Pat Burns from Taxpayers Against Fraud predicts $9 billion in 2012.
Although a record $3 billion was recovered in 2011 using the false claims act, it appears that many people in-the-know are predicting an even bigger 2012…three times bigger to be exact.
Taxpayers Against Fraud Education Fund spokesman Pat Burns made this amazing prediction in the Corporate Crime Reporter recently, and while Pat is not exactly known for understating anything, there is reason to believe that he was being a little conservative.
Of course, many things will affect the total — for example, some of them might bleed over into 2013 through no fault of anyone….
Those 2009 bi-partisan changes to the FCA sure did help out…
Pat Burns from Taxpayers Against Fraud Predicts $9 billion in 2012
The Year 2011 Review: A New Record False Claims Act Recoveries
WASHINGTON – The Justice Department secured more than $3 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2011, Tony West, Assistant Attorney General for the Civil Division, announced today. This is the second year in a row that the department has surpassed $3 billion in recoveries under the False Claims Act, bringing the total since January 2009 to $8.7 billion – the largest three-year total in the Justice Department’s history. The $3 billion total for fiscal year 2011 includes a record $2.8 billion in recoveries under the whistleblower provisions of the False Claims Act, which is the government’s primary civil remedy to redress false claims for federal money or property, such as Medicare benefits, payments on military contracts, and federal subsidies and loans. The department has recovered more than $30 billion under the False Claims Act since the act was substantially amended in 1986. The 1986 amendments strengthened the act and increased the incentives for whistle blowers to file lawsuits on behalf of the government. That in turn led to an unprecedented number of investigations and greater recoveries. “Twenty-eight percent of the recoveries in the last 25 years were obtained since President Obama took office,”Assistant Attorney General West said. “These record-setting results reflect the extraordinary determination and effort that this administration, and Attorney General Eric Holder in particular, have put into rooting out fraud, recovering taxpayer money and protecting the integrity of government programs.” Assistant Attorney General West noted that the $3 billion recovered this year included $2.4 billion in recoveries involving fraud committed against federal health care programs. Most of these recoveries are attributable to the Medicare and Medicaid programs administered by the Department of Health and Human Services (HHS). They also include the TRICARE program administered by Department of Defense (DoD), the Federal Employees Health Benefits program administered by the Office of Personnel Management and Veterans Administration health programs. Fighting health care fraud is a top priority for the Obama Administration. On May 20, 2009, the Attorney General and HHS Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. Since January 2009 alone, the department has used the False Claims Act to recover more than $6.6 billion in federal health care dollars. This is more recovered under the act than in any other three-year period. The historic $2.8 billion recovered in whistle blower cases came from suits filed under the qui tam, or whistleblower, provisions of the False Claims Act. These provisions allow private citizens, known as relators, to file lawsuits on behalf of the government. In the 25 years since the False Claims Act was substantially amended, whistle blowers have filed more than 7,800 actions under the qui tam provisions. Qui tam suits hit a peak of 638 this past year, after hovering in the 300s and low 400s for much of the decade. Assistant Attorney General West thanked the courageous citizens who have come forward to report fraud, often at great personal risk: “We are tremendously grateful to whistle blowers who have brought fraud allegations to the government’s attention and assisted us in this public-private partnership to fight fraud,” he said. In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act, including enhancements to the qui tam provisions to encourage whistle blowers to come forward with allegations of fraud. In this 25th anniversary year of the 1986 amendments, Assistant Attorney General West paid tribute to the bill’s sponsors, saying that “without their foresight, the breadth of the recoveries we announce here today would not have been possible.” He also expressed his gratitude to Senator Patrick J. Leahy, chairman of the Senate 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. Assistant Attorney General West also applauded Congress’ passage of the Affordable Care Act (ACA) in 2010, which reenforced the government’s ability to redress fraud in the nation’s health care system. Among many other changes, the ACA amended the False Claims Act to provide additional incentives for whistle blowers to report fraud to the government and strengthened the provisions of the federal health care Anti-Kickback Statute. Enforcement actions involving the pharmaceutical industry were the source of the largest recoveries this year. In all, the department recovered nearly $2.2 billion in civil claims against the pharmaceutical industry in fiscal year 2011, including $1.76 billion in federal recoveries and $421 million in state Medicaid recoveries. These cases included $900 million from eight drug manufacturers to resolve allegations that they had engaged in unlawful pricing to increase their profits. Additionally, GlaxoSmithKline PLC paid $750 million to resolve criminal and civil allegations that the company knowingly submitted, or caused to be submitted, false claims to government health care programs for adulterated drugs and for drugs that failed to conform with the strength, purity or quality specified by the Food and Drug Administration. Adding to its successes under the False Claims Act, the department obtained 21 criminal convictions and $1.3 billion in criminal fines, forfeitures, restitution, and disgorgement under the Food, Drug and Cosmetic Act (FDCA). The FDCA’s criminal provisions are enforced by the Civil Division’s Consumer Protection Branch. In addition to health care, the department continued its aggressive pursuit of fraud in government procurement and other forms of financial fraud, including grant, housing and mortgage fraud that emerged in the wake of the financial crisis. In November 2009, President Obama established the Financial Fraud Enforcement Task Force to hold accountable the individuals and corporations who contributed to the crisis as well as those who would claim illegal advantage through false claims for funds intended to stimulate economic recovery. Of the $3 billion in fiscal year 2011 recoveries, these non-war related procurement and consumer-related financial fraud cases accounted for nearly $358 million. Overall, the department recovered $422 million in fiscal year 2011 in procurement fraud cases, including $89.3 million in recoveries in connection with the wars in Southwest Asia. This brings civil fraud recoveries in connection with the wars in Southwest Asia since January 2009 to $153.4 million, and the total amount recovered in procurement fraud cases during that time to $1.5 billion, again a greater amount than in any previous three-year period. Assistant Attorney General West expressed his deep appreciation for the dedicated public servants who contributed to the investigation and prosecution of these cases. These individuals include attorneys, investigators, auditors and other agency personnel throughout the Civil Division, the U.S. Attorneys’ Offices, HHS, DoD and the many other federal and state agencies.
