This is the accessible text file for GAO report number GAO-06-320R entitled 'Information on False Claims Act Litigation' which was released on March 3, 2006. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. January 31, 2006: The Honorable F. James Sensenbrenner, Jr. Chairman, Committee on the Judiciary: House of Representatives: The Honorable Chris Cannon: Chairman, Subcommittee on Commercial and Administrative Law: Committee on the Judiciary: House of Representatives: The Honorable Charles E. Grassley: United States Senate: Subject: Information on False Claims Act Litigation: The False Claims Act (FCA) is one of the government's primary weapons to fight fraud against the government. The Act, as amended in 1986, provides for penalties and triple damages for anyone who knowingly submits or causes the submission of false or fraudulent claims to the United States for government funds or property.[Footnote 1] Under the FCA's qui tam provisions, a person with evidence of fraud, also known as a whistle blower or relator, is authorized to file a case in federal court and sue, on behalf of the government, persons engaged in the fraud and to share in any money the government may recover. The Department of Justice (DOJ) has the responsibility to decide on behalf of the government whether to join the whistle blower in prosecuting these cases. From fiscal years 1987 through 2005, settlements and judgments for the federal government in FCA cases have exceeded $15 billion, of which $9.6 billion, or 64 percent, was for cases filed by whistle blowers under FCA's qui tam provisions.[Footnote 2] The whistle blowers share of the qui tam settlements and judgments was over $1.6 billion during this period. With regard to your request to provide information on FCA litigation, this report addresses the following questions: * What statutory guidance and DOJ policies exist regarding the relationship between the government and relators in prosecuting qui tam cases? * What is known about DOJ's qui tam caseload based on the data it collects? To determine what statutory guidance and DOJ policies exist, we reviewed applicable laws, regulations, and DOJ policies regarding the relationship between the government and relators in prosecuting qui tam cases. We interviewed DOJ and other federal officials and private practice attorneys involved in qui tam litigation. To provide information on DOJ's qui tam caseload, we obtained DOJ's qui tam database on closed unsealed qui tam cases for fiscal years 1987 through 2005 and conducted computerized analyses of certain data fields. To assess the reliability of the data, we discussed the data collection methods for ensuring data quality with responsible officials and reviewed the data for reasonableness. We found the data we used for our analyses were sufficiently reliable for the purposes of this report. In December 2005, we discussed with your offices the results of our work. This document conveys the information provided during those discussions (see enclosure). We performed our work from April 2005 through January 2006 in accordance with generally accepted government auditing standards. Results: The briefing slides in the enclosure address our two objectives. In summary, we found the following: * Under the FCA, the federal government has primary responsibility for prosecuting a qui tam case and it is at the DOJ's discretion to involve the relator on a case-by-case basis. DOJ officials told us that their policy is broad and encourages DOJ attorneys to recognize the benefits of a cooperative relationship with relators and to exercise their professional judgment in dealing with them. DOJ does not collect data that document the extent of the relator's participation in the prosecution of a qui tam case, nor is it required to do so. * DOJ's Civil Division received 8,869 FCA cases from fiscal years 1987 through 2005.[Footnote 3] During this period, the number of qui tam FCA cases generally increased as a proportion of total FCA cases. Agencies under the Departments of Health and Human Services and Defense were named more frequently than other agencies as allegedly defrauded in qui tam cases DOJ received. The 2,490 closed, unsealed qui tam cases that GAO analyzed were filed in 92 U.S. district courts. Health care and procurement fraud cases constituted about 79 percent of all qui tam cases. DOJ pursued health care fraud cases (33 percent or 363 of the total 1,117 health care cases) and procurement fraud cases (29 percent or 237 of the total 819 procurement cases) more than other types of fraud cases.[Footnote 4] Cases in which DOJ intervened took a median of 38 months to conclude and ranged from 4 months to 187 months. The median FCA recovery in a qui tam case was $784,597, of which the median relator share was $123,885.