False Claims Act Cases Yield Record 2012 Profits

The federal government recovered nearly $5 billion from False Claims Act cases in 2012 according to a recent press release by the Department of Justice. “The False Claims Act is the government’s primary civil remedy to redress false claims for federal money or property, such as Medicare benefits, federal subsidies and loans and payments under contracts for goods and services, including military contracts.” The Act also encourages whistleblowers to speak out by promising them up to 30 percent of the money recovered by the government.

This record recovery is part of the $13.3 billion that the federal government has recovered from False Claims Act cases since the Obama Administration came into power in January of 2009, “which is the largest four-year total in the Justice Department’s history and more than a third of total recoveries since the act was amended 26 years ago in 1986.” Principal Deputy Assistant Attorney General Delery credited these results “to the brave individuals who initiate many of the investigations through whistleblower suits and to the Obama Administration’s efforts to coordinate enforcement efforts across government.”

An interested development in this area of law is the rise of False Claims Act recoveries deriving from mortgage and foreclosure fraud. The Department of Justice provided the following explanation for, and summary of, the “unprecedented $1.4 billion” recovered in 2012 from mortgage and foreclosure fraud cases:

In November 2009, President Obama established the Financial Fraud Enforcement Task Force to hold accountable the individuals and corporations who contributed to the crisis as well as those who would claim illegal advantage through false claims for funds intended to stimulate economic recovery.   The task force is the broadest coalition of law enforcement, investigative, and regulatory agencies ever assembled to combat fraud…In fiscal year 2012, the Task Force’s efforts resulted in a landmark $25 billion agreement between the federal government, the attorneys general of 49 states and the District of Columbia, on the one hand, and the nation’s five largest mortgage servicers, on the other, to address mortgage loan servicing and foreclosure abuses.   The five settling companies are the Bank of America Corporation, JP Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC).   Among its other provisions – which included significant relief for struggling homeowners – the settlement included resolutions under the False Claims Act that returned more than $900 million to federal mortgage insurance programs, including programs designed to promote home ownership by families and veterans…Other significant settlements to redress false claims in connection with federally insured mortgages include a $202.3 million settlement with Deutsche Bank AG and its subsidiary MortgageIT Inc., a $158.3 million settlement with Citibank subsidiary CitiMortgage Inc. and a $132.8 million settlement with Flagstar Bank.