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Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019

By Zachary Kitts on January 17, 2020 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

False Claims Act Recoveries Top $3 Billion in Fiscal Year 2019

Last week the Department of Justice announced that federal False Claims Act recoveries topped $3 billion in fiscal year 2019.  This announcement of the annual totals has become something of a tradition at the Department of Justice, and many lawyers practicing in this area await it with great anticipation.

History is, I think, a combinaton of two elements: (1) relatively stable long-term trends, and (2) a more or less random series of events.  Many positive long-term trends in this area of law continued last year, as we will see in this post.

Long Term Trends in federal False Claims Act Enforcement Continue, Part I: FCA Cases Brought by Qui Tam Whistleblowers have the Best Results.

It is no surprise that Qui Tam cases continue to result in the lion’s share of FCA recoveries.  (As regular readers know, only cases brought by whistleblowers qualify as qui tam cases).  Of the $3 billion in settlements and judgments reported by the government in fiscal year 2019, over $2.1 billion came from lawsuits filed under the qui tam provisions of the False Claims Act.  That is, by my math, 70% of the government’s total recoveries.

And this is one long-term trend that looks to continue.  Last year, qui tam relators filed 633 cases in the 94 U.S. District Courts.  While this number has increased steadily over time, there was — if memory serves — one year not too long ago where about 1,000 cases were filed.

Long Term Trends in federal False Claims Act Enforcement Continue, Part II:  Healthcare recoveries.

Last year one of the key long-term trends in false claims act enforcement continued, in that health care recoveries were the largest part of the total.  Specifically, of the roughly $3 billion recovered, $2.6 billion of it was the result of health care fraud.  According to the press release, health care recoveries exceeded $2 billion for the tenth consecutive year.

A running total of the recoveries since the 1986 amendments breathed life back into the statute can be found here.

Long Term Trends in federal False Claims Act Enforcement Continue, Part III: Increased Liability for Individual Wrongdoers.

Wrongdoers continued to be individually liable in 2019.  This is a direct result of the continuing influence of the Yates memo (issued in 2015) which announced an increased focus on individual wrongdoers for the first time.

The press release discusses in particular the recovery of millions of healthcare dollars from the individual owners in the Osteo Relief Institutes, Vanguard Healthcare, and Diabetic Care Rx cases.  A little closer to home (and on the non-healthcare front) Luke Hillier (the former CEO of Virginia-based defense contractor ADS, Inc.) paid $20 million to settle allegations that he violated the FCA by fraudulently obtaining federal set-aside contracts reserved for small businesses.

Long Term Trends in federal False Claims Act Enforcement Continue, Part IV:  Non-healthcare Recoveries.

FY 2019 also saw some interesting non-healthcare recoveries.  Among others, 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 by individuals stationed in the Middle East who had not worked the hours claimed.

In an interesting case from the Eastern District of Virginia, an Oregon aluminum extrusion manufacturer agreed to pay $46 million to NASA, the Department of Defense, and others to resolve criminal charges and civil claims relating to a 19-year fraud scheme that included falsifying thousands of certifications for aluminum extrusions provided to hundreds of government customers.

Other interesting non-healthcare cases come from the usual suspects, including underpayments of royalties for minerals and natural gas removed from federal lands, false certifications of compliance with environmental laws, and false claims to federal student loan programs.

Long Term Trends in federal False Claims Act Enforcement Continue, Part V: Qui Tam Whistleblower Recoveries in Non-Intervened Cases.

It was also nice to see the government include information on non-intervened cases like the one against Duke University.  That case is particularly note-worthy to fans of this blog because of its size ($112.5 million), its relator share of a 30%, and the fact that it was obtained by our good freind John Thomas at Hafeman Magee & Thomas.  So far as I know, a 30% relator share is unprecedented in a case of that magnitude.

Conclusion

It is indeed good to see all of these positive trends in FCA enforcement continue; stay tuned dear readers, for more updates to come!

