A national boom in cases of businesses allegedly defrauding government offices is in full blast, and the Gulf Coast leads the way. Do all the cases have merit?
Florida's well-earned reputation for being a top destination for seniors and retirees has a flip side: a supersized potential for fraud.
Specifically, cases in Medicare and related health care fraud are on a significant growth track. These federal cases allege doctors, medical facilities and other health care entities have overbilled, overprescribed and overtested patients. And as health care fraud cases rise, so too have cases against contractors alleged to have committed fraud against government agencies.
Most of these cases fall under the federal False Claims Act, where many times a whistleblower, usually an employee of the company or entity, comes forward with an allegation of wrongdoing. When it's a civil case, not criminal, it goes through the courts process, and the U.S. Justice Department enters it toward the end, for settlement negotiations on how much the fines will be.
The growth in False Claims Act cases over the past decade is nationwide, according to Justice Department data. For example, there were 632 whistleblower FCA cases filed across the country in 2015, up 66.7% from 379 in 2008. Whistleblower cases under the FCA are called qui tam lawsuits, Latin for “who as well.”
U.S. Attorney for the Middle District Lee Bentley, with a district based in Tampa that spreads from Jacksonville to Naples, says his office is a national leader in FCA cases. Only the area that covers Los Angeles, he says, has more FCA cases and penalties collected.
To wit: A decade ago the district collected about $8 million to $10 million a year in penalties from FCA cases, says Bentley. Last fiscal year, which ended Sept. 30, it collected $180 million, an office record. And Bentley says the first quarter of fiscal 2017 will include nearly $400 million in FCA penalties from the district for cases under seal in final settlement negotiations.
Most of the money collected in FCA cases goes to the U.S. Treasury. A whistleblower can receive 15% to 25% of the total payment. And Bentley says more cases his department hasn't investigated yet are ripe. “This district is a particularly fertile ground for these cases,” Bentley says.
Tampa lawyer Mike Matthews, chairman of Foley & Lardner's False Claims Act litigation group, which defends entities and individuals against FCA allegations, sees the same boom. But he worries federal officials might have gone too far with the overall FCA explosion.
“The majority of these cases really don't have a whole lot,” says Matthews, who represents several clients facing current FCA charges. “But if you don't settle, you are taking a big risk.”
Several factors have led to the increase in FCA cases.
One, says Bentley, is the decade-long Florida population boom means more elderly people, with more income. That means more fraud opportunities.
Matthews contends there are legal forces at work, too. First, there's what attorneys call the Yates memo, a September 2015 dictum from Deputy Attorney General Sally Yates that U.S. attorneys offices nationwide should focus on individual accountability for alleged corporate wrongdoing. That has emboldened officials to go deeper into FCA cases, Matthews says.
Another reason for the increase is a rise in the total penalty authorities can impose in FCA cases. This stems from the Federal Civil Penalties Inflation Adjustment Act of 2015, which allows the Justice Department to nearly double the penalty per each FCA claim.
Bentley counters that the FCA cases from his office have legitimate fraud that should be weeded out. Like the pharmacists in one case, he says, who charged TriCare, a health plan for the military, up to $20,000 each for a tube of skin cream.
“There is no doubt in my mind if we had more agents we would see more of these cases,” Bentley says.
The U.S. Justice Department set an all-time record in total penalties collected from False Claims Act cases in 2014, with $5.7 billion. That includes whistleblower and nonwhistleblower cases.
While that figure took a dip in 2015, to $3.5 billion, collections overall have been on the rise since 2008, when it took in $1.3 billion. The next-best year behind 2014 was 2012, with $4.9 billion.
And the department has collected at least $3 billion each year since 2010. By comparison, from 1987-2009 the department only collected more than $3 billion in one year, when it had $3.2 billion in 2006.