More Resources Are Needed in the Fight on Fraud
Over the last month, Fraud by the Numbers has emphasized the vast problem of fraud on the government and our financial markets – fraud that is not just taking money out of your pockets, but is causing harm to patients, members of our military, and the stability of our financial systems and future – and contrasted it with the relatively small numbers the government is recovering in enforcement actions. Congress has built solid structures under the False Claims Act, as well as the SEC, CFTC, IRS, FinCEN, and other whistleblower programs, and there are dedicated public servants working hard to recover ill-gotten gains. The fact is, however, that we are only recovering a fraction of the billions of dollars being lost to fraud each year.
Matters are not helped by the fact that even when unscrupulous companies are caught by whistleblowers and pay hundreds of millions of dollars, they are often undeterred because corporate profits are so large that even those payouts may seem like just the cost of doing business. Not to mention that they often continue to receive government contracts despite multiple fraud enforcement actions. In an earlier FBTN post this month, Kate Scanlan discussed the dearth of FCA actions involving Department of Defense fraud. In 2023, there was one such case: a $377.5 million settlement against Booz Allen Hamilton for claims that it improperly billed the Army for costs attributable to its commercial and international contracts to its federal contracts.
On the heels of this settlement, the Army awarded Booz Allen a $86.3 million laboratory support deal. When a competing company lodged a protest claiming that the Army contracting officer “unreasonably found Booz Allen to be a responsible bidder with the necessary ‘satisfactory record of integrity and business ethics,’ [because] the Army knew or should have known about Booz Allen’s FCA settlement and failed to take that into account in their responsibility determination,” the Government Accountability Office (GAO) denied the protest. The GAO found that there was “no basis to conclude that the contracting officer was required to be aware of, or to inquire into, all [U.S. Department of Justice] investigations involving the agency, especially at an agency as vast as the Army.”
Booz Allen is far from the only recidivist fraudster out there, and this is all the more reason that whistleblowers and resources for whistleblower programs are more critical than ever. As Nick Mendoza explained in his post earlier this month, last fiscal year, whistleblowers matters under the False Claims Act were responsible for recovering about $2.33 billion of the $2.68 billion total recovered, and whistleblowers filed 712 qui tam actions – the most ever.
Whistleblowers are stepping up if the government has the resources to run with their cases. However, as Nick reported in a different FBTN post this month, 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 – the vast majority of which will be used to defend the 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).
In order to begin to truly make a dent in the between $233-521 billion lost to fraud each year and to have a real deterrent impact on fraudulent actors, we need more whistleblowers, more resources for the government to enforce whistleblower programs, and for each of you reading this to make fighting fraud a priority and talking point. We need to be in this together to put integrity first!
This is the fourth year that we have published Fraud by the Numbers, which is the original brainchild of former TAF Coalition Public Education Committee Chairwoman Kate Scanlan (Keller Grover), and the legacy continues with current Chairman Clay Wire (Ogborn Mihm). We also wanted to recognize and thank the rest of our all-star contributors for their time researching, writing, and editing this year’s series:
The Anti-Fraud Coalition staff in addition to myself: James King (Director of Communications & Digital), Grace Swindler (Director of Legal Education), Rosie Tomiak (Public Interest Advocacy Fellow), and Caroline Nolan (former Legal Intern).
– The Anti-Fraud Coalition Public Education Committee Members: Tony Munter (Price Benowitz), Nick Mendoza (Murphy Anderson), Max Rodriguez (Law Office of Max Rodriguez), and Scott Terry (Florin Gray) for their contributions in writing and editing many of the posts in this project.
– TAF Coalition Members: Molly Knobler (DiCello Levitt), Roger Wenthe (Roger Wenthe, PLLC), Emily Stabile (Phillips & Cohen), Rachel Rose (Rachel v. Rose – Attorney at Law), and Max Voldman (Whistleblower Partners), and Jillian Estes (Morgan Verkamp)
Lastly, here are some highlights from the last month to ponder until the next FBTN:
– The April 2024 Government Accountability Office (GAO) report estimates that, based on data gathered between 2018-2022, the federal government is losing $233-521 billion per year to fraud, but only $2.68 billion was recovered by the DOJ in enforcement actions.
