The False Claims Act is one of the Justice Department’s primary tools in combating fraud against the government. But critics say many FCA investigations are routinely dragging on for years, postponing the recovery of taxpayer funds and delaying the punishment of fraudulent companies.
Federal judges have expressed frustration with the long wait times associated with FCA investigations; Congress has legislation pending to speed up the investigatory process, and even businesses accused of fraud are starting to want cases resolved more quickly. The DOJ has indicated that it too would like to resolve cases in a more efficient way, but serious obstacles remain that prevent easy solutions to the problem of seemingly indefinite FCA investigations.
The FCA has led to more than $20 billion in recovered funds since it began to be used widely in fraud cases in the mid-1980’s, and particularly in health care fraud cases more recently. The act includes tough provisions that punish fraudulent companies with fines and exclusion from dealing with government programs, as well as possible exclusion for individuals within fraudulent companies.
But the time it takes for prosecutors to investigate FCA cases and resolve them through settlements or judgments is generating frustration. In whistleblower qui tam cases, which make up the majority of new FCA cases every year, the whistleblower first files suit against the alleged fraudulent group and alerts the government to the lawsuit. Then the DOJ investigates whether to intervene in the case while keeping the case sealed.
In cases that reached a DOJ election decision during the second half of the 1980’s, DOJ lawyers took roughly six months on average to decide whether to intervene. More recently, the average investigation time has ballooned to around two years, according to data collected by David Freeman Engstrom, a law professor at Stanford Law School. And that is just the time from the case being filed until the investigation step is complete. The actual in-court procedure can take an average of 18 more months to resolve.
And there are many cases to resolve: as of January of this year, there were 1,341 FCA qui tam cases alone which the DOJ is investigating under seal– almost two-thirds of which involved health care fraud, the DOJ and the Department of Health and Human Services said in a letter to Sen. Charles Grassley (R-Iowa), who has raised the issue of lingering FCA cases in the past. In the last five years, according to the statistics in the letter, the DOJ resolved 541 qui tam cases by settlement or judgment and 1,244 were declined or dismissed.
Two notable FCA cases took more than a decade to investigate and litigate, and another one that began in the 1990’s and lingered into the next decade was dismissed after a federal judge ruled that it violated the statute of limitations.
That has not been the only action by courts against long FCA cases. Federal judges have long been frustrated with and are increasingly trying to cut cases short, said Laurence Freedman, a partner at Patton Boggs LLP who represents health care industry clients accused of fraud and served as assistant director of the DOJ’s Civil Fraud Section for seven years. The DOJ often asks the court for lengthy extensions to allow more time to investigate, and this is where Freedman said judges have been less flexible in recent years.
In the DOJ’s investigation of the national pain medication monitoring company Millennium Laboratories, for example, a federal district judge denied the government’s request for an extension after 18 months of investigating and so the suit was unsealed before the government made up its mind. The government is still investigating that case.
In Boston, judges are ordering health-care related FCA cases to be unsealed amid a deep backlog.
Congress has also taken notice of the backlog.
In May, Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and ranking member Grassley introduced the Fighting Fraud To Protect Taxpayers Act, and the panel approved the measure later that month. The bill contains a provision designed to help speed up FCA cases.
“It often takes time to build up a False Claims Act case, but cases that are longer than the median average are of concern because they leave whistleblowers in limbo and the federal government spending unnecessary money,” Grassley said in a statement to Main Justice. He said that a provision he included “will require the Justice Department to make transparent the length of time False Claims Act cases languish under seal across the country.”
There is already a dispute about DOJ transparency on the FCA.
In the January letter the DOJ and the Department of Health and Human Services provided to Grassley with information in fraud cases, Assistant Attorney General for Legislative Affairs Ronald Weich wrote that the average length of time an FCA case remained under seal, and therefore investigation, was 13 months.
