US Government Fraud Settlements Reach Record High

by Leroy Baker, Tax-News.com, New York

27 November 2006

The US authorities recovered a record $3.1 billion in settlements and judgments in cases involving allegations of fraud against the government last year, the Justice Department has announced.

According to the DoJ, settlements by industry giants Boeing and Tenet Healthcare in the fiscal year that ended September 30, 2006, helped it to beat its previous collection record of $2.2 billion, set in the 2003 fiscal year.

Two settlements - Boeing's for $565 million and Tenet's for $920 million - alone accounted for almost half of the total recovered in 2006.

“These record recoveries send a clear message that the Justice Department will not tolerate fraud against the government," stated Attorney General Alberto Gonzales.

"Since 1986, the Justice Department has recovered $18 billion from those who commit fraud. These funds are then restored to their intended public purposes and save taxpayers' money," he added.

“By any measure, it was a remarkable year,” noted Peter D. Keisler, Assistant Attorney General of the Department’s Civil Division.

“Recoveries in health care fraud climbed more than a billion dollars over last year, and recoveries outside the health care arena – which accounted for 28% of the total – increased by half a billion. Obviously, the system is working," he observed.

Last year, government-initiated claims accounted for $1.8 billion of the total $3.1 billion, while suits brought by whistle blowers under the False Claims Act's qui tam provisions accounted for the remaining $1.3 billion. The qui tam provisions authorize individuals to file suit on behalf of the United States against those who have falsely or fraudulently claimed federal funds. Such cases run the gamut of federally funded programs from Medicare and Medicaid, to defense contracts, disaster assistance and agricultural subsidies.

Individuals who knowingly submit false claims for federal funds are liable for three times the government’s loss plus a civil penalty of $5,500 to $11,000 for each false claim. If the United States intervenes in a qui tam action, the person who filed the suit may receive from 15% up to 25% of the government’s recovery. In FY 2006, whistleblowers were awarded $190 million.

By industry, 72% of the recoveries were in health care, 20% in defense, and 8% other. Health care fraud accounted for $2.2 billion in settlements and judgments, including the settlement with Tenet Healthcare.

Defense procurement fraud accounted for $609 million in settlement and judgment awards, the majority of which was the-then record $565 million settlement with The Boeing Company, the nation’s second largest defense contractor.

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