[Footnote 5] Recoveries and relator's share amounts in health care fraud cases were larger than in other types of fraud. Recoveries and relator share amounts were greater in cases where DOJ intervened than in cases where DOJ declined to intervene. Agency Comments and Our Evaluation: We requested comments on a draft of this letter from the Departments of Justice, Health and Human Services, and Defense. The Department of Justice provided technical comments, which we incorporated into this letter. The Departments of Health and Human Services and Defense had no comments. As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time, we will provide copies of this report to the Attorney General and other interested parties. We will also provide copies to others on request. In addition, the letter will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions or need additional information, please contact me at (202) 512-8777, ekstrandl@gao.gov. Major contributors to this letter were John Hansen, Assistant Director, Nancy Kawahara, Christine Davis, John G. Smale, Jr., George H. Quinn, Jr., and Dorian Dunbar. Signed by: Laurie E. Ekstrand: Director, Homeland Security and Justice: Enclosure: Information on False Claims Act Litigation: Briefing for Congressional Requesters: December 15, 2005: Introduction: Since Congress amended the False Claims Act (FCA) [NOTE 1] in 1986, the government has won recoveries of over $15 billion from fiscal years 1987 through 2005. Of the $15 billion, 64 percent, or $9.6 billion, was for recoveries associated with cases filed by whistle blowers under FCA's qui tam provisions. [NOTE 2] Whistle blowers were entitled to a share of these qui tam recoveries, which totaled over $1.6 billion during this period. The Department of Justice (DOJ) has the responsibility to decide on behalf of the government whether to join the whistle blower in prosecuting these cases. NOTES: [1] The False Claims Act, as amended, is codified at 31 U.S.C. §§ 3729- 33. [2] Represents funds the government is entitled to recover as a result of qui tam case settlements or court judgments. These funds may or may not have been collected by the government. A DOJ official told us that while most of these funds arise from FCA allegations in the qui tam complaint, some funds are attributable to government initiated claims under the FCA and other statutory and common law claims, such as breach of contract, bribery, or conflict of interest, and that the relator is not entitled to a share of these funds. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. Definitions: Term: False Claims Act; Definition: The FCA is a civil antifraud statute, providing that any person who knowingly submits or causes the submission of false claims for government funds or property is liable for damages and penalties. Term: Qui tam; Definition: Qui tam is an abbreviation for a Latin phrase dating back to 13th century England, meaning a person who sues for the king as well as for himself. Under the FCA, a qui tam case is filed by a private person on behalf of the federal government. The government can also pursue FCA claims through federal agency investigations and referrals without a relator. Term: Relator; Definition: A person who files a civil case for a violation of the FCA. Relators are also known as whistle blowers. Term: Case under seal; Definition: Under the FCA, a relator files a qui tam case under court seal, and the case is not publicly disclosed. Until the court lifts the seal in whole or in part, no records relating to the case may be disclosed, except to DOJ. Term: DOJ intervenes in a qui tam case; Definition: DOJ represents the government and is a named party in every qui tam case. When DOJ decides to intervene in a case, it takes primary responsibility for prosecuting the case. Term: DOJ declines to intervene in a qui tam case; Definition: When DOJ declines to intervene in the case, the relator has the right to pursue the case without the government. However, DOJ can decide to intervene in the case upon showing of good cause, and any settlements in the case are made with the consent of the government. Term: Qui tam recoveries; Definition: The funds the government is entitled to recover as a result of qui tam case settlements or court judgments. These funds may or may not have been collected by the government. A DOJ official told us that while most of these funds arise from FCA allegations in the qui tam complaint, some are attributable to government initiated claims under the FCA and other statutory and common law claims, such as breach of contract, bribery, or conflict of interest, and that the relator is not entitled to a share of these funds. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. Term: Relator share of qui tam recoveries; Definition: If the qui tam case is successful, the relator is entitled to a share of the recoveries. [End of table] Objectives: What statutory guidance and DOJ policies exist regarding the relationship between the government and relator in prosecuting qui tam cases? What is known about DOJ's qui tam caseload based on the data it collects? Scope and Methodology: To determine what statutory and DOJ guidance exist regarding the relationship between the relator and the government, we: * reviewed applicable laws, regulations, and DOJ policies and: * interviewed DOJ and other federal officials and private attorneys involved in qui tam cases. To provide information on DOJ's qui tam caseload, we: * obtained DOJ's qui tam database on closed unsealed qui tam cases for fiscal years 1987 through 2005 and conducted computerized analyses of certain data fields. Data Reliability: To assess the reliability of the data, we: * discussed the data collection methods with responsible agency staff, * reviewed the data and information for reasonableness, and: * obtained related documentation where available. We found that the DOJ qui tam database we used for our analyses was sufficiently reliable for the purposes of this report. Results in Brief-FCA and DOJ Guidance on the Government-Relator Relationship: Under the FCA, the federal government has primary responsibility for prosecuting a qui tam case and it is at DOJ's discretion to involve the relator on a case-by-case basis. DOJ officials told us that their policy is broad and encourages DOJ attorneys to recognize the benefits of a cooperative