress false claims for federal funds and property involving a multitude of other government operations and functions.  The Act helps to protect our military and first responders by ensuring that government contractors provide equipment that is safe, effective, and cost efficient; to protect American businesses and workers by promoting compliance with customs laws, trade agreements, visa requirements, and small business protections; and to protect other critical government programs ranging from the provision of disaster relief funds to farming subsidies. 

In 1986, Congress strengthened the Act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.  These whistleblower, or qui tam, actions comprise a significant percentage of the False Claims Act cases that are filed.  If the government prevails in a qui tam action, the whistleblower, also known as the relator, typically receives a portion of the recovery ranging between 15 and 30 percent.  Whistleblowers filed 633 qui tam suits in fiscal year 2019, and this past year the department recovered over $2.1 billion in these and earlier filed suits.

Health Care Fraud

The department investigates and resolves matters involving a wide array of health care providers, goods, and services.  The department’s health care fraud enforcement efforts not only recover money for federal health care programs, such as Medicare, Medicaid, and TRICARE, but also help deter fraud schemes that put patients at risk and increase health care costs. 

Reflecting the department’s commitment to holding drug companies accountable for their role in the opioid crisis, two of the largest recoveries involving the health care industry this past year came from opioid manufacturers.  In one matter, as part of a global resolution of criminal and civil claims, Insys Therapeutics paid $195 million to settle civil allegations that it paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients.  The kickbacks allegedly took the form of sham speaker events, jobs for the prescribers’ relatives and friends, and lavish meals and entertainment.  The government also alleged that Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and lied to insurers about patients’ diagnoses to ensure payment by federal healthcare programs.  In another matter, Reckitt Benckiser Group plc paid a total of $1.4 billion to resolve criminal and civil liability related to the marketing of the opioid addiction treatment drug Suboxone, which is a formulation of the opioid buprenorphine.  As part of the resolution, RB Group paid $500 million to the United States to resolve civil allegations that it directly or through subsidiaries promoted Suboxone to physicians who were writing prescriptions for uses that were unsafe, ineffective, and medically unnecessary; promoted Suboxone Film using false and misleading claims that it was less susceptible to diversion, abuse, and accidental pediatric exposure than other buprenorphine products; and took steps to delay the entry of generic competition in order to improperly control pricing of Suboxone.

The department also pursued other cases involving drug manufacturers.  For example, Avanir Pharmaceuticals paid over $95 million to resolve allegations that it paid kickbacks and engaged in false and misleading marketing to induce healthcare providers in long term care facilities to prescribe the drug Neudexta for behaviors commonly associated with dementia patients, which is not an approved use of the drug.  The department also continued to investigate efforts by drug manufacturers to facilitate increases in drug prices by funding the co-payments of Medicare patients.  Congress included co-pay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs.  This year, seven drug manufacturers – Actelion Pharmaceuticals US Inc., Amgen Inc., Astellas Pharma US Inc., Alexion Pharmaceuticals, Inc., Jazz Pharmacueticals Inc., Lundbeck LLC, and US Worldmeds LLC – paid a combined total of over $624 million to resolve claims that they illegally paid patient copays for their own drugs through purportedly independent foundations that the companies in fact treated as mere conduits.

The department also reported substantial recoveries involving a variety of other healthcare providers.  Pathology laboratory company Inform Diagnostics, formerly known as Miraca Life Sciences Inc., paid $63.5 million to resolve allegations that it paid kickbacks to referring physicians in the form of subsidies for electronic health records (EHR) systems and free or discounted technology consulting services.  Greenway Health LLC, an EHR software vendor, paid over $57 million to resolve allegations that it misrepresented the capabilities of its EHR product “Prime Suite” and provided unlawful remuneration to users to induce them to recommend Prime Suite to prospective new customers.  Encompass Health Corporation (formerly known as HealthSouth Corporation), the nation’s largest operator of inpatient rehabilitation facilities (IRFs), paid $48 million to resolve allegations that some of its IRFs provided inaccurate information to Medicare to maintain their status as an IRF and to earn a higher rate of reimbursement, and that some admissions to its IRFs were not medically necessary. 

