Last week, the Department of Justice announced that it collected $3.7 billion in settlements and judgements from False Claim Act (FCA) cases against the government in 2017. The FCA is a statute that allows individual whistleblowers, called relators in this context, to file lawsuits on behalf of the government.
Known as Lincoln’s Law, the FCA was originally passed in the Civil War when avaricious contractors supplied the Union with faulty weapons and failing supplies. Over the last decade, FCA cases filed have grown in number and become one of the government’s premier tools for policing corporate fraud.
The cases this year covered a wide range of unscrupulous conduct. Several pharmaceutical companies bilked Medicare to the tune of hundreds of millions of dollars while two housing finance companies endorsed mortgages for federal insurance that failed to meet basic underwriting standards. Agility Public Warehousing, a Kuwaiti-based military food provider, agreed to pay $95 million for overcharging the US government for fruits and vegetables meant for American soldiers fighting in the Middle East, while Bechtel Corp was fined $125 million for fraudulently charging the Department of Energy for deficient nuclear materials.
Of the $3.7 billion collected, a stunning 92% ($3.4 billion) came from lawsuits brought by whistleblowers under the False Claims Act.
Whistleblowers were the driving factor behind these victories for the taxpayer. Of the $3.7 billion collected, a stunning 92% ($3.4 billion) came from lawsuits brought by whistleblowers under the False Claims Act. Chad Readler, Acting Assistant Attorney General of the Justice Department’s Civil Division, stated “[b]ecause those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth.” He added further, “the Department’s recoveries this past year continue to reflect the valuable role that private parties can play in the government’s effort to combat false claims concerning government contracts and programs.”
Readler is exactly right and the DOJ should be commended for embracing whistleblowers. Unfortunately, not all parts of the government seem to have gotten the memo. The recent tax bill dropped two vital whistleblower amendments, and will make life easier for tax cheats as Executive Director Steven Kohn recently explained. Meanwhile, the Department of Interior has failed to effectively publicize wildlife crime whistleblower provisions that have been signed into law for decades.
Incentivizing whistleblowers is crucial for the detection and enforcement of fraud. Individuals inside companies are best placed to know about corporate misfeasance, and they are uniquely positioned to report on and collect evidence of civil and criminal violations occurring behind the scenes at a company.
Strong whistleblower laws and aggressive enforcement of whistleblower provisions already on the books will save taxpayers money and make crime easier to uncover. For 2018, let’s hope all the federal government realizes this important truth.