The Government Spends Much Less on Fraud Cases than Big Companies Spend Defending Them
As we have previously discussed on Fraud by the Numbers, the government has a limited number of lawyers working on False Claims Act (FCA) cases. For each FCA case that is filed, the U.S. Justice Department (DOJ) assigns an Assistant U.S. Attorney (AUSA) in the U.S. Attorney’s Office of the federal district court in which the case is filed, and a lawyer from the Civil Division of the Justice Department in Washington, D.C. (“Main Justice.”) Main Justice and the U.S. Attorney’s Offices (USAOs) also pursue fraud on the government through their own law enforcement initiatives, including by reviewing False Claims Act cases for allegations meriting criminal prosecution, and prosecuting criminal fraud cases outside of the civil False Claims Act.
In its proposed budget for fiscal year 2025, the Justice Department is seeking $400.4 million for the Civil Division, which will fund 997 attorneys along with supporting personnel. However, the vast majority of these resources will be used to defend the United States government from claims against it, rather than pursuing affirmative litigation including FCA cases against fraudsters (in 2021, DOJ estimated that 88% of its caseload was defensive.) The Fraud Section of the Civil Division, which supervises FCA fraud litigation, is a relatively smaller office within the Department.
DOJ’s proposed budget states that it is seeking about $239 million to fund the Criminal Division, which will fund 487 attorneys along with supporting personnel. Of that, DOJ estimates that about $27.7 million will be spent on combatting corruption, financial crime, and fraud.
The proposed budget is seeking about $2.8 billion to fund the 94 U.S. Attorneys Offices across the country, which will fund about 6,255 AUSAs along with supporting personnel. Although each USAO has different priorities depending on its leadership and location, the budget indicates that a relatively small percentage of these resources go to pursuing fraud. In 2023, 7% of the criminal workload of the USAOs was dedicated to white collar crime, and of the civil cases the USAOs filed or responded to, only 4% were affirmative litigation including False Claims Act cases.
It is therefore reasonable to estimate that there are currently less than a thousand U.S. government attorneys working on fraud cases, a small number compared to the army of lawyers that Corporate America, and large law firms, devote to defending these cases. While it is difficult to estimate the amounts that big companies spend defending government investigations and prosecutions (in large part because companies don’t often reveal this information) all the evidence shows a massive inequity of resources.
One U.S. Chamber of Commerce-funded survey of Fortune 200 companies found that the average total cost of outside litigation was $115 million per respondent in 2008, or 0.6% of revenue. That number has surely increased substantially in the 16 years since that survey. A 2023 report from the Association of Corporate Counsel found that, for companies with more than $20 billion in revenue, the median company spent $80 million per year on legal costs. Although much of this legal spending is on private litigation and regulatory compliance, these numbers show the scale of what each of the largest corporations can spend on lawyers.
Large corporations also pay their lawyers significantly more than U.S. government lawyers. Above the Law’s 2023 In-house Compensation Report, which surveys U.S. companies’ in-house lawyers, found the median total compensation for respondents was $284,000. In contrast, the highest paid position in the Justice Department, the U.S. Attorney General, earns a salary of $246,400
Outside counsel from the big law firms, who are typically brought in to defend DOJ investigations, earn considerably more than even in-house counsel. The salary for first-year lawyers at the biggest law firms is $225,000, rising to almost half a million dollars after a few years of experience. These salaries are funded by comically high billing rates that are mostly invisible to the public, but are occasionally revealed in bankruptcy litigation where law firms must file their hourly rates with the court. The filings show that the biggest firms’ rates for even their most junior lawyers are approaching $1000 per hour.
While corporate fraudsters may sometimes claim that the government’s fraud prosecutions are oppressive, the unequal legal spending between the government and large companies they investigate is slanted in the other direction.
Nicolas Mendoza is a Senior Associate at Murphy Anderson