Procurement Fraud

In the past year, the department also pursued a variety of fraud matters involving the government’s purchase of goods and services.  For example, five South Korea-based companies – SK Energy Co. Ltd., GS Caltex Corporation, Hanjin Transportation Co. Ltd., Hyundai Oilbank Co. Ltd. and S-Oil Corporation – agreed to resolve allegations that they engaged in anticompetitive conduct targeting contracts to supply fuel to the U.S. military in South Korea and made false statements to the government in connection with their agreement not to compete.  The United States Department of Defense paid substantially more for fuel supply services in South Korea than it would have absent collusion on the fuel supply contracts.  In total, the five companies paid over $162 million as part of the False Claims Act settlements.

The Civil Division entered into a $34.6 million settlement with aluminum extrusion manufacturer Hydro Extrusion Portland Inc., formerly known as Sapa Profiles Inc. (SPI), to resolve SPI’s civil liability for causing a government contractor to invoice NASA and the Department of Defense’s Missile Defense Agency (MDA) for aluminum extrusions that did not comply with contract specifications.  Government contractors purchased aluminum extrusions from SPI for use on rockets for NASA and missiles provided to the MDA.  SPI provided those contractors with falsified certifications after altering the results of tensile tests designed to ensure the consistency and reliability of aluminum extrusions. Several of the rockets used by NASA crashed, resulting in the loss of the NASA payloads that they carried.  SPI also resolved related criminal claims arising from the same conduct. 

The department recovered over $27 million from Northrop Grumman Systems Corporation (NGSC) in a settlement resolving False Claims Act allegations related to two battlefield communications contracts with the United States Air Force.  The settlement resolved allegations that NGSC billed the Air Force for labor hours purportedly incurred by individuals stationed in the Middle East who had not actually worked the hours claimed. 

In separate settlement agreements with the Civil Division, American Airlines paid $22 million and British Airways Plc/Iberia Airlines paid $5.8 million to resolve allegations that they falsely reported the times they transferred possession of United States mail to foreign postal administrations or other intended recipients under contracts with the United States Postal Service (USPS).  USPS contracted with the airlines to take possession of receptacles of United States mail at six locations in the United States or at various Department of Defense and Department of State locations abroad, and then timely deliver that mail to numerous international and domestic destinations.  

The software development company Informatica LLC paid $21.57 million to resolve allegations that it caused the government to be overcharged by providing misleading information about its commercial sales practices that was used in General Services Administration (GSA) contract negotiations.  Informatica allegedly provided false information concerning its commercial discounting practices for its products and services to resellers, who then used that false information in negotiations with GSA for government-wide contracts.  The false disclosures caused GSA to agree to less favorable pricing, and, ultimately, government purchasers to be overcharged. 

Other Fraud Recoveries

The number and variety of judgments and settlements announced during fiscal year 2019 reflect the diversity of fraud recoveries arising under the False Claims Act.  For example, Duke University paid $112.5 million to resolve allegations that it violated the False Claims Act by submitting applications and progress reports that contained falsified research on federal grants to the National Institutes of Health (NIH) and to the Environmental Protection Agency (EPA).  Luke Hillier, the majority owner and former Chief Executive Officer of Virginia-based defense contractor ADS, Inc., paid $20 million to settle allegations that he fraudulently obtained federal set-aside contracts reserved for small businesses that his company was ineligible to receive.  In order to qualify as a small business, companies must satisfy defined eligibility criteria, including requirements concerning size, ownership, and operational control.  The government alleged that Hillier caused ADS to falsely represent that it qualified as a small business concern and that, as a result of Hillier’s representations, his company was awarded numerous small business set-aside contracts for which it was ineligible.  The government previously resolved related claims against ADS for $16 million and Charles Salle, the former general counsel of ADS, for $225,000.

The department also continued its efforts to hold accountable those who seek to abuse their license to remove minerals from federal lands in exchange for the payment of an appropriate royalty.  This past year, gas marketer B. Charles Rogers Gas Ltd. (BCR) and its owners paid over $3.5 million to resolve allegations that they engaged in a scheme to reduce mineral royalty payments for natural gas removed from federal lands.  Another individual who worked with BCR while employed as a gas supply manager at a natural gas distributor paid an additional $800,000 to resolve his alleged role in the scheme.