Earlier this week, the United States Department of Justice announced that slightly more than $3 billion was recovered in 2011 using the federal False Claims Act — this amount represents a new record for False Claims Act recoveries in a single year. The complete text of the DoJ press release is included below the break or you can click here.
Perhaps most importantly, the DoJ acknowledged the vital role that qui tam whistleblowers play in the government’s efforts to fight fraud. Of the total $3 billion recovered, more than $2.8 billion was recovered in cases filed by qui tam whistleblowers! For those of you doing the math that’s a total of 94%.
I’ll repeat that — 94% of the money recovered by the government was the result of a whistleblower coming forward with first-hand information about fraud on the government.
If there is any mechanism anywhere else in the world that allows a single person to hire a lawyer and take on some of the biggest, wealthiest, most influential companies in the world in the name of the government I don’t know where it is.
Now here is the take-away message — many people think that in 2012 the record of $3 billion will not only be surpassed but will be doubled or trebled….
________________________________
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Monday, December 19, 2011
Justice Department Recovers $3 Billion in False Claims Act Cases in Fiscal Year 2011
Department Sets Records for Recoveries in Health Care and War-Related Fraud Annual Recoveries in Whistle Blower Cases Reach All Time High
There is no new thing under the Sun … especially fraud, waste and abuse in government spending (and the need for the Virginia Fraud Against Taxpayers Act and federal False Claims Act)
The problem was especially acute for the Union. This of course was a direct result of the great advantage in material wealth enjoyed by the North. The Union army tried to purchase horses and got mules; when they purchased gunpowder they got sawdust, and so on. So I think that readers will find Shelby Foote’s treatment of this topic in his masterpiece The Civil War: A Narrative Vol. I quite interesting. In particular, Foote discusses problems related to General John C. Fremont and Secretary of War Simon Cameron. Take Fremont for example. Fremont served as the commanding Union General in the Western United States for a brief period during 1861. His command was brief primarily because of his megalomania and incompetence—a deadly combination if ever there was one—but there were other problems as well. Specifically Fremont had a graft problem. In fact more than $12 million disappeared from Fremont’s department during his brief three month stint in 1861. (That is more than $287 million in 2010 dollars.) Fremont was unable to account for this money – and Lincoln suspected that much of it had lined his own pockets and the pockets of his friends in the contracting business. In any event, then as now, a failure to be able to trace enormous amounts of money speaks for itself and Fremont was sacked as the war kicked off. Secretary of War Simon Cameron was another facet of the problem. In my estimation his problem is more typical of what we see in modern government. Foote writes: … for months [leading up to Cameron’s termination] there had been reports of waste and graft in the war department; of contracts strangely let; of shoddy cloth, tainted pork, spavined horses and guns that would not shoot; of the Vermont wholesaler who boasted, grinning, that “You can sell anything to the government at any price you’ve got the guts to ask.” 
Anyone who has ever googled the words “qui tam” or “federal False Claims Act” has certainly found the basic history of these concepts. In a nutshell, the history can be stated as follows: fraud on government coffers was rampant during the American Civil War (although Virginians do not find the name “Civil War” offensive, as a general rule we prefer the “War Between the States” which is more accurate.)
Review of Significant 2011 Events for the Virginia Fraud Against Taxpayers Act
This was a significant year for the Virginia Fraud Against Taxpayers Act and for qui tam litigation in Virginia, so as the year winds down it only seems fitting to review some of the key developments.
