Tuesday, December 25, 2018

U.S. Department of Justice 2018 False Claims Act Statistics -- not a banner year for DOJ or Relators

Dear Readers:

Happy holidays and best wishes to you for 2019.

Just in time for Christmas, the Civil Division of the U.S. Department of Justice ("DOJ") released its
2018 annual statistics for False Claims Act ("FCA") filings and cases for fiscal year 2018 (10/1/17 - 9/30/18). The DOJ's press release highlights DOJ settlements and recoveries, and I will not repeat them here. Rather, as I have done for the last several years, I wish to focus on a few of the highlights revealed by the statistics.

2018 was not a banner year for DOJ and FCA cases. DOJ "obtained" $2.8 billion "in settlements and judgments" from civil cases involving fraud and false claims against the government, and of that amount, over $2.1 billion resulted from qui tams. That’s the lowest amount “obtained” since 2009, when DOJ “only” recovered $2.4 billion.

2018 was also not a banner year for qui tam relators who recovered “only” $301 million in relator share awards, down 37% from last year. This was the lowest amount recovered by relators in any single year since 2009.

767 FCA cases were filed in 2018, down from 825 in 2017 and the second lowest year for FCA filings since 2011. Last year, DOJ filed 122 "non-qui tam" or direct-filed cases and qui tams accounted for 645 matters.  DOJ does not say in which of the 645 cases it has intervened, declined, or is still “investigating.” Note: DOJ apparently revised 2017’s statistics: last year it published statistics showing 125/674 direct filed and qui tam matters and this year’s statistics now show 145/680 direct filed and qui tam matters for 2017. 

Healthcare related cases continue to predominate (almost 69%) all FCA cases filed: 506 healthcare FCA cases filed and $2.5 billion “obtained.” Direct-filed healthcare cases continued to be up at 60, tied with 2008, for the second most number of direct filed cases in a year since 1987. The record is 70 in 2016. Recoveries in direct filed FCA cases were up dramatically to $568 million, up from $32 million in 2017 and the third best year since 1987. A large portion of the healthcare FCA recoveries (almost 59%) is attributable to five cases: $625 million paid by AmerisourceBergen Corp., $210 million paid by United Therapeutics Corp., $270 million by HealthCare Partners Holdings LLC, $216 million from Health Management Associates, and $84.5 million by William Beaumont Hospital.

The "other" category of FCA cases accounted for almost 28% of all FCA cases filed in 2018.  That is down from 225 last year and is the lowest overall since 2010 when 211 cases were filed.  The big news here is that recoveries were only $259 million, a dramatic drop from the $106 billion last year and the lowest since 2010.  Relator shares, not surprisingly, dropped as well: $14.9 million, which is down 78% from the prior year and is the worst year for relators in this category since 2008.

Department of Defense FCA cases continued to be small: 47 or 6% of all FCA cases, and they accounted for $107 million recovered.

A few observations about 2018:

  • Relator generated qui tams continue to hold strong in healthcare where 446 qui tams were filed. 2018 was the fifth best year since 2010. Relator recoveries in declined healthcare cases dropped from $445 million in 2017 to $80 million in 2018, with relator share awards in declined cases falling as well: $123 million in 2017 to $22 million in 2018. The $266 million in relator share awards in healthcare cases overall was the lowest since 2010.
  • The relator share awards in the “other” category (non HHS, non DOD) fell dramatically from $77 million in 2017 to $20.7 million in 2018.  That is the lowest amount collected in this category since 2008.  
  • Of the $2.8 billion “obtained,” DOJ does not tell us how much it actually recovered in cash as opposed to "judgments” in 2018 or any other year.  For example, DOJ cites as an example a “judgment totaling more than $114 million” that it obtained against three individuals that allegedly paid kickbacks to two labs.  However, the title of its press release proclaims that it “recovered” $2.8 billion. 
  • DOJ’s press release heralded its commitment to “holding individuals accountable” in FCA cases.  Several examples are cited, including DOJ’s FCA settlement with Lance Armstrong who agreed to pay $5 million.  Given where the government started in that case with its demands, however, that settlement effectively was a win for Armstrong. With the new revisions to the Yates policy, it will be interesting to see how that affects DOJ’s efforts to hold individuals accountable going forward.

Overall, a good year for DOJ direct filed cases against healthcare defendants, and a bit of a decline in all other areas. 

Finally, a plea to DOJ and U.S. Attorneys:  when are you going to release the FCA statistics for each individual U.S. Attorney Office? And, why not provide a breakdown of all FCA settlements and judgments “obtained” for each district?