In another matter, Omega Protein Corp. and Omega Protein, Inc. paid $1 million to resolve allegations that it obtained a loan from the United States by falsely certifying compliance with federal environmental laws.  A leading domestic producer of Omega-3 rich fish oil, protein-rich specialty fishmeal, and organic fish solubles, Omega allegedly certified to the Oceanic and Atmospheric Administration, an agency within the Department of Commerce, that it was complying with federal environmental laws while knowingly and unlawfully discharging pollutants and oil into U.S. waters. 

North Greenville University (NGU) paid $2.5 million to resolve allegations that it submitted false claims to the U.S. Department of Education.  Title IV of the Higher Education Act (HEA) prohibits any institution of higher education that receives federal student aid from making incentive payments to student recruiters based on their success in securing student enrollment.  The settlement resolves allegations that NGU compensated a student recruiting company based on the number of students who enrolled in NGU’s programs, in violation of the prohibition on incentive compensation.  

Holding Individuals Accountable

The department continued its commitment to use the False Claims Act and other civil remedies to deter and redress fraud by individuals as well as corporations.  In addition to the settlements with Luke Hillier and Charles Salle discussed above, the following are additional examples of recoveries involving individuals. 

The department negotiated separate settlements with the individual owners of seven Osteo Relief Institutes for a total recovery from the owners and their clinics of more than $7.1 million.  The settlements resolved allegations that the defendants knowingly billed Medicare for medically unnecessary viscosupplementation injections and medically unnecessary knee braces.  Viscosupplementation is a treatment for osteoarthritis, in which a doctor injects a gel-like fluid into a patient’s knee joint to act as a lubricant and to supplement the natural properties of joint fluid.  The government alleged that these clinics administered viscosupplementation injections to patients who did not need them, used multiple brands of viscosupplements successively on patients without clinical support, and used discounted viscosupplements reimported from foreign countries.  The government also alleged that they provided unnecessary custom knee braces to patients. 

In addition to negotiating a settlement with Vanguard Healthcare LLC for approximately $18 million in allowed claims to resolve allegations of grossly substandard nursing home services, the department also pursued Vanguard’s majority owner and CEO and Vanguard’s former director of operations.  These two individuals collectively paid $250,000 to resolve allegations that five Vanguard-owned skilled nursing facilities submitted false claims to Medicare and Medicaid for nursing home services that were grossly substandard or worthless, including allegations that the facilities failed to administer medications as prescribed, failed to provide standard infection control or wound care, failed to take prophylactic measures to prevent pressure ulcers, and failed to meet basic nutrition and hygiene needs of their residents. 

This year, the department also obtained a $21 million settlement with a compounding pharmacy, Diabetic Care Rx LLC (which does business as Patient Care America), and a private equity firm, Riordan, Lewis & Haden Inc., (RLH) to resolve a lawsuit alleging that they submitted false claims to Tricare, the federal health care program for military members and their families, through their involvement in a kickback scheme to generate referrals of prescriptions for expensive pain creams, scar creams, and vitamins, regardless of patient need.  At the same time as this settlement with Diabetic Care and RLH, the department secured settlements totaling over $300,000 with Diabetic Care Rx’s Chief Executive Officer and former Vice President of Operations.  All of the settlements were based on the defendants’ ability to pay. 

Recoveries in Whistleblower Suits

Of the $3 billion in settlements and judgments reported by the government in fiscal year 2019, over $2.1 billion arose from lawsuits filed under the qui tam provisions of the False Claims Act.  During the same period, the government paid out $265 million to the individuals who exposed fraud and false claims by filing these actions.

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 633 qui tam suits filed this past year – an average of more than 12 new cases every week.

“Whistleblowers continue to play a critical role identifying new and evolving fraud schemes that might otherwise remain undetected,” said Assistant Attorney General Hunt.  “Taxpayers have benefitted greatly from these individuals who are often required to make substantial sacrifices to bring these schemes to light.”

In 1986, Senator Charles Grassley and Representative Howard Berman led the successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009 and 2010, further improvements were made to the False Claims Act and its whistleblower provisions.  Congress also included in the False Claims Act authority for the government to dismiss cases that do not advance the goal of fraud prevention, and during the past year the government made increasing use of this tool to help prioritize and protect the expenditure of government resources.  

Finally, Assistant Attorney General Hunt expressed appreciation for the many dedicated public servants throughout the department’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General and the many other federal and state agencies that contributed to the department’s False Claims Act recoveries this past fiscal year.  

