The federal False Claims Act (FCA) is one of the government’s strongest enforcement tools, annually resulting in billions of dollars clawed back to the United States as a result of the statute’s treble damages and penalties provisions. As much of what happens in the FCA world occurs outside the public view, we eagerly await the U.S. Department of Justice’s (DOJ) annual FCA summary and the insights it provides into enforcement priorities and trends.

In its annual release of its FCA statistics, the DOJ touted nearly $2.7 billion in settlements and judgments from the 2023 fiscal year, a notable increase from its $2.2 billion in recoveries in fiscal year 2022, which was itself a low dollar year compared to the steadily rising trend of years past. During remarks to announce the statistics on February 22, the DOJ stressed that government-initiated investigations—as opposed to those brought by whistleblowers or “relators” in FCA parlance—remained a focal point of its enforcement activity in fiscal year 2023. The DOJ also took the opportunity to outline expected FCA enforcement areas in 2024.

While the $500 million jump from 2022 to 2023 is not insignificant from one year to the next on a percentage basis, fiscal year 2022 was something of an outlier: it was the lowest year in terms of FCA judgments and settlements in about two decades. By way of comparison, from 2010 to 2019, the DOJ’s recoveries consistently approached, or exceeded, more than $3 billion each year.

Although the monetary recovery total ticked upwards (without approaching pre-2020 levels), the overall number of FCA settlement and judgments in 2023—a whopping 543, or more than ten each week—represents the highest such total in history. The DOJ’s Civil Fraud Section also reported it issued 1,504 Civil Investigative Demands for documents and testimony as it investigated potential FCA misconduct—another record-breaking figure.

The Role of Whistleblowers

Of note, the DOJ’s press release underscored its commitment to investigating and bringing cases itself, as opposed to joining qui tam lawsuits filed by relators. The DOJ’s self-initiated enforcement actions jumped 1.5 times over the prior year, to 500, according to the statistics. The number of actions filed by whistleblowers remained high, with 712 cases initiated by relators (the third-highest in history and an average of 13 new cases each week), but the increase in DOJ-initiated cases is striking. Given the years many FCA cases take to resolve, in particular those filed under seal by relators, qui tam lawsuits accounted for the majority of FCA settlements and judgments in FY 2023, totaling $2.3 billion (or 86 percent of all recoveries). Relators who brought such cases received more than $349 million in relator-share payments.

Active FCA Enforcement Areas In 2023

Fraud in the health care industry was again the top source of FY 2023 settlements and judgments, accounting for more than $1.8 billion (67% of total recoveries) in cases centering on managed-care providers, pharmacies, hospitals, physicians, opioids, and unlawful kickbacks. Notably, health care fraud cases served as 80% of total recoveries in FY 2022, and 90% of the total in FY 2021.

At approximately $552 million, 2023 resulted in the third-highest amount of Department of Defense-related recoveries in the last four decades. Many of these recoveries centered on FAR-based contracting and procurement, including one large $377 million settlement with a defense contractor.

Other sizable categories of FCA enforcement recoveries included pandemic relief programs and violations of cybersecurity requirements in government contracts.

Expected FCA Priorities in 2024

Following FY 2023’s record high number of settlements and judgments, the DOJ promised it will continue to use the FCA as its primary civil enforcement tool in 2024, with a specific focus on the following areas:

1. Cybersecurity

The DOJ underscored the efforts of its Civil Cyber-Fraud Initiative, which was created to hold government contractors and grantees accountable for placing government data and security systems at risk. While the DOJ’s press release did not identify the number of 2023 FCA recoveries resulting from this Initiative, it is projected that enforcement efforts will continue to ramp up in 2024 and in future years. Contractors and grantees should pay particular attention to cybersecurity requirements as a source of FCA risk in coming years.

2. Paycheck Protection Program and Other Pandemic Loans

Pandemic-related fraud continues to keep government investigators busy. In 2023, the DOJ settled approximately 270 FCA matters relating to Paycheck Protection Program (PPP) loans, totaling $48.3 million in recoveries. Although many of the pandemic-related fraud cases result in a relatively small recoveries, the government remains focused on the misuse of COVID-19 pandemic funds.  In 2023, federal agencies created interagency task forces and shared information to assist in prosecuting and investigating many of these matters, and these joint efforts undoubtedly will continue.

3. Private Equity Firms Causing the Submission of False Claims

Although private equity funds and venture capital firms largely do not directly submit claims to the government, they can cause entities under their control to submit false claims. In the health care field, for example, a private equity fund could set unreachable revenue targets or other such standards that prioritize reimbursement and knowingly lead providers to submit false claims through improper billing for federally-funded programs.  The private equity fund could become the subject of an FCA enforcement action in such a scenario, as causing the submission of false claims carries the same risk as direct submission of such claims.

If you have any questions regarding False Claims Act investigations, please contact Rosie Dawn Griffin (rgriffin@feldesman.com) or Mindy B. Pava (mpava@feldesman.com) or call 202.466.8960.