 

Virginia False Claims Act Lawyers

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Federal False Claims Act Cases are not just about money

By Zachary Kitts on December 19, 2019 in

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Federal False Claims Act Cases Are Not Just About Money

First off, I am — as regular readers know — a lawyer focusing on complex civil litigation.  Mostly, my cases concern the federal False Claims Act, the Virginia Fraud Against Taxpayers Act, and the false claims statutes of various states.  In each of those cases, I have a qui tam relator as my client — i.e., an individual with non-public knowledge of fraud on the government.

As part of my efforts to keep my clients focused on what we can do — as opposed to what we can’t do — I try to focus them on the money we can recover if our case succeeds.  This is for sound, practical reasons that have nothing to do with money.  Rather, it is because, as noted above, I am lawyer focusing on civil litigation.  We (that is, me and my clients) can’t raise the dead or heal the sick , and we can’t put anyone in prison on our own.  We also can’t fix large problems in society.

Instead, all that we can do is focus on the one case at hand and develop it as best we can.  In the parlance law practice (and elsewhere) this is called controlling the client’s expectations.  It is always important to what lawyers do, but in qui tam/FCA cases it is especially important.  Many times, qui tam relators will want the bad guy to go to prison or receive some other non-monetary punishment, and that is something we just can’t deliver on our own.

That being said, one of the nice things about this area of practice is that each case we successfully prosecute does do a bit of good.  At a minimum, some money is returned to the U.S. Treasury (or the treasury of a state, or both) and one or more bad actors is brought to task.  Hopefully, those same bad actors won’t go on to submit more false claims in the future.  Perhaps also some other folks who were thinking of trying the same thing will read about the case and think better of thier scheme.

But I wouldn’t count on most of those rosy outcomes, at least not in every case.  Nope, federal FCA cases are mostly about money.

Note that I said mostly — the recent case of Dr. Javaid Perwaiz shows that federal false claims act cases are not just about money.  Important goals like patient safety are also accomplished using this law.  Here is a sample of the recent coverage of Dr. Perwaiz’s practice:

 

The indictment reads like a true horror story, and check out the declaration filed in support of the indictment.  This is, of course, just one example and it is a local one in the EDVA…but it is still an example of the good that can be done…

Stay tuned for more on this developing saga…

 

Virginia False Claims Act Lawyers

 

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When is a claim submitted to the United States?

By Zachary Kitts on November 23, 2019 in

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

SECOND CIRCUIT ISSUES IMPORTANT NEW OPINION ON THE TOPIC OF “CLAIMS” TO THE UNITED STATES

As regular readers of this blog know, one of the central issues for lawyers litigating qui tam/false claims act cases is finding the “claims” at issue.  In my humble opinion, the best way to analyze any false claims act case is to find the claim first, and work backwards from there.

Today we will look at an interesting new opinion issued last week on this topic by the United States Court of Appeals for the Second Circuit.  The case is styled United States ex rel. Krause and Bishop v. Wells Fargo, N.A.

But first, a word of caution.  The Federal Reserve System was established in 1913 when the world economy (and even our national economy) was considerably less complex.  As the world-economic system has grown and developed over the last 106 years so too has our understanding of the Fed and what it does.

As Judge Katzman is quick to point out early on in his opinion, the ruling in this case is a narrow one and may well not apply to other issues involving the Fed.  That was likley a wise exercise of judicial restraint, because he recognized that any opinion interpretating critical and fundamental definitions at the Fed could have wide ramifications indeed.

THE FEDERAL RESERVE BANK SYSTEM

“The Fed” is comprised of twelve FRBs, which are separately incorporated banks dispersed geographically throughout the country, and a Board, which is based in Washington, D.C.  The Fed is an independent agency within the executive branch. See 12 U.S.C. §§ 241‐252, 264, 341‐362.

Many people are not aware of this, but when a person “negotiates” a check delivered to them (which is legalese for saying they deposit the check into thier bank account or cash it), they do not actually present a claim to the bank on which the check is drawn.  Rather, they present a claim to the FRB, which then, in turn, presents the claim to the bank on which the check is drawn.  So, in this instance, the FRB serves as a clearinghouse for all checks.