“The accomplishments announced today reflect the extraordinary efforts of the men and women throughout the government committed to protecting the federal fisc and the integrity of the government’s programs,” said Assistant Attorney General Hunt.  “Having served many years in the Civil Division, I have witnessed the passion and dedication of the talented employees who have committed their careers to serving the American people and defending the interests of our great nation.”

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Except where indicated, the government’s claims in the matters described above are allegations only and there has been no determination of liability.  The numbers contained in this press release may differ slightly from the original press releases due to accrued interest.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

Voting is beautiful, be beautiful ~ vote.©

DOJ: Acting Associate Attorney General Jesse Panuccio Delivers Remarks at the American Bar Association’s 12th National Institute on the Civil False Claims Act and Qui Tam Enforcement Washington, DC

Jesse Panuccio addresses the rare provisions of the False Claims Act through prosecutorial discretions of the Attorney General.

Acting Associate Attorney General Jesse Panuccio Delivers Remarks at the American Bar Association’s 12th National Institute on the Civil False Claims Act and Qui Tam Enforcement

Washington, DC

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Thursday, June 14, 2018

Remarks as prepared for delivery

Thank you, Sara, for that kind introduction.  Sara has been litigator and leader in the Civil Division for nearly twenty years.  You are fortunate to be able to learn from her expertise, and we are fortunate to have her in the Department.

Nominations

Ordinarily at this time, you might be hearing from the Assistant Attorney General for the Civil Division, who has direct oversight over our False Claims Act enforcement.  The President nominated a highly qualified lawyer, Jody Hunt, to serve in that position last September.  Jody has served in the Department for over fifteen years, most recently as Chief of Staff to the Attorney General and, before that, in the Civil Division as the Director of the Federal Programs Branch.  Jody is eminently qualified and deserves swift confirmation.

But he is still awaiting confirmation.  And Jody is not alone in that wait. Of the seven litigating components in Main Justice, only two currently have Senate-confirmed leaders.  This has been the case for a year and a half.  Some nominees have been waiting for over a year. 

While the Senate should act quickly to confirm these nominees, it is worth noting—contrary to some press reports—that these positions are not sitting vacant. Attorney General Sessions has assembled an experienced and talented leadership team, including those who are serving as acting heads of Divisions. Chad Readler has been performing that role for the Civil Division since January of 2017 and he has been instrumental in the Department’s work, including maintaining the False Claims Act and its qui tam provisions as one of the government’s most effective civil tools in protecting vital government programs from fraud schemes.  I’m thrilled to report that, last week, the President nominated Mr. Readler to the Court of Appeals for the Sixth Circuit—a stellar choice, and we appreciate Chad’s continued willingness to serve.

Civil Enforcement Work

As you may know, the Associate Attorney General oversees several litigating components within DOJ, including the Civil Division.

Thus, it is a great pleasure to be here today to speak to you about the critical False Claims Act work being done to protect taxpayer funds from fraud.  I am continually impressed by what the Department and its partners have achieved.

As we all know, the federal qui tam statute has long and honorable roots dating back to efforts to fight rampant and harmful fraud on the Union Army during the Civil War.

Today, the need for the Department to remain vigilant and active in its efforts to combat fraud within taxpayer-funded programs remains as strong as ever.  Just this past year, the Department opened 815 new fraud matters, which includes 675 qui tam matters filed by relators.  That brings the total filings by relators since the 1986 amendments to more than 11,900.

The Department’s recoveries are equally impressive. Since 1986, the Department has recovered more than $56 billion in False Claims Act matters.  Relators have been awarded more than $6.6 billion in the matters they have brought to us.

Protecting the Public

So long as greed remains a human vice, fraud will persist—and even as we close down one scheme or another, fraudsters are always finding new ways to cheat the taxpayer. For example, I vividly recall that when, during my years as Florida’s labor secretary, we developed a system to quickly detect and shut down unemployment insurance fraud.  It was alarming to watch, in real time, as fraudsters would shift tactics to get around each new road block we established.  That’s why vigilant and rigorous anti-fraud work is so vital to good government: the fraudsters will never stop and neither can enforcement efforts.

Here at the federal level, some of our recent False Claims Act successes illustrate the startling variety and breadth of fraudulent schemes used against the government.  They also demonstrate that, in many cases, fighting fraud is not just about dollars, but also is critical to ensuring public health, the safety of our men and women in uniform, and the well-being of members of the public.   

