Grassley On Latest False Claims Act Recoveries
WASHINGTON – Sen. Chuck Grassley, incoming chairman of the Committee on Finance,
today praised the latest tally showing False Claims Act recoveries have exceeded $10 billion since
1986, when he was the Senate author of successful amendments to strengthen the act.
“At the time, we had several fights on our hands,” Grassley said. “The Defense Department
was too cozy with its contractors, and defended them to the fraud-prosecuting Justice Department.
The defense industry fought hard against our changes. Probably 10 different senators had holds on
our bill at any one time. Then the law faced and withstood a constitutional challenge.
“I’m glad our side prevailed. Not only has the False Claims Act been a valuable tool in
prosecuting fraud, it’s also become much more of a fraud deterrent than I ever anticipated. I’m glad
the Justice Department continues to find the False Claims Act so useful, and I look forward to even
more aggressive fraud prosecutions under the False Claims Act. As part of my congressional
oversight, I’m watching to make sure nothing happens to undermine the utility and strength of the
False Claims Act.”
Yesterday’s Justice Department news release on False Claims Act recoveries follows.
FOR IMMEDIATE RELEASE CIV
MONDAY, DECEMBER 16, 2002 (202) 514-2007
WWW.USDOJ.GOV TDD (202) 514-1888
JUSTICE DEPARTMENT RECOVERS OVER $1 BILLION IN FY 2002
False Claims Act Recoveries Exceed $10 Billion Since 1986
WASHINGTON, D.C. -- Recoveries in suits and investigations of fraud against the federal
government for the fiscal year ending September 30, 2002 exceeded a billion dollars for the third
year in a row, the Justice Department announced today. False Claims Act recoveries since the law
was substantially amended in 1986 have now topped $10 billion - over $6 billion of which was
recovered under the so-called whistleblowers provisions of the Act.
"The success of this statute is a tribute to the vision of its sponsors, Senator Charles Grassley of
Iowa and Representative Howard L. Berman of California, as well as the thousands of private
citizens who have reported fraud by filing suit under the Act," said Robert D. McCallum, Jr.,
Assistant Attorney General for the Civil Division. "This success could not have been achieved
without the tireless efforts of the many public servants involved in prosecuting fraud claims-from
the government's lawyers in the Civil Division in Washington, D.C. and in the U.S. Attorneys'
offices throughout the country, to the Department's Criminal Division attorneys, as well as agency
investigators, auditors and countless others throughout the government."
In fiscal year 2002, the government's recoveries in civil fraud claims reached nearly $1.2 billion --
a sum that includes investigations initiated by the government as well as suits filed by
whistleblowers. Health care fraud again accounted for the overwhelming majority of recoveries,
totaling more than $980 million. Recoveries associated with suits brought by whistleblowers,
including non-whistleblower claims resolved at the same time, accounted for almost $1.1 billion in
settlements and judgments during the fiscal year.
The whistleblower or "qui tam" provisions of the False Claims Act allow individuals, known as
"relators," to file suit on behalf of the United States against those who have falsely or fraudulently
claimed federal funds, including Medicare, Medicaid, disaster assistance and other benefits,
subsidies, grants, loans and contract payments. Persons who file qui tam suits can recover from 15
to 25 percent of any settlement or judgment reached in a case if the United States intervenes in the
action, or up to 30 percent if they pursue it on their own. In the fiscal year just ended, relators
recovered more than $160 million.
The 1986 amendments to the False Claims Act enhanced the qui tam provisions, increasing the
financial incentives and reducing the jurisdictional hurdles to filing such suits. Relators filed 33
cases in the year following the amendments with the number of such suits peaking in 1997 with 533
suits filed. It appears to have leveled off in recent years to the 300s annually. In all, 4,000 qui tam
suits have been filed, resulting in the $6 billion recovered since 1986. Recoveries in suits pursued
by the government account for $5.9 billion of the total, compared to the $260 million recovered in
suits pursued by the relator alone. During the same period, the United States recovered an additional
$4 billion in government-initiated claims, for a total of $10 billion.
Among the Department's largest recoveries in fiscal year 2002 are:
* $568 million from TAP Pharmaceuticals, a joint venture between Abbott Laboratories and
Takeda Chemical Company. TAP allegedly conspired with doctors to bill Medicare for samples of
the drug Lupron in violation of the Prescription Drug Marketing Act, paid kickbacks to providers
to increase sales of Lupron, and inflated its pricing of the drug to further a scheme in which TAP and
its provider customers overcharged Medicare and Medicaid.
* $87.3 million from PacifiCare Health Systems. The United States alleged that PacifiCare's
subsidiaries submitted false claims under contracts with the Office of Personnel Management to
provide health care benefits to federal employees under the Federal Employees Health Benefits
Program. PacifiCare allegedly failed to charge OPM the most favorable rates charged to its
commercial customers, as required under the contracts, and to disclose downward rate adjustments
* $76 million from General American Life Insurance Company. General American was a
Medicare Part B carrier in Missouri until December 31, 1998. Carriers process Medicare claims
under contract with the Department of Health and Human Service's Centers for Medicare and
Medicaid Services (formerly known as the Health Care Financing Administration). The United
States alleged that General American improperly approved claims for federal Medicare funds and
manipulated its quality assurance data to conceal its failure to process claims properly. In addition
to the monetary settlement, General American agreed to stay out of the Medicare program for five
* $73.3 million from the State of California and the County of Los Angeles. The United States
alleged that California and Los Angeles billed Medicaid for services provided to persons not eligible
for Medicaid because they didn't meet the required standard of need.
* $29 million from Lifemark Hospitals of Florida, a subsidiary of Tenet Healthcare Corporation.
Tenet and its subsidiary allegedly participated in a host of schemes including submitting false
Medicare claims for home health services; for hospital services not rendered; for services provided
by unskilled, unlicenced, or uncertified personnel; for services not ordered by a physician; and for
services inadequately documented as required under the program.
* In another settlement, 139 hospitals owned and operated by Tenet paid the United States $17
million to resolve false claims allegations spanning several federally insured health care programs,
including Medicare, Medicaid, TRICARE (covering military personnel and their families), and the
Federal Employees Health Benefits Program.
* $21.5 million from Union Oil Company of California (Unocal) for allegedly underpaying the
Department of Interior royalties owed for oil extracted from federal lands. Unocal was the last of
16 major oil companies to settle claims in four related qui tam actions in which more than $430
million was recovered by the federal government, plus an additional $10 million on behalf of Native
Americans for similar losses suffered on tribal lands.
* $8.7 million from Intertek Testing Services Environmental Testing Laboratories. Intertek held
contracts with the Air Force, Navy, Army Corps of Engineers, and Environmental Protection Agency
to test air, liquid, and soil samples for hazardous substances. The settlement resolved claims that
Intertek failed to perform tests as required by its contracts.
* $7.3 million from Lockheed Martin in two settlements. In the first, Lockheed Martin and BAE
Systems Controls paid the United States $6.2 million to resolve allegations that Lockheed Martin,
BAE, and their predecessors delivered over 1,300 accelerometer sensor assemblies that did not
comply with contract specifications. The assemblies were components installed in the Navy F/A18
Hornet in the 80s and 90s to control the aircraft's rudder. The second settlement for $2.1 million
resolved claims that the company's Tactical Systems Division, when still owned by Unisys, charged
the government for unallowable bid and proposal costs on a series of defense contracts for the
Trident Missile program.
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