As it turns out, this is most likley the simplest thing the FRB does.  The functions of the Fed are many and varied and, in case anyone has been in a cave recently,  the Fed has a major impact on the world economy.

But alas, the Fed is not financed using tax dollars.  Instead, the Fed is financed by its member institutions — i.e., American banks.  Just as consumers maintain bank accounts at banks like Wachovia and Wells Fargo, banks like Wachovia and Wells Fargo maintain bank accounts at the FRBs.

Also of interest:  by law, the United States Treasury controls the issue of coins, but the Federal Reserve controls the issue of paper money.

THE ALLEGATIONS OF THE QUI TAM COMPLAINT

Relators filed thier case in 2011 in the Southern District of New York.  They alleged that Wells Fargo and Wachovia fraudulently requested loans from the FRBs and that, through the Fed’s emergency lending facilities, “the United States provided significant funding . . . to the Defendants, amounting to at least tens of billions of dollars.”

The relators asserted two theories of liability:  implied false certification and express false certification.

The question is whether a fraudulent loan request made to one of the FRBs is an effort to defraud a private entity or an effort to defraud the United States.  Even more specifically, this question breaks down into three distinct questions:  (1) Are FRB officers and employees officers and employees of the federal government? (2) Are the FRBs “agents of the United States” as defined in the FCA? and (3) Are fraudulent loan requests to the Fed claims to the United States?

The answer to the first question is no, yes and yes, at least in the context of this case…

THE COURT’S NARROW RULING

The opinion makes for an interesting and complex read — in order to do it the justice it deserves, I will cover it some detail in a second post…stay tuned readers.

Virginia False Claims Act Lawyers

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Updated two-volume set on Employment Law in Virginia is on its way

By Zachary Kitts on November 5, 2019 in

 

 

 

 

Updated two-volume set on Employment Law in Virginia is on its way

After some delays, I finally sent off my updated chapter to the two-volume set Employment Law in Virginia. This set was last published in 2016, so it was time for an update.

As in prior years, I contributed Chapter 6 on Qui Tam Whistleblower litigation.  While my chapter on qui tam litigation is not, perhaps, really about employment law, the folks at VaCLE say there is a lot of interest in it and feel like it should be published somewhere.  I think this two-volume set, which is among the best-sellers at VaCLE, is as good as a place as any for it.

This got me thinking about how we, as lawyers and the public, categorize qui tam/false claims/whistleblower practice, so I thought I would write about that today.  One frequent place we see qui tam (or false claims act) litigation categorized is under employment law — so lets start with that.

The Connections Between Employment Law and Qui Tam Litigation

So why are qui tam litigation and employment law so frequently thought of together?  It’s a good question, and here is my attempt at an answer: most qui tam relators continue to be employees who discover wrongdoing (in the form of fraud or false claims to the government) during thier employment and decide to do something about it.  Therefore, many of the first lawyers to file these cases were employment lawyers, for the obvious reasons: they were the ones that had access to wrongfully termination employees.

However, we are beginning to see more qui tam actions filed by individuals other than employees.  I would say that small businesses seeking to correct anti-competitive behavior in the market place are probably the second largest group of qui tam relators after employees.  These folks generally have the kind of information needed to put together a qui tam action.

They also usually have the motivation necessary to organize and execute a qui tam case; this requirement is not to e underestimated.  Indeed, I even wrote a little book called How to be a Successful Qui Tam Whistleblower to assist potential qui tam relators organize thier thoughts (and documents) and find the right lawyer.

As always, feedback and comments are very welcome…stay tuned readers!

