The U.S. Department of Justice (DOJ) published its 2024 False Claims Act (FCA) statistics and press release this week touting $2.9 billion in judgments and settlements last fiscal year, slightly higher than 2023’s $2.7 billion. Healthcare fraud again was the primary area of recovery at $1.67 billion, but DOJ also declared significant recoveries for federal procurement fraud and pandemic-related fraud like submitting false claims for Paycheck Protection Program loan forgiveness.
Perhaps the most important takeaway for companies doing business with the federal government is that whistleblowers (called relators under the FCA) brought a record high 979 qui tam cases in 2024, up significantly from the 713 qui tam cases initiated in 2023. In fact, over $2.4 billion of the total $2.9 billion in 2024 FCA recoveries arose from qui tam complaints.
Procurement Fraud
Among the highest FCA settlements in 2024, a large defense contractor paid $70 million for allegedly entering an improper subcontract with a commonly owned entity, which inflated prices the Navy paid for spare aircraft parts. The DOJ press release also highlighted a settlement with a Navy contractor who allegedly supplied the government with combat ship valves that it knew did not meet the military specifications. Notwithstanding these settlements, recoveries in connection with Department of Defense (DOD) contracts were low last year—totaling only $93,283,935 compared to around $556 million in 2023.
Outside of DOD, one government contractor paid $18.4 million for allegedly billing the National Nuclear Security Administration for hours it did not actually work. Another large government contractor paid $11.8 million to settle claims that it included false information on Federal Emergency Management Agency applications for Hurricane Katrina-related relief. DOJ recovered $55 million from a General Services Administration (GSA) Multiple Award Schedule holder who allegedly misrepresented its commercial sales practices during contract negotiations and violated the Price Reductions Clause of the GSA Schedule contract.
Despite the government’s ongoing and highly publicized Civil Cyber-Fraud Initiative launched in 2021, DOJ’s press release only highlighted two modest corporate settlements in 2024 (one of which was accompanied by an individual settlement) stemming from two state contracts for pandemic-related services. The three settlements totaled around $14 million. In one case, the defendant allegedly failed to keep users’ health information confidential and secure, and in the other settlement, users’ personal identifiable information was compromised in a cybersecurity breach.
Record Number of Qui Tam Complaints
FCA relators initiated a record 979 cases in 2024. While it is possible that there was more fraud to report in 2024, it is more likely that employees and other potential relators are increasingly aware of the FCA and the potential upside to filing a qui tam complaint alerting the government to company wrongdoing. Specifically, qui tam relators can receive between 15 and 30 percent of the government’s recovery in FCA cases, which can amount to millions of dollars. In 2024 alone, relators received a combined $403,971,450.
Of course, not every whistleblower complaint ends in a judgement against the company or a settlement with DOJ. Often the “fraud” that employee relators identify is something more akin to breach of contract, and sometimes suspicions of company wrongdoing stem from an employee’s simple misunderstanding of federal contract requirements or regulations. But investigating and defending against even meritless claims can take years and cost hundreds of thousands of dollars, if not more.
The rise in qui tam complaints highlights the importance for contractors and federal fund recipients to (1) have a basic understanding of the FCA and their particular compliance weaknesses; (2) provide employees easy and anonymous avenues to flag compliance concerns and complaints internally and (3) take internal complaints seriously, which may require conducting an internal investigation, consulting an FCA defense attorney, and determining appropriate corrective action. These measures can help prevent qui tam complaints by frustrated employees, and can demonstrate a culture of compliance in any future government investigations or prosecutions.