Monday, December 7, 2015

Government Recovers $1.1 Billion of Contract Fraud in Fiscal Year 2015

We frequently post articles about fraud, waste, and abuse in Government contracting programs. Most of these come directly from Department of Justice press releases. While many of these reported cases involve Government contractors acting alone, a significant number of cases involve a level of "cooperation" from someone within Government contracting circles. Although typically bereft of details as to how the fraud was uncovered, these press releases usually contain enough information to see some aspects of the fraud triangle at work; pressure, opportunity, and rationalization. As auditors concerned foremost with adequate internal control systems, it is apparent that many fraudulent activities were allowed to develop because of weak or non-existent internal controls.

The Department of Justice recently reported its recoveries from false claims act cases that were settled in fiscal year 2015. The Department obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the Government. The report also noted that from January 2009 to present, it has recovered $26.4 billion.

More than half of the recoveries ($1.9 billion) came from companies and individuals in health care industries. These cases typically involved unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid by Medicare, Medicaid, and other federal health care programs.

The second largest category behind health care involved Government contracts. Settlements and judgments in cases alleging false claims for payment under Government contracts totaled $1.1 billion in fiscal year 2015 ($4 billion since January 2009). Notable cases included contracts for food, water, fuel, and supplies for American soldiers in Afghanistan, and two cases involving allegations that contractors were not providing qualified employees to perform contract work.

The report noted that most false claims actions are filed under the Act's whistleblower, or qui tam, provisions that allow individuals to file lawsuits on behalf of the Government. If the Government prevails in the action the whistleblower receives up to 30 percent of the recovery. Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the Government recovered $2.8 billion. Whistleblower awards during the fiscal year totaled nearly $600 million. As you might guess, there is an entire legal industry devoted to filing whistleblower suits.

You can read the entire report by clicking here.

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