Virginia False Claims Act Lawyers

 

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K&G Law Group Partner Zachary Kitts is named “Qui Tam Lawyer of the Year”

By Zachary Kitts on August 20, 2019 in , ,

Zachary Kitts is announced as Qui Tam Lawyer of the year

 

 

 

 

 

 

 

 

 

K&G Law Group Partner Zachary Kitts is named “Qui Tam Lawyer of the Year”

It is always nice to be included in any kind of honors list, but this year I am honored to announce my selection as “Qui Tam Lawyer of the Year” by the publication Best Lawyers in America.  Hopefully the addition of “Qui Tam Law” as a category in these honors listings means practice under the federal False Claims Act and Virginia Fraud Against Taxpayers Act is coming into its own as a practice area, although it is still very much a niche speciality.

This is the first year that a lawyer has been selected from each practice area as lawyer of the year.   According to the Best Lawyers press release, Lawyer of the Year honorees receive this award based on their overall feedback within specific practice areas and metropolitan regions. “Lawyer of the Year” recognitions were awarded in 137 practice areas across 182 metropolitan regions.

For the 2020 Edition of The Best Lawyers in America, 8.3 million votes were analyzed, which resulted in the inclusion of more than 62,000 lawyers, or approximately 5% of lawyers in
private practice in the United States.

ABOUT BEST LAWYERS

For almost 40 years, Best Lawyers has assisted those in need of legal services to identify the lawyers best qualified to represent them in distant jurisdictions or unfamiliar specialties.  Best Lawyers lists are published in leading local, regional, and national publications across the globe.

 

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VaQuiTamLaw.com author Zach Kitts is appointed to the Professionalism Committee of the Virginia State Bar

By Zachary Kitts on July 18, 2019 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

VaQuiTamLaw.com author Zach Kitts is appointed to the the Virginia State Bar’s Professionalism Committee

I am honored to announce my appointment to a three year term on the Virginia State Bar’s Standing Committee on Professionalism.

This is different than my previous appointment to the faculty of the Mandatory Professionalism Course required of every Virginia lawyer.  The Standing Committee on Professionalism does, in part, administer the professionalism course, among other duties.

According to the Virginia State Bar’s website:

The Standing Committee on Professionalism is charged with responsibility for the administration and oversight of the mandatory course on professionalism, which is required of all newly admitted active members of the Virginia State Bar. The purpose of the course is to encourage attorneys to uphold and elevate the standards of honor, integrity, and courtesy in the legal profession. The committee designs and updates the curriculum of the course and selects and trains the faculty of more than eighty distinguished Virginia lawyers and judges.

It is an honor and I look forward to it!

Virginia False Claims Act Lawyers

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Judge Alston is confirmed to the U.S. District Court for the Eastern District of Virginia

By Zachary Kitts on June 11, 2019 in ,

 

Judge Alston is Confirmed to the U.S. District Court for the Eastern District of Virginia

I am pleased to announce that as of yesterday, June 10, 2019, Judge Alston has been confirmed to the U.S. District Court for the Eastern District of Virginia, Alexandria Division.  Like many judges these days, Judge Alston had quite a wait — I think it was close to a year and a half.  Virginia Lawyers Weekly has the full scoop here.

 

 

According to Virginia Lawyers Weekly, Alston, 62, was elected in 2009 to the Court of Appeals after service in both the circuit and juvenile and domestic relations courts of Prince William County. He spent nine years in private practice in Manassas and served as a commissioner in chancery and substitute judge. Before private practice, he worked for five years with the National Right to Work Legal Defense Foundation and for two years as a staff attorney with the National Labor Relations Board. He graduated from Averett University and from the North Carolina Central University law school.

Although I have never appeared before him, I have met him several times — he is a frequent speaker at the Mandatory Professionalism Seminar and I have read a number of his opinions.  What strikes me most about him is his independent streak; I fully trust that Judge Alston will follow the law and his conscience, and this is a critical element for a federal Judge, or indeed any Judge IMHO.

Judge Alston will be a welcome addition to the Alexandria bench.  According to some folks, the Court there has slowed down just a bit as a result of the retirements of several Judges, including, most recently, Judge Cacheris and Judge Lee.  (Rest assured, it is still the Rocket Docket!)   Judge Alston is young (relatively speaking) and I look forward to many years of court appearances before him.