For example, in the public health arena, a national electronic health records software vendor and certain of its employees paid $155 million to resolve allegations that they concealed that the company’s electronic health records software did not comply with the requirements that go to the reliability of electronic health records.  The United States alleged that in order to obtain the necessary certification for the software, instead of programming the capability to retrieve any drug code from a complete database, the vendor hardcoded the only drug codes that would be used in the certifying entity’s test—essentially, the company was cheating for the test.

Likewise, in early 2017, a pharmaceutical company paid $350 million to settle federal and state False Claims Act allegations that it used kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product, which was a bioengineered human skin substitute.

Also last year, a pharmaceutical company paid $465 million to resolve False Claims Act allegations that it treated its product, which is used to treat anaphylactic shock, as a generic drug for Medicaid rebate purposes. The company’s scheme enabled it to raise its prices dramatically while avoiding paying additional rebates it owed for its product that would have insulated Medicaid from these price hikes.

In another example, the Civil Division recently filed a suit against a leading compounding pharmacy and several of its executives alleging that the pharmacy grossly inflated the price of compound medications reimbursed by TRICARE, a federally-funded health care program for military personnel and their families.

Outside of the healthcare space, the False Claims also serves a critical function.  For example, in the public safety space, since 2007,  body armor companies have paid the United States more than $132 million to resolve allegations that they knowingly manufactured and sold defective bulletproof vests for use by law enforcement officers.  Our most recent recovery was for $66 million from a manufacturer that produced allegedly defective material in the vests.

This recovery will help purchase approximately 18,700 additional bullet-resistant vests for state, local, and tribal law enforcement officers through the Department’s Bulletproof Vest Partnership Program.  According to the International Association of Chiefs of Police, in the past 30 years, over 3,000 cases have been reported where law enforcement officials survived ballistic and nonballistic incidents because they were wearing bulletproof vests.  It is simply unconscionable for a company to cheat or cut corners in the production of life-saving equipment for the brave men and women of law enforcement. These cases are about saving officers’ lives and protecting our communities.

In still another context, the False Claims Act is being used to help protect and ensure fair competition for American businesses.   We are actively pursuing those fraudsters who are misrepresenting their eligibility for small business contracts and denying these opportunities for legitimate small businesses.  We are also using the Act to prevent companies from flouting our customs laws.  Over the last five years, the Department has recovered more than $100 million in settlements involving the evasion or underpayment of import duties for a wide variety of merchandise.

Affirmative Priorities

The False Claims Act has also proven to be a vital tool in our efforts to advance important Department of Justice priorities. 

One of Attorney General Sessions’ top priorities is to combat the nation’s opioid crisis.  Opioid abuse has become one of country’s most pressing public health and safety crises.  Indeed, we’re in the midst of one of the worst drug epidemics in our country’s history.  An estimated 64,000 Americans lost their lives to drug overdoses in 2016, about two-thirds of them as a result of opioids.  A new study published in the Journal of the American Medical Association found that one in five deaths among adults age 25 to 34 is opioid-related.

In addition to our criminal enforcement efforts across the country, the Department is relying on its civil remedies to combat the opioid epidemic.  In April of this year, for example, the Department intervened in five lawsuits against the manufacturer of an opioid product—a sublingual spray that contains fentanyl, one of the most highly addictive and deadly opioid products available.  For this reason, fentanyl is approved by the FDA only for patients with cancer who are suffering from otherwise uncontrollable pain.  The Department has alleged in its complaint that the company used a variety of illegal means to increase prescriptions of its product, including paying kickbacks and lying about patients having cancer.

Let me be clear: the Department of Justice will actively employ the False Claims Act, as well as any other available civil or criminal statute, against any entities involved in the opioid distribution chain who engage in the abuse and illegal diversion of opioids—from pharmaceutical manufacturers and distributors, to pharmacies, to pain management clinics and physicians.

Another major priority for Attorney General Sessions is protecting our nation’s elders from fraud and abuse.   The False Claims Act continues to play an integral role in support of that goal.  For example, in November, the Department secured a False Claims Act settlement from a nursing home management company, its owner, and others for grossly substandard nursing home care.  The defendants allegedly diverted Medicare and Medicaid funds from the facility in question, leaving it unable to pay for basic needs of patients like food, heat, air conditioning, pest control, and cleaning.