Engstrom disputes that figure. Engstrom speculates that the DOJ figure may understate the average time qui tam cases remain under investigation because it may include only those cases filed since October of 2006 that have already reached a DOJ election decision, and thus may omit cases that remain under investigation and will not reach an election decision for some time. This latter set of cases, Engstrom said, could be large: among cases that reached an election decision in 2009, for instance, roughly 40 had been under investigation for more than four years, and roughly 100 for more than two years. If this trend continued, there could be many cases filed since 2006 that have been ongoing for more than 13 months but not counted in the DOJ letter to Congress.
A spokesman said a number of factors contribute to the length of time.
Charles Miller, a spokesman for the Civil Division, said in an email that the size and complexity of a case can determine its length, and can be “hampered” by a defendant’s refusal to cooperate or by the naming of hundreds of defendants.
“The Justice Department take seriously its obligation to verify allegations of wrongdoing before intervening or declining in those allegations,” Miller said.
Miller added that cases could also be slowed down by concurrent criminal investigations, which he said complicates the information-gathering and sharing process, and even delay the start of a civil investigation until after the criminal probe concludes.
“This process benefits both the United States and relators, even though it may have the effect of prolonging the seal period,” Miller said.
Outside opinions vary about how to solve the problem.
Freedman said that businesses accused of fraud and their lawyers, who have traditionally favored a longer, drawn-out process to delay any negative press or public attention, increasingly are favoring quicker decision-making, though “without short-cutting the mutual interest in resolving matters that can be resolved,” he said.
Late last month, for example, lawyers from the law firm Skadden, Arps, Slate, Meagher & Flom wrote that companies under investigation should be more aggressive and push to force the government to unseal lawsuits earlier. The firm cites the “government’s pinched resources” combined with thorough investigating, and says these factors will lead to long delays if companies do not actively resist.
But without hurting the quality of investigations or using non-existent extra resources, Freedman says the speed of fraud cases could be increased “if the department had clear authority to dismiss cases, and thus could focus its resources on investigations and litigations that fit its priorities.”
While some believe that the DOJ could do a better job of setting priorities, Engstrom says efficient triage for the DOJ can be difficult, as prosecutors cannot always tell which cases deserve more attention until they first devote resources to look into them. Engstrom called it an informational Catch-22.
“Increasing investigation times is in large part a basic resource problem,” Engstrom said. “But there’s also a tension here: if companies and defense lawyers want cases to be resolved more quickly, that will require more resources for prosecutors. But that could also lead to more aggressive enforcement and, in turn, potentially more qui tam filings, imposing further resource constraints.”
It’s simple math Senator. Fewer lawyers, less money = longer time required to complete a case. Duh.
But the DOJ has no problem going public with it’s intentions when it serves it’s masters politics. Both parties have, but this one has taken it to a new level. Dare I say to the point of corruption. It serves obamacare better to drag it’s feet, and to keep them sealed. What better way to leverage support than blackmail. Look at what they are AGAIN doing with home lenders. Threatening lenders with discrimination claims, and lawsuits in the press while knowing no laws have been broken.
This article is disturbing to some degree. First, it makes a complaint of the lengthy process by suggesting that for 3 1/2 years the defendant in the case has a pending lawsuit causing frustration, and second, it suggests that two years of investigation passes before a decision is made. Neither one of these suggestions lend themselves to the complete truth.
The article makes a disturbing revelation that law firms are pushing to have complaints unsealed. Stop and ask yourself why these law firms are aware of a petition that is filed under seal. The company that is the subject of a qui tam should not be aware that a qui tam has been filed. Thus, the company should not be suffering any frustration during that two years of investigation before complaints are unsealed. No adverse action is taken while a complaint is underseal, certainly not any debarrment action, which occurs after DOJ makes public any criminal or civil complaints.
My second point is to highlight the two years of “investigation.” More often than not, investigative agencies respond quickly to qui tams and make recommendations to DOJ attorneys that lead to dