Earlier this month, the Department of Justice ("DOJ") released its statistics on civil fraud enforcement actions for the 2021 fiscal year (which ended September 30, 2021). In total, DOJ hauled in more than $5.6 billion in judgments and settlements from civil fraud and False Claims Act ("FCA") cases, the second largest total ever, and the largest total since 2014.
Healthcare and Procurement Fraud Made Up the Lion's Share of Recoveries in 2021
Healthcare and procurement fraud were far and away the leading areas of focus for DOJ. Approximately 96% of fraud judgments and settlements obtained by DOJ related to fraud in health care programs such as Medicaid, Medicare, and TRICARE. DOJ particularly targeted fraudulent arrangements for unnecessary medical services and schemes that inappropriately profited off the opioid epidemic. For instance, in October 2021, Purdue Pharma LP and DOJ reached a $2.8 billion agreement to resolve both criminal and civil claims related to the company's marketing and sale of opioid drug treatments.
Procurement fraud recoveries, on the other hand, totaled nearly $120 million. DOJ continued the recent trend of pursuing contractors and subcontractors of all sizes for conduct such as falsifying pricing data, providing non-compliant goods and services, and illegal kickbacks.
COVID-Related and Cyber-Fraud Are Likely to Be Priorities in 2022 and Beyond
The DOJ press release accompanying the statistics revealed that, in addition to healthcare fraud and procurement fraud, COVID-related and cyber-fraud will be among DOJ's top priorities going forward. In 2021, DOJ weaponized the FCA to bring actions against individuals and small businesses that improperly applied for or misused loans granted through the Payment Protection Program ("PPP"). The press release affirmed that the Department will continue to go after those who took advantage of the program, stating that DOJ is working "with various Inspector Generals and other agency stakeholders to identify, monitor and investigate the misuse of critical pandemic relief monies."
In October 2021, DOJ announced the Cyber-Fraud Initiative in response to President Biden's executive order committing the federal government to shore up its cybersecurity vulnerabilities. At the time, the Department said that it intended to use the FCA to prosecute contractors "that put U.S. information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, or knowingly violating obligations to monitor and report cybersecurity incidents and breaches." February's press release was a stark warning that DOJ will continue instituting enforcement actions against contractors that fail to meet cybersecurity obligations imposed under government contracts.
Strong Compliance Programs are Necessary Now More than Ever
Regardless of where DOJ aims its enforcement efforts in 2022, robust and effective compliance programs are of the utmost importance for any government contractor or other organization that receives government funding. The strongest compliance programs include educational components that train employees on how to spot fraud, written policies for reporting and investigating suspected fraud, and the appointment of knowledgeable compliance officers to administer and oversee the programs.
As the old adage goes, an ounce of prevention is worth a pound of cure. Compliance programs are not only vital for reducing the risk that organizations will engage in conduct that constitutes an FCA violation or other type of fraud, the existence of such a program is a key mitigation factor when assessing an organization's ultimate liability after an enforcement action commences. A strong compliance program could be the only thing that saves your organization from having to pay a business-ending judgment or settlement.
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