 

 

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Deputy Attorney General designate Jeffrey A. Rosen’s Answers to the Senate Judiciary Committee

By Zachary Kitts on April 29, 2019 in , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Deputy Attorney General designate Jeffrey A. Rosen’s Answers to the Senate Judiciary Committee

With all of the “stuff” going on in the political and legal world, thank goodness that we here at VaQuiTamLaw.com focus only on the federal False Claims Act and Virginia Fraud Against Taxpayers Act.  Along those lines, Deputy Attorney General designate Jeffrey A. Rosen prepared written answers to the Senate Judiciary Committee’s questions this month in advance of his testimony.  You can read the Deputy AG Rosen answers to all of the questions here.  

Specifically concerning the federal False Claims Act, Rosen responded to questions from Sen. Grassley as follows:

Specific Answers to Sen. Grassley’s Questions:

  1. Whistleblowers are critical to exposing government waste, fraud and abuse. They are our eyes and ears on the ground, and their courage to come forward and expose government malfeasance benefits us all. Will you commit to protecting whistleblowers from retaliation, and to promoting a culture that values their important contributions?

 

RESPONSE:  I strongly support federal laws that protect whistleblowers, and I am committed to upholding the letter and spirit of those laws. Whistleblowers perform an important service for the public and the Department of Justice when they truthfully report evidence of wrongdoing.  Such individuals should not be subjected to reprisal.

 

  1. In 1986, President Reagan signed into law some very important amendments to the False Claims Act. Since those 1986 amendments, the government has recovered more than $59 billion in taxpayer money. Most of that is because of whistleblowers who found the fraud and brought the cases at their own risk.

 

6.If confirmed, will you vigorously support and enforce the False Claims Act?

 

RESPONSE: The False Claims Act is a critically important tool used by the government to detect fraud and recover money.  If confirmed, I will diligently enforce the False Claims Act.

 

7. If confirmed, will you continue current staff and funding levels to properly support and prosecute False Claims Act cases?

 

RESPONSE:  Because I am not currently at the Department, I have not had the opportunity to evaluate the proper level of staff, funding, and support for False Claims Act cases.  If confirmed, I will consult with the relevant Department personnel about these issues to ensure that the False Claims Act is diligently enforced.

 

8. A new guidance document developed by the Justice Department last year, known as the “Granston memo,” provides a long list of reasons that the Department can use to dismiss False Claims Act cases. Some of them are pretty vague, such as “preserving government resources.” Of course the government can dismiss obviously meritless cases. But even when the Justice Department declines to participate in a False Claims Act case, the taxpayer can and in many cases still does recover financially. So it’s important to let whistleblowers pursue cases even when the Justice Department isn’t able to be involved.

 

9.Under what circumstances can, or should, the Justice Department move to dismiss a False Claims Act case?

 

RESPONSE: The False Claims Act is a critically important tool used by the government to detect fraud and recover money.  If confirmed, I will support the Department’s diligent enforcement of the False Claims Act.  In certain cases, it may be appropriate for the Department to move to dismiss a False Claims Act case.  This may true, for example, when the Department determines a case is meritless or when there is no evidence to support the allegations in the case. Any decision to dismiss a case should made only after thorough review of the case file and consultation with the litigating attorneys.

 

  1. In circumstances where the government does not intervene in a False Claims Act case, if confirmed, will you commit to ensuring that the Justice Department does not unnecessarily dismiss False Claims Act cases?

RESPONSE:  Please see my response to Question 6(a) above.

 

Conclusion

Generally speaking, I think the FCA has become so ingrained in our jurisprudence and in our form of government that real damage to the statute (for example, the repeal of the FCA) would be unthinkable; moreover, I think that even drastic changes to enforcement of the FCA would be unthinkable…but we have to stay vigilant!

