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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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The Department of Justice obtained more than $2.8 billion in fiscal year (FY) 2018 in settlements and judgments from civil False Claims Act cases, according to DOJ’s press release issued in late December. According to the yearly statistics that accompanied DOJ’s press release, last year’s FCA recoveries were lower than the yearly recoveries from 2010 to 2017, but they mark 10 consecutive years of total FCA recoveries exceeding $2 billion each year. DOJ noted in its press release that FCA recoveries since 1986 now total more than $59 billion.

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Of the $2.8 billion in settlements and judgments in FY 2018, $2.5 billion involved the health care industry. DOJ’s press release announced that this is the ninth consecutive year that DOJ’s civil health care fraud settlements and judgments have exceeded $2 billion.

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DOJ noted that in addition to health care fraud, “the False Claims Act serves as the government’s primary civil remedy to redress false claims for federal funds and property involving a multitude of government operations and contracts. These areas range from defense and national security to import tariffs and small business programs.” In cases relating to the Department of Defense, in FY 2018 there were total recoveries of about $107.5 million.

DOJ also announced that whistleblowers filed 645 qui tam suits in FY 2018, and that DOJ recovered over $2.1 billion from these and earlier-filed qui tam suits. DOJ announced that during the same period, the government paid out $301&nbsp;million to relators who filed these qui tam actions.

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DOJ also released its annual FCA statistics in the form of a spreadsheet that includes data for each fiscal year since 1987. The data for FY 2018 shows that in addition to 645 new qui tam cases, there were 122 new non-qui tam cases filed. The total recoveries from FCA settlements and judgments were about $2.881 billion, of which $2.113 billion resulted from qui tam cases and $767 million resulted from non-qui tam cases.

The statistics each year demonstrate that DOJ decisions on whether to intervene have a major impact on the outcome of any FCA case. Of the $2.113 billion resulting from qui tam cases, only about $119 million resulted from cases where DOJ declined to intervene (with the majority of recoveries where DOJ intervened or “otherwise pursued” the case). Of the relator share awards totaling about $301.7 million, only about $32.7 million resulted from cases where DOJ declined to intervene.

While the majority of DOJ’s recoveries are in the health care field, DOJ’s press release highlighted several examples of procurement fraud. DOJ discussed the case of Toyobo Co. Ltd. of Japan and its American subsidiary, which paid $66 million to resolve claims that they sold defective Zylon fiber used in bullet proof vests purchased by the United States for federal, state, local and tribal law enforcement agencies.

DOJ also highlighted the case of UK marine services contractor Inchcape Shipping Services and its subsidiaries, which paid $20 million to resolve allegations that they overbilled the U.S. Navy under contracts to provide services to Navy ships at ports throughout the world.

In another case, TrellisWare Technologies Inc. paid over $12&nbsp;million to settle allegations that it was ineligible for multiple Small Business Innovation and Research (SBIR) contracts it had entered into with the Navy, Army and Air Force. DOJ had alleged that TrellisWare was not eligible for the SBIR awards because it was a majority-owned subsidiary of a large company at the time it was awarded and performed the SBIR contracts.

Implications for Corporate Compliance and Mandatory Disclosure

With 10 consecutive years of FCA recoveries exceeding $2&nbsp;billion, there is significant enforcement pressure adding to the Federal Acquisition Regulation’s Mandatory Disclosure Rule (MDR). Government contractors face the reality that if they do not detect and disclose potential FCA violations, whistleblowers may do so for them. Government contractors also have the opportunity to disclose potential violations in a manner that can prevent additional violations and that is consistent with the FAR, their contracts and good corporate citizenship.

The MDR, added to the FAR in 2008, requires government contractors to disclose certain potential violations of law, including “credible evidence” of a violation of certain criminal laws or the civil FCA. FAR clause 52.203-13, “Contractor Code of Business Ethics and Conduct,” implements the MDR in all federal contracts and subcontracts that are expected to exceed $5 million with a performance period of 120 days or more. FAR 52.203-13 also requires (with exceptions for small businesses and commercial items) the contractor to establish an ongoing business ethics awareness and compliance program and an internal control system, with related standards set out in the clause.

Best practices require robust compliance with the MDR, the FAR, and statutory, regulatory and contractual requirements, as well as the company’s code of business ethics and conduct. DOJ’s annual release of FCA statistics provides a yearly reminder and added incentive for robust corporate compliance efforts in 2019 and beyond.

Joseph R. Berger 202.263.4193 <a href="mailto:Joseph.Berger@ThompsonHine.com">Joseph.Berger@ThompsonHine.com</a>

Tom Mason 202.263.4168 <a href="mailto:Thomas.Mason@ThompsonHine.com">Thomas.Mason@ThompsonHine.com</a>

Ray McCann 202.263.4152 <a href="mailto:Ray.McCann@ThompsonHine.com">Ray.McCann@ThompsonHine.com</a>

Francis E. Purcell, Jr. 202.263.4118 <a href="mailto:Chip.Purcell@ThompsonHine.com">Chip.Purcell@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

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DOJ Recovers $2.8 Billion in False Claims Act Cases in FY 2018

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