We also have pursued hospice companies that enroll patients who aren’t terminally ill, inducing them to prematurely abandon curative care.  And we have pursued skilled rehabilitation facilities that subject elderly patients to physical therapy that’s not medically warranted in order to increase Medicare billings.

Policy Initiatives

As these and other recent matters illustrate, this Administration is committed to pursuing vigorous False Claims Act enforcement.

We are also committed to enforcement that is fair and consistent with the rule of law.  Attorney General Sessions has stressed, since his first day in office, that the Department must pursue its work consistent with the plain meaning of the law, with respect for democratic accountability, and with an unwavering commitment to the first principles of our Constitution.

Accordingly, under his leadership, the Department has instituted a number of litigation policies and reform efforts.  One example is the ban on certain third-party payments in settlement agreements; another is the use of our rights under the Class Action Fairness Act to object to unfair settlements of class action cases; and still another is the directive to reexamine consent decrees with local law enforcement agencies to ensure they enforce the law and promote effective, constitutional policing while respecting local control and accountability.

Several new policies and reforms relate specifically to the False Claims Act. We have many attorneys who have done great work on these policies in the Civil Division; on the Attorney General’s Advisory Committee of U.S. Attorneys; on the Corporate Enforcement and Accountability Working Group; and on the Regulatory Reform Task Force.  In my office, my deputy Steve Cox, who is with us today, has taken a leading role in developing and implementing significant and just FCA enforcement policies.  Let me walk through some of them now.

Qui Tam Dismissals

One important development relates to the dismissal of qui tam actions that the Department determines are not in the public interest and therefore should not proceed.  The number of qui tam suits has grown considerably since 1986 and now routinely clocks in at over 600 per year.  And while the Department does not have the resources to pursue every meritorious qui tam case, it is also true that the Department declines to intervene in some cases due to the lack of legal or factual support.  In these circumstances, if the relator nevertheless elects to pursue the matter, the Department should consider whether the relator’s continued pursuit of the case is warranted or whether the Department should exercise its dismissal authority to advance the interests of the United States.

Let me stress here that the Department appreciates the risks that relators may take in coming forward to expose fraudulent conduct. And we understand the dedication and skill that is necessary for a successful qui tam lawyer to prevail to judgment in a declined matter.  And we acknowledge that there have been matters in which that dedication and skill resulted in large recoveries for the taxpayers of this country.

But when declined cases go forward, they often require that the Department—and our client agencies—devote significant resources to monitoring them.  We are often called upon to participate in such cases by responding to discovery requests or filing statements of interest to help courts get the law right.  And these cases also impose substantial costs on defendants and the judiciary.

When these cases lack merit or are otherwise contrary to the interests of justice, they consume limited resources that could be used to pursue other meritorious cases and priorities.  Frivolous cases can also lead to bad case law, which can undermine enforcement of the False Claims Act generally.  Thus, when declining intervention, and even throughout the life of the case, we have now instructed our attorneys to consider whether moving to dismiss an action would be an appropriate exercise of the Department’s prosecutorial discretion under the False Claims Act.  Although this authority has previously been used only rarely, the Department’s use of the dismissal option has a pedigree goes back to 1986.  Drawing on that experience and exercising this authority more consistently, but judiciously, will free up Department resources for important matters like the ones I’ve already mentioned, and will ultimately make our efforts to fight fraud on the public fisc all the more effective.

Guidance

Another area that has been of concern across the Administration is the problem of regulation by guidance. Guidance documents can be helpful in educating the public about statutes, regulations, and legal developments.  But it is improper to try to use guidance to bind those outside the Executive Branch by imposing legal obligations beyond those already enshrined in existing statutes or properly promulgated regulatory provisions.  Put simply, agency guidance should educate, not regulate.  Guidance should not be used to evade lawful legislative and regulatory processes, which are designed to ensure accountable and limited governance.

Attorney General Sessions announced in November that the Department will no longer issue any kind of binding sub-regulatory guidance. We hope other agencies will follow this example, and in the affirmative litigation context, we have instructed DOJ attorneys not to use our enforcement authority to convert sub-regulatory guidance into rules that have the force or effect of law.