 

Virginia False Claims Act Lawyers

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Professionalism in Client Relations

By Zachary Kitts on March 13, 2019 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

LAWYER PROFESSIONALISM IN CLIENT RELATIONS

As regular readers know, last year I was appointed to the faculty of the Virginia State Bar’s mandatory course on lawyer professionlism.  This course is otherwise known as the Harry L. Carrico Professionalism Course.  It is certainly an honor to be appointed to the faculty.  The appointment generally entails teaching one or two (or more) seminars per year.  From time to time, a lawyer may also be asked to give a lecture on one of a set of pre-determined topics.

The course is, in keeping with the seriousness of its nature, very structured.  The faculty is carefully screened and the contents are carefully assembled.  Participants attend series of lecutres and workshops over the course of an eight-hour day.  I was asked to give one of the lectures at the March 6, 2019 session of the course in Alexandria.  Well, I actually wasn’t asked exactly, but I would have accepted anyway and I considered it an honor.

My assigned topic was “Professionalism in client relationships.”  The other two lectures are entitled “Professionalism in relationships with other lawyers” and “Professionalism in relationships with the Court.”  The very precise instruction given by Judge Lannetti was to prepare a written lecture of 20 to 23 minutes.  The lecture is read, which is quite unlike any other speech one may give.  A lawyer is also required to email the lecture to Judge Lanneti one week before the course so he can approve or disapprove it.

This may seem strict but there is no other way to ensure a high quality year in and year out.  If lawyers were allowed to give thier lectures in any way they see fit, we would wind up with some brilliant speeches.  We would also wind up with some very lousy speeches. I think that would be completely contrary to the nature of professionalism.  It might even defeat the whole purpose of the course.

This was either my second or third time teaching the course, but it was the first time I was asked to give a lecture.  So, I am not sure if I did it right or not.  But since March 6 I have been emailed by a few participants asking for a copy of my lecture, so I thought it might be of broader interest.  I attach the lecture here.

VIRGINIA CONTINUES TO ATTRACT HIGH CALIBER NEW LAWYERS

Two things I have noticed that I think speak well of the new Virginia lawyers are the following:  first, few people learn the truly mandatory nature of the course the hard way.  In other words, by failing to take the course and having thier brand-new law license suspended.  I had thought that there would be at least two or three every year, but in fact it almost never happens.

One additional thing impresses me thus far, and I think this one is perhaps best of all — I almost never see a new lawyer on his or her phone during the seminar.  Judge Lanneti runs a tight ship, and each time we teach the seminar, he instructs us that phone or device use is absolutely prohibited.  The first time I taught the course, I was bracing to fight attendees over phone use.  Many people these days seem to have an addiction to thier phones…but I have been pleased that not one single new Virginia lawyer has been removed from the seminar for using a phone.

In short, the new Virginia lawyers I have had the privilege of teaching are a fine continuation of our long tradition of excellence in professionalism.

 

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It’s Official — K&G Law Group has the largest settlement in Virginia for 2018

By Zachary Kitts on February 15, 2019 in

 

 

 

 

 

 

 

 

I am quite pleased to announce that a case of mine — the $20.7 million settlement in the qui tam case styled U.S. ex rel. Arven v. Virginia Neurological Birth Injury Fund, et al., — has been named the largest civil settlement in Virginia for 2018.

This is the second year in a row that one of my cases has made the list of Virginia’s largest settlements — in 2017 the $4.2 million settlement in U.S. ex rel. Morrow v. Fredericksburg Hospitalist Group, et al., made the list at number 11.  And, longtime-readers will recall that in 2012 I just barely missed number one with my firm’s $18.1 million settlement in US ex rel. Chao v. Calnet, Inc., et al.

Many thanks are due to many different people, including of course the courageous clients, my esteemed co-counsel, Assistant United States Attorney Brian Hudak, former co-counsel John Thomas, and former AUSA Ted Radway, who initially had the case…

You can click here for the third-person version on my firm’s main webpage…and we will keep our fingers crossed for 2019!

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