A. Brian Albritton
December 26, 2018

Tuesday, December 18, 2018

Maybe That Wasn’t Such a Good Idea After All – DOJ takes a “common sense” approach in applying Yates Policy in civil cases

Dear Readers:

In June 2016, I reported how the U.S. Department of Justice (DOJ) planned on implementing its Yates policy of stressing the accountability of corporate executives and employees in False Claims Act (FCA) cases. In FCA investigations of corporate wrongdoing, DOJ’s Yates policy instructed its attorneys to “focus on both the company and individuals who may be responsible for bad conduct” and, charged its attorneys in any investigation of corporate misconduct to proceed “in tandem” with an inquiry into individual misconduct. Indeed, DOJ stated that settlements of FCA claims with corporations will not end DOJ’s “inquiry into whether and which individuals will be pursued.” DOJ went so far as to claim that it was “threshold requirement” for any corporate defendant seeking “credit” for its “cooperation” in settling a FCA case to “disclose all facts related to individuals involved in the wrongdoing.” (emphasis added).

As with many of its initiatives, DOJ’s Yates policy sounded good in theory: pursue every avenue of corporate and individual civil liability. I predicted, however, that as a result of the new focus on individual accountability, “FCA investigations and cases are likely to become more complicated.” In fact, I wondered if “DOJ and U.S. Attorneys will follow through in promoting this policy of individual accountability given that FCA investigations and cases often move quite slowly and this policy will require more time and substantial resources to enforce.” And, I was right.

Two years later, Deputy Attorney General Rod Rosenstein (“Rosenstein”) announced “common sense reforms” in applying the Yates policy stressing individual accountability in civil cases. “Civil cases,” Rosenstein pointed out, “are different” than criminal cases.  The “primary goal of civil affirmative cases,” such as FCA cases, are to “recover money,” and as a result DOJ needs to use its resources “efficiently.” To that end, Rosenstein observed that the “all or nothing approach to [awarding] cooperation” for civil cases was “counterproductive.” “[O]ur attorneys,” Rosenstein explained, “need flexibility to accept settlements that remedy the harm and deter future violations, so they can move on to other important cases.” In a seldom seen acknowledgement by DOJ of how things should work in the real world, Rosenstein noted that “[o]ur civil litigators simply cannot take the time to pursue civil cases against every individual employee who may be liable for misconduct and we cannot afford to delay corporate resolutions because a bureaucratic rule suggests that companies need to continue investigating until they identify all involved employees and reach an agreement with the government about their roles.”

So what does this mean? In part, the revised Yates policy is intended to restore “some of the discretion that [DOJ] civil attorneys traditionally exercised” though with “supervisory review,” of course. Also, in part, it means that companies no longer need to cooperate to the Nth degree in order to obtain any credit for their cooperation. To be sure, the gold standard for obtaining “maximum credit” remains that a corporate defendant must “identify every individual . . . substantially involved in or responsible for the misconduct.” But, whereas that was the requirement for a corporate defendant to receive any credit under the previous Yates policy, now DOJ counsel may award some credit as long as a “company honestly did meaningfully assist the government’s investigation.” Of course, the other extreme from the gold standard for which no credit will be awarded are companies who seek to “conceal wrongdoing by senior officials” or who fail to “act in good faith.” 

Rosenstein provided an example of how this new policy might be applied in an FCA case. A defendant who made a “voluntary disclosure” to DOJ and provided “valuable assistance” is entitled to “some credit even if the company is unwilling to stipulate about which non-managerial employees are culpable or . . . to identify every individual who might face civil liability in theory, but in reality would not be sued personally.”

Again, in an uncharacteristic admission as to how things really work at U.S. Attorney’s offices, Rosenstein acknowledged that the “civil policy was not strictly enforced in many cases” and that as a result he prefers “realistic internal guidance.”

Finally, DOJ’s new pragmatism endorses considering “an individual’s ability to pay in deciding whether to pursue a civil judgment.” DOJ does not want its “attorneys to spend time pursuing civil litigation that is unlikely to yield any benefit; not while other worthy cases are competing for [its] attention.” Translating this for the defendant, being broke really can be a benefit when the government is trying to determine whether to pursue FCA liability against your individual client.

Rosenstein is to be commended for this change which takes into account -- for once – the “practical implications of [DOJ] policies” and whether a policy actually “inhibit[s]” or promotes DOJ’s goals.  His enthusiasm for such a change of policy, I suspect, comes from serving as a U.S. Attorney in a medium sized district (Maryland) over many years.  DOJ priorities, mandates, and initiatives frequently enjoin U.S. Attorneys to investigate every last detail or person who could possibly be responsible, even on the civil side.  Being 100% faithful to the letter and spirit of such mandates, as I am sure Rosenstein experienced, is frequently an impossible task, if your goal is to keep pace with the pressing number of cases, criminal and civil, that continually come before a U.S. Attorney.  “Common sense” policies that restore discretion to line assistants and that promote realistic goals in FCA cases are long overdue.

A. Brian Albritton
December 18, 2018