But you don’t have to take my word for it. Back in July Gibson Dunn published its 2011 Mid-Year False Claims Act Update2011 Mid-Year False Claims Act Update which is well worth a read.
In addition to an exhaustive treatment of false claims act legislative activity from each state, the Gibson Dunn talks about the 2011 amendments to our Virginia state false claims act. Additional coverage is given the Attorney General Cuccinelli’s intervention in the Bank of New York Mellon case earlier this year.
On a side note, I read various update-style newsletters from firms big and small across the country. The information published by Gibson Dunn is always top-notch, which is *not* something I can say for all of the law firm publications I receive….
More to follow in this year end-review.
Fairfax County Circuit Court Clerk John Frey Jumps Into the Attorney General Race
Important news in the Virginia Attorney General race came in late this week — Fairfax County Circuit Court Clerk John Frey announced that he would seek the GOP nomination for Attorney General.
The announcement came as a surprise to most, even those active in Republican circles in Fairfax County. As to Frey’s chances, there is an interesting analysis by the Not Larry Sabato blog which raises some good points in his favor. Perhaps most importantly, Frey was re-elected county-wide in 2007 election, and was the only Republican to do so in that election cycle.
Moreover, Frey’s knowledge of and success in retail politics should not be underestimated. He enjoys wide bipartisan support not only because he runs a tight ship at the Fairfax County Courthouse (which is important to every lawyer practicing in that Court) but also because more or less everyone who meets John genuinely likes him.
And on the topic of primary interest to this blog, the Virginia Fraud Against Taxpayers Act and qui tam litigation in Virginia, I can say for certain that Mr. Frey has more experience with the statute than the other candidates who have announced so far. I say that because filing a VFATA case in a Virginia Circuit Court is much more complicated than filing a normal civil action and I have personally filed several Virginia Fraud Against Taxpayers Act cases in Mr. Frey’s Court. Each time, he took the time to read the statute and prepare for the filing.
Even more important, John also understands the statute, and anyone who wants to properly do the job of Virginia Attorney General will need to understand it. Attorney General Cuccinelli has broken new ground in the use of the Virginia Fraud Against Taxpayers Act, but there remains much to be done.
This is shaping up to be a very interesting primary indeed.
More Candidates for Virginia Attorney General Jump Into the Fray
The 2013 race for Virginia Attorney General (which started last week) is now in full swing.
The first Republican to announce his intent to seek the nomination was Mark Obenshain, and he was quickly followed by Rob Bell and Dave Foster.
On the Democratic side, there have been murmuring that recently ousted Del. Ward Armstrong will seek the Democratic nomination, but nothing definite.
As a quick caveat, this blog is dedicated to the Virginia Fraud Against Taxpayers Act and to qui tam litigation in Virginia and elsewhere. As such, I have an obvious interest in who occupies the Attorney General’s office — but this blog is strictly non-partisan, and so a candidate from either party who will dedicate resources to fighting fraud on our state coffers will get my full support.
And how, you might ask, could a candidate do that? First and foremost, a candidate could do that by pledging to dedicate resources to the fight against fraud by establishing a special litigation unit in the office just to handle affirmative civil enforcement of the VFATA.
More to come….stay tuned
BREAKING NEWS: ATTORNEY GENERAL KEN CUCCINELLI TO RUN FOR GOVERNOR OF VIRGINIA IN 2013
It is that time again Virginia — the 2013 state-wide election cycle kicked off today with an “unofficial official” announcement that Virginia Attorney General Ken Cuccinelli is running for Governor of the Commonwealth in 2013.
Anita Kumar at the Washington Post (usually referred to in this blog as WaPo) has the scoop as does the Richmond Times Dispatch and others by now.
For the last year or so, Cuccinelli had said he intended to run for re-election as Attorney General. His intent in this regard was also consistent with other intelligence gleaned from the Virginia rumor mill. The theory ran that Mark Warner had decided to not run for re-election to the U.S. Senate in 2015 (with the ultimate intent of running for Governor of Virginia again).
So, Cuccinelli was rumored to be running for re-election to his current post in 2013, with an eye towards running for the open Senate seat in 2014. But not anymore.
This blog is of course non-political and is not affiliated with any political party. I support vigorous enforcement of *all* of the laws of the Commonwealth, and will support any candidate for office who makes affirmative civil enforcement of the Virginia Fraud Against Taxpayers Act a priority.
A handful of political operatives have dropped hints about a potential run for AG in 2013, and as new developments occur we will keep readers posted.