relationship with relators and to exercise their professional judgment in dealing with them. DOJ does not collect data that document the extent of the relator's participation in the prosecution of a qui tam case, nor is it required to do so. Results in Brief-Information on Qui tam Cases: Of the total 8,869 FCA cases [NOTE 1] DOJ's Civil Division received from fiscal years 1987 through 2005, the number of qui tam FCA cases generally increased as a proportion of total FCA cases. The Departments of Health and Human Services (HHS) and Defense (DOD) agencies were named more frequently than other agencies as allegedly defrauded in qui tam cases DOJ received. The 2,490 closed, unsealed qui tam cases that GAO analyzed were filed in 92 U.S. district courts; the Central District of California (Los Angeles) was the busiest, with 10 percent of all cases filed. Health care and procurement fraud cases constituted about 79 percent of all qui tam cases. * DOJ pursued [NOTE 2] health care fraud cases (33 percent or 363 of the total 1,117 health care cases) and procurement fraud cases (29 percent or 237 of the total 819 procurement cases) more than other types of fraud cases. * Cases in which DOJ intervened took a median of 38 months to conclude and ranged from 4 months to 187 months. Results in Brief-Information on Qui tam Cases: * The median FCA recovery in a qui tam case was $784,597. Of that amount, the median relator share was $123,885. [NOTE 3] * Recoveries and relator's share amounts in health care fraud cases were larger than in other types of fraud. * Recoveries and relator share amounts were greater in cases where DOJ intervened than in cases where DOJ declined to intervene. NOTES: [1] Represents newly received FCA referrals and investigations initiated by the government and newly filed qui tam cases initiated by a relator. These include open cases and cases under seal. According to a DOJ official, this does not include non-qui tam cases under $5 million handled by the United States Attorney's offices. The official also told us that the Civil Division does not maintain data on these cases. [2] Includes DOJ intervened cases and cases settled by DOJ before declination or intervention. [3] includes relators whose qui tam case resulted in a settlement or judgment, but the relators received zero or a reduced share of the government's recovery. A DOJ official told us that these cases involved instances where the relator's entitlement to a full statutory share was jurisdictionally barred or in question and that this information is reflected in DOJ case files. Background-Qui Tam provisions of the False Claims Act: * Anyone who knowingly submits or causes the submission of false claims to the government is liable for damages up to three times the erroneous payment, plus civil penalties. * A private individual with knowledge of false claims-called the relator-may bring a suit on the government's behalf called a qui tam case. * The relator's incentive to sue is the potential to share in the recoveries if the case is successful. Background-Qui Tam Procedures under the FCA: * The relator can file a qui tam complaint under seal in any U.S. district court where any defendant can be found, resides, or transacts business, or in any U.S. district court where the fraud occurred, with a copy of the complaint served on the Attorney General and the appropriate U.S. Attorney. * The complaint remains under seal for 60 days (or longer for good cause shown) while DOJ and/or other federal agency fraud units investigate the allegations and DOJ decides whether to intervene and take over the case. * Qui tam litigation is handled either by DOJ's Civil Division or the United States Attorneys, sometimes on a joint basis. Generally, U.S. Attorneys handle investigations of FCA claims under $5 million, including referrals from federal agencies and qui tam cases. The Civil Division tracks qui tam cases litigated by the United States Attorneys for statistical reporting purposes. [NOTE] NOTE: According to a DOJ official, the Civil Division does not track non-qui tam cases generally under $5 million which were initiated and pursued by the U.S. Attorneys' Offices. Background-Government Intervention or Declination in a Qui Tam Case: DOJ officials told us that after investigating the allegations and considering the input of relevant government officials, DOJ makes a decision to: * Intervene and take over primary responsibility for prosecuting the case. DOJ may intervene and decide to take over some but not all of the relator's claims. * Decline to intervene. The relator has the right to continue as a party, but the government retains the right to intervene upon a showing of good cause. * Settle the case before intervening. Whether or not DOJ intervenes, the government may settle the case over the relator's objections if the court determines that the proposed settlement is fair, adequate, and reasonable. Background-Relator's Share in Qui Tam Recoveries: In general, the relator in a successful qui tam suit is entitled to a share of the recovery: * between 25 and 30 percent if the government declines to intervene. * between 15 and 25 percent if the government intervenes. Background-Relator's Share in Qui Tam Recoveries: Several factors may affect the relator's share of the recovery, such as: * how substantially the relator contributed to the case, * whether the case primarily depended on disclosures from other sources (in which case the relator's share can be no more than 10 percent), * whether the relator planned and initiated the false claim (in which case the