Government Claims $1.34 Billion in Fraud Cases

Monday, 10 Nov 2008 03:00 PM

By Newsmax Staff

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The United States recouped $1.34 billion in settlements and judgments last fiscal year in pursuing allegations of fraud against the federal government, the Justice Department said Monday.

That tally, for the fiscal year that ended Sept. 30, brought the total recovered to $21 billion since Congress strengthened the civil False Claims Act in 1986. As in previous years, the bulk of the total resulted from healthcare fraud, which tallied $1.12 billion alone, the Justice department said in a news release.

The amount collected is only part of the story, said Gregory Katsas, assistant attorney general for Justice’s Civil Division, who credited citizens’ help in making hot-line calls and initiating suits on their own.

The resulting legal action “undoubtedly saves the country many times that amount in aborted schemes and misconduct," Katsas said.

Almost 78 percent of fiscal 2008 recoveries were associated with suits that private individuals start under specific provisions of the act, the Justice Department said. The cases involve federally funded programs ranging from Medicare and Medicaid to defense procurement contracts, disaster assistance loans and agricultural subsidies. The act provides that people who make false claims for federal funds are liable for three times the government's loss, plus a civil penalty of $5,500 to $11,000 for each claim.

The private citizens, known as relators under the act, are entitled to recover 15 percent to 25 percent of the proceeds of a successful suit if the government intervenes, and up to 30 percent if the government chooses not to become involved and the citizen pursues the action alone.

In fiscal 2008, the relators received $198 million, Justice said.

The largest healthcare recoveries came from pharmaceutical companies, as settlements with Cephalon Inc., Merck & Co., and CVS Caremark Corp. totaled more than $640 million, the department said. Those cases returned another $430 million to state Medicaid programs, it said.

The Civil Division's investigation of the pharmaceutical industry is part of a department-wide effort, Justice said. Typical allegations include "off-label" marketing, which is the illegal promotion of drugs or devices billed to Medicare and other federal healthcare programs for uses that the Food and Drug Administration has not found safe and effective and medical literature doesn’t support; kickbacks to physicians, wholesalers, and pharmacies to encourage drug or device purchases; establishing inflated drug prices to manipulate reimbursement; and knowingly failing to report the company's true "best price" for a drug to reduce rebates owed to the Medicaid program.

The Justice Department said it also collected $133 million in defense procurement fraud, including a $53 million settlement with Pratt & Whitney, a division of United Technologies Corp., and PCC Airfoils LLC, a subsidiary of Precision Castparts Corp. The settlement resolved allegations that Pratt & Whitney and PCC Airfoils knowingly submitted false claims to the Air Force for defective turbine blades sold to the government to retrofit the F100-PW-220 engines in F-16 and F-15 aircraft.

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