SO CLOSE AND YET SO FAR AWAY: THE ON-GOING SAGA OF MR. MCCANN AND HIS FAILED EFFORTS TO BRING STATE FALSE CLAIMS ACT CASES IN FLORIDA AND CALIFORNIA AGAINST BANK OF AMERICA FOR FAILURE TO ESCHEAT UNCLAIMED PROPERTY
Today’s post is about a series of unsuccessful qui tam cases brought by a former Bank of America employee. Both cases were brought pursuant to state false claims act statutes (first in Florida and then in California) for an alleged failure on the part of Bank of America to escheat uncashed checks to the state of the payee’s last known address. The complaints in both cases alleged that BOA failed to pay to the State amounts that should escheat as abandoned or unclaimed property. Let me say at the outset that this post is not intended to embarrass or to criticize anyone, but rather to show how someone can be so close—and yet so far away—to bringing a valid cause of action under a state false claims act statute. Mr. McCann brought his first qui tam case in the State of Florida under the Florida False Claims Act on or about 2006. In that case, he alleged that Bank of America had failed to escheat unclaimed property belonging to Florida residents. Such amounts should have escheated to the State of Florida, according to McCann. STATE ESCHEAT STATUTES AND STATE FALSE CLAIMS ACTS When someone mails a person a check that is never cashed, after a certain set amount of time the check becomes “unclaimed property.” The Uniform Disposition of Unclaimed Property Act, which has in some form been enacted in all 50 states, requires unclaimed personal property to be delivered to the state of the owner’s last known residence if the “property holder” (i.e., the person who finds themselves in possession of property belonging to someone else) has a last known address for the “property owner” (i.e., the person owning the property.) Just about anyone could become a holder of unclaimed property. For example, if a person has a party at his or her house and afterwards finds an expensive piece of jewelry left behind by a party-goer, the home owner has just become a holder unclaimed personal property. That scenario however is uncommon. What is more far more common is for a bank, a credit union, a retail store, etc. to find itself in possession of property belonging to someone else—someone who, for whatever reason, has not shown any interest in the property. When that happens, the “property holder” must deliver that money to the state of the last known residence of the property owner. But some companies choose not to do this, and instead treat unclaimed property as a revenue source. And that is where state false claims act violations occur. Every holder of property is required to file an annual report with the various states where they do business, and that report must list all of the unclaimed property. UNCLAIMED PROPERTY v. ESCHEAT One very technical but very important point needs to be made. Many sources call this “escheat” of unclaimed property, but the truth is that unclaimed personal property—unlike unclaimed real property—never truly escheats. That is because the states never take title to unclaimed personal the property. Rather, all 50 states simply become “holders” of the unclaimed personal property and it is held in perpetuity for the rightful owners. The state must make regular efforts to locate the rightful owners of the property and deliver the property to them. For that reason, most states have some kind of unclaimed property office that runs advertisements in newspapers, and maintain websites where people can search for their property. MR. MCCAN’S ALLEGATIONS Mr. McCann brought his case in The relator couldn’t point to any specific check however and couldn’t show for certain that the “clearing errors” (as he called them) resulted in any specific liability for unclaimed property to any specific state including but not limited to Florida. At best, his case alleged some errors that might have resulted in some unclaimed property that was owed to someone, somewhere. But he couldn’t point to any specific check to any specific person for any specific sum. 
Both cases failed. In my legal opinion—as someone who has successfully prosecuted such cases—McCann did in fact fail to state a claim, and the result in both cases was correct.
A little background on the escheatment of unclaimed property and state false claims acts will be helpful.
Therein lies the problem with that type of allegation. In order to be unclaimed property, the check draft or other instrument must meet certain requirements–for example, the check or draft be for a specific amount of money and must be payable on demand.
After the Florida case was dismissed, Mr. McCann tried again in California. Proceeding in the name of the State under the California False Claims Act (California Govt.Code, § 12650 et seq.). Again his case was dismissed for failure to state a claim.
CASES STATING A CLAIM FOR FAILURE TO ESCHEAT PROPERTY
Numerous other relators have however succeeded where the relator in this case failed, including here in State of California ex rel. Stull v. Bank of America
So yes, it is quite possible to bring a false claims act cases based on a failure to escheat unclaimed property, but as with every qui tam or False Claims Act case, the devil is in the details.
Analysis from Thomson Reuters News & Insight — State False Claims Acts Stand Tall Around the Country
Thomson Reuters reporter Andrew Longstreth did an article today on the failure of states like Kentucky and Pennsylvania to pass state false claims statutes — as with most reports in this arcane area of law, Mr. Longstreth makes a few errors but on the whole this is a solid piece and worth a read.
The U.S. Small Business Administration Gets Serious about Fraud and False Claims in SBA Small Business Programs
Late last week the U.S. Small Business Administration issued a new /files/116785-109034/SBA_frau_10_27_Memo.pdf”>Congressional Hearing Memo from this week points out, the government actively seeks — and indeed relies on — private citizens to come forward with evidence of fraud on the government. Such private citizens can be handsomely rewarded under the federal False Claims Act.