relator's share can be reduced to any amount the court deems appropriate), and: * whether statutory bars preclude the relator from sharing in the recovery because of a criminal conviction or a jurisdictional disqualification in the case. Background-Health Care Fraud and Abuse Control Program: The Health Insurance Portability and Accountability Act of 1996, among other things, established a Health Care Fraud and Abuse Control Program (HCFAC) to strengthen ongoing efforts to combat fraud and abuse in health care programs. Under the HCFAC program, a portion of settlements and judgments resulting from FCA cases involving health care fraud are used to finance part of the antifraud activities in HHS and DOJ. In fiscal year 2004, HHS and DOJ were allocated over $240 million from HCFAC program funds to devote to their health care fraud enforcement activities. FCA and DOJ Guidance on the Government-Relator Relationship: FCA Gives Government Discretion in Its Relationship with Relator: * If the government intervenes, the FCA gives the government primary responsibility for prosecuting a qui tam case. * The FCA does not specify the degree to which the government must cooperate with the relator. * DOJ attorneys use their discretion in deciding how much the relator and relator's counsel may assist in the case. DOJ Policy Is Broad Regarding the Government-Relator Relationship: DOJ officials told us that their policy is broad and encourages DOJ attorneys to recognize the benefits of a cooperative relationship with relators and to exercise their professional judgment in dealing with them. Many factors could affect the Government-relator relationship, such as * the amount of information the relator possesses about the potential fraud, * the degree of experience possessed by the relator's counsel, * the existence of a criminal investigation and other issues involving sensitivity of data, such as privacy or national security, and: * interpersonal dynamics between the relator and defendant. DOJ Data Documenting the Relationship between the Government and the Relator: DOJ does not collect data that document the extent of the relator's participation in the prosecution of a qui tam case, nor is it required to do so. Information on DOD's Qui Tam Caseload for Fiscal Years 1987 through 2005: The Number of New Qui Tam Cases Generally Increased: Of the total 8,869 new FCA cases [NOTE 1] DOJ's Civil Division received from fiscal years 1987 through 2005, the number of qui tam cases generally increased as a proportion of the total FCA cases. New FCA Cases, Fiscal Years 1987 through 2005: [See PDF for image] Source: DOJ's Civil Division Fraud Statistics which include open cases and qui tam cases under seal. [End of table] NOTE: [1] Represents newly received FCA referrals and investigations initiated by the government and newly filed qui tam cases initiated by a relator. HHS and DOD Agencies More Frequently Named as Allegedly Defrauded: HHS and DOD agencies were more frequently named than other agencies as allegedly defrauded in qui tam cases DOJ received. HHS agencies were named 54 percent of the time and DOD agencies were named 29 percent of the time of the total 5,129 qui tam cases DOJ received from fiscal year 1987 through 2005. Number of Qui Tam Cases Listed by Allegedly Defrauded Agency, Fiscal Years 1987 through 2005: [See PDF for image] Note: More than one federal agency could be named in each qui tam case. Source: DOJ's Civil Division Fraud Statistics, which includes open cases and qui tam cases under seal. [End of table] Qui Tam Cases Filed in U.S. District Courts: The 2,490 closed, unsealed qui tam cases GAO analyzed were filed in 92 U.S. district courts. The Central District of California (Los Angeles) was the busiest, with 10 percent of all cases filed. Table legend: C.D. = Central district M.D. = Middle district E. D. = Eastern district D. = Statewide district S. D. = Southern district W.D. =Western district N.D. = Northern district: Qui Tam Cases Filed in U.S. District Courts, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [End of table] Most Cases Involve Health Care and Procurement Fraud: Health care and procurement fraud cases constitute about 79 percent of all qui tam cases. Health care fraud cases were pursued in part by DOJ and HHS staff funded by the HCFAC program. Types of Fraud Alleged in Qui Tam Cases, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] A DOJ official told us that the miscellaneous fraud category includes cases where the complaint is vague or does not fit into other case types. [End of table] DOJ Pursued Health Care and Procurement Cases More Often than Others: DOJ pursued health care fraud cases (33 percent or 363 of total 1,117 health care cases) and procurement fraud cases (29 percent or 237 of total 819 procurement cases) more than other types of fraud cases. Percent of Qui Tam Cases Pursued by DOJ Listed by Type of Fraud Alleged, Fiscal Years 1987 through 2005: [See PDF for image] Note: Does not include 132 cases that were dismissed prior to DOJ's decision to intervene in the case. Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] Includes cases where DOJ decided to intervene in some but not all of the realtor's claims. [2] The sum of DOJ intervened cases and cases settled by DOJ before intervention or declination. [3] A DOJ official told us that the miscellaneous fraud category includes cases where the complaint is vague or does not fit into other case types. [End of table] Time to Conclude Qui Tam Cases in Which DOJ Intervened: Cases in which DOJ intervened took a median of 38 months to conclude and ranged from 4 months to 187 months. [NOTE 1] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. NOTE: [1] Includes cases where DOJ decided to intervene in some but not all of the realtor's claims. Time period measured between date the complaint was filed to the date the case was concluded by settlement, judgment, or dismissal. Qui Tam Recoveries: Mean: $10,028,482 Median: $784,597: Qui Tam Recoveries, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] According to a DOJ official, a portion of these qui tam settlement and judgment amounts could include amounts attributable to government initiated claims under the FCA and other statutory or common law claims, such as breach of contract, bribery, or conflict of interest. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. [End of table] Relator Share of Qui Tam Recoveries: Mean: $1,700,153 Median: $123,885: Total Relator Share Amounts of Qui Tam Recoveries, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] Includes relators whose qui tam case resulted in a settlement or judgment, but the relators received zero or a reduced share of the government's recovery. A DOJ official told us that these cases involved instances where the relator's entitlement to a full statutory share was jurisdictionally barred or in question and that this information is reflected in DOJ case files. [End of table] Qui Tam Recoveries by Type of Fraud Alleged: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] According to a DOJ official, a portion of these qui tam settlement and judgment amounts could include amounts attributable to government initiated claims under the FCA and other statutory or common law claims, such as breach of contract, bribery, or conflict of interest. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. [2] A DOJ official told us that the miscellaneous fraud category includes cases where the complaint is vague or does not fit into other case types. [End of table] Relator Share of Qui Tam Recoveries by Type of Fraud Alleged: Relator Share Amounts by Type of Fraud Alleged, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] A DOJ official told us that the miscellaneous fraud category includes cases where the complaint is vague or does not fit into other case types. [End of table] Qui Tam Recoveries by DOJ Case Intervention: Qui tam recoveries from cases where DOJ intervened were greater than in cases where DOJ declined to intervene. Qui Tam Recoveries by DOJ Case Intervention, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] According to a DOJ official, a portion of these qui tam settlement and judgment amounts could include amounts attributable to government initiated claims under the FCA and other statutory or common law claims, such as breach of contract, bribery, or conflict of interest. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. [2] Includes cases where DOJ intervened in some but not all of the realtor's claims. [End of table] Relator Share of Qui Tam Recoveries by DOJ Case Intervention: Relator share amounts were greater in cases where DOJ intervened than in cases where DOJ declined to intervene. Relator Share of Qui Tam Recoveries by DOJ Case Intervention, Fiscal Years 1987 through 2005: [See PDF for image] Source: GAO analysis of DOJ's Civil Division data on closed, unsealed qui tam cases. [1] Includes relators whose qui tam case resulted in a settlement or judgment, but the relators received zero or a reduced share of the government's recovery. A DOJ official told us that these cases involved instances where the relator's entitlement to a full statutory share was jurisdictionally barred or in question and that this information is reflected in DOJ case files. [2] Includes cases where DOJ intervened in some but not all of the relator's claims. [End of table] [End of slide presentation] [End of section] (440383): This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. FOOTNOTES [1] The False Claims Act, as amended, is codified at 31 U.S.C. §§ 3729- 33. [2] Represents funds the government is entitled to recover as a result of qui tam case settlements or court judgments. These funds may or may not have been collected by the government. A DOJ official told us that while most of these funds arise from FCA allegations in the qui tam complaint, some funds are attributable to government initiated claims under the FCA and other statutory and common law claims, such as breach of contract, bribery, or conflict of interest, and that the relator is not entitled to a share of these funds. The official also told us that precise amounts attributable to each claim may not be distinguished in the case of a lump-sum settlement or judgment. [3] Represents newly received FCA referrals and investigations initiated by the government and newly filed qui tam cases initiated by the relator. These include open cases and cases under seal. According to a DOJ official, these cases do not include non-qui tam cases under $5 million handled by the United States Attorneys' Offices. The official told us that the Civil Division does not maintain data on these cases. [4] Includes cases in which DOJ intervened and cases settled by DOJ before declination or intervention. [5] Includes relators whose qui tam case resulted in a settlement or judgment, but the relators received zero or a reduced share of the government's recovery. A DOJ official told us that these cases involved instances where the relator's entitlement to a full statutory share was jurisdictionally barred or in question and that this information is reflected in DOJ case files.