– Between November 2023 and April 2024 alone, a report confirmed that 6,845,908,997 known records were breached in 2,741 publicly disclosed incidents.
– Qui tam recoveries increased from $1.99 billion in fiscal year 2022 to $2.33 billion in fiscal year 2023, and unlike in previous years, the increase in total recoveries was caused by Department of Defense related cases rather than healthcare fraud cases.
– The Pandemic Response Accountability Committee (PRAC), a multi-agency group overseeing all pandemic relief programs, reported that by October 2022, the federal government provided over $793 billion in PPP loans to 11.5 million businesses, and the SBA Inspector General estimates that approximately 8%, or $64 billion, of total PPP funds disbursed were obtained fraudulently.
– According to DOJ’s fraud statistics, the amount clawed back in FCA cases involving Department of Defense fraud over more than thirty years of enforcement isn’t even covering the cost of a single contract DOD recently awarded to service just 20 planes.
– Between 2013 and 2022, at least 25 private equity-owned healthcare companies (and sometimes the private equity owners themselves) have entered into settlements or been subject to judgments totaling over $600 million to resolve claims that they fraudulently overcharged government payers.
– Medicare spent over $3 billionon telehealth services in 2023 alone.
– The Medicare watchdog, HHS-OIG, reported that after conducting several audits of Medicare Advantage plans through November 2023, it found that 70% of the diagnosis codes they reported to CMS were not supported by the patient’s medical record.
– In just eight months in 2024, the SEC’s whistleblower award program generated awards ranging from $200,000 to $37 million.
– Over the six month period between February 1 and July 31, 2024, DOJ announced at least eleven enforcement actions, recovering over $137.5 million, from FCA actions alleging Anti-Kickback Statute violations.
– The government estimated $300 billion in projected PPP fraudulent forgiveness, all of which was taxable. Assuming no tax was paid, an estimated $63 billion in tax principal went unpaid. Late payment penalties and underpayment interest totaling 8% annually would add another $13.86 billion. That gives total potentially collectible proceeds of $76.86 billion.
– Cyber crime is up: 2023 marked the highest year on record for ransomware attacks globally, with fraudsters extorting $1.1 billion from victims, compared to $567 million in 2022.
– The new Criminal Division Corporate Whistleblower Awards Pilot Program seeks information involving four areas of violations including money laundering by financial institutions; foreign corruption and bribery by companies; kickbacks made to domestic federal, state, and local public officials and government officers and employees; and fraud involving private or non-public health care programs, or against patients, investors, or other non-governmental health care entities, or any other healthcare related violations not covered under the False Claims Act.
– According to the CFTC, 30% of its enforcement actions involve whistleblowers and the whistleblower program has led to over $3.2 billion in sanctions, with whistleblowers receiving 10-30% of such amounts.
– In response to the high cost of prescriptions, the government passed the Inflation Reduction Act, to enable government to negotiate with pharmaceutical companies over the prices of certain Medicare Drugs. The Department of Health and Human Services (“HHS”) recently unveiled negotiated prices for ten Medicare Drugs that were between 38 and 79 percent lower than the original market price. (See the table below.) The reduction for these ten drugs is predicted to save patients a projected $1.5 billion in the first year.
– The Department of Justice 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 Assistant U.S. Attorney along with supporting personnel. Although each U.S. Attorney’s Office (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.
– In October 2021, the Department of Justice’s (DOJ) launched its Civil Cyber-Fraud Initiative, and the initiative’s first full year, 2022, the DOJ recovered $9,930,000.00.
– In comparing recoveries among U.S. Attorney’s Offices, the Eastern District of Pennsylvania obtained far and away the highest number of settlements and judgments, 89. The District of Massachusetts leads with the highest amount of money in settlements and judgments, a total $2.2 billion recovered from 54 cases, including the highest amount from declined cases.
– In FY2023, the fifth largest service procurement for agencies other than the Department of Defense was $10.2 billion in IT and Telecom – business application / application development support. This is the first year IT and software support has broken in to the top five.
See you next year!
Jacklyn DeMar is the President & CEO of The Anti-Fraud Coalition