Now, as Attorney General Sessions made clear, guidance documents can be used to simply explain existing law.  Therefore, in the False Claims Act arena, where the allegations are that a party falsely certified to the government that it complied with certain laws, it is fully consistent with Department policy to use a party’s receipt of a guidance document as probative evidence of knowledge of the law that the document explains.  But guidance documents that expand upon statutory or regulatory requirements should not be used by Department attorneys as the basis for contending that legal violations have occurred.  That policy keeps government restrained and promotes the rule of law, fair notice, and due process.

Cooperation

Let me turn to another reform project at the Department.  The Deputy Attorney General has spoken in the past about incorporating into one place Department policies that now are found scattered throughout numerous memoranda and internal guidance issued by various DOJ components.  This process of formalizing our policies is now underway and, with input from stakeholders within and outside the Department, will result in modifications to past practices.  Let me assure you, however, that there are certain principles from which we will not stray.

We will continue, for example, to expect and recognize genuine cooperation of corporate entities accused of wrongdoing in both civil and criminal matters.  We want to create incentives for companies to help us identify the individuals responsible for wrongdoing, because we remain steadfast in our resolve to hold such individuals accountable.

I want to make perfectly clear that False Claims Act investigations are no exception to this policy on cooperation.  Corporate defendants can receive a more favorable resolution for providing meaningful assistance to our False Claims Act investigations – from voluntary disclosure, which is the most valuable form of cooperation, to other efforts such as sharing information gleaned from an internal investigation and making witnesses available.  Because the False Claims Act allows recovery of treble damages and civil penalties, the Department has tremendous enforcement discretion with respect to structuring settlements that make the government whole while also providing a material discount based on a defendant’s cooperation.  Of course, the extent of the discount will depend on the nature of the cooperation and how helpful it is to the Department’s investigation, including our pursuit of individual wrongdoers.

Compliance

As we deter fraud by holding individuals accountable, we also want to be sure that we continue to reward companies that invest in strong compliance measures.

The challenge of corporate compliance is especially acute in large and diverse organizations.  I empathize: every day at DOJ we face the challenges of an organization with 115,000 employees.  Things go wrong in every organization.

When something does go wrong, however, the greatest consideration should be given to companies that do not just adopt compliance programs on paper, but incorporate them into the corporate culture.

Lawyers have an important role to play in ensuring compliance.  Just as relator’s counsel in this room are important partners for us in protecting taxpayer funds, compliance counsel can be as well, by working on the front lines to provide the advice that prevents fraud in the first place and redressing it when it happens.

Competition requires a level playing field.  If some businesses evade the rules, others lose out by following them.  We recognize that and it motivates our False Claims Act enforcement and our partnership with all of you.

Piling On

One last policy issue I want to discuss today is the topic of multiple law enforcement and regulatory agencies pursuing a single entity for the same or substantially similar conduct.  When those agencies impose unwarranted and disproportionate penalties for that conduct, some people refer to it as “piling on.” 

When a company engages in wrongdoing, we should enforce the law and punish the wrongdoers.  And it is also appropriate to ensure that the victim is fully compensated for its losses, including through enforcement under the False Claims Act or other available remedies.

But we also recognize that repeated and unwarranted punishment for the same conduct has the potential to undermine the spirit of fair play and the rule of law.  Multiple punishments can also deprive a company, as well as its employees, customers, and investors, of the benefits of certainty and finality ordinarily available through a full and final settlement.  For that reason, the Department just recently announced a new policy designed to avoid piling on by promoting coordination within the Department and with other regulators to apportion penalties and fines where appropriate, to ensure that defendants are subject to the appropriate, not just the highest, level of punishment that is available.

The same policy also reminds our attorneys not to use the Department’s criminal enforcement authority against a company for purposes unrelated to the investigation and prosecution of a possible crime. Department attorneys may not invoke the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case.  Parallel investigations involving the False Claims Act, both within DOJ and with other enforcement agencies, may present conditions in which you will see this policy at work.

I appreciate the opportunity you have given me today to explain our views on many of the important issues that arise in the False Claims Act arena.  I have no doubt that during the course of this conference, these and other issues will be debated by you and that Department attorneys in attendance will report back with suggestions on how we can better do our job.  We welcome that.  Indeed, that is the great value in gatherings such as these.

So let me conclude by encouraging you to take part in these discussions and by thanking you for letting me play a role in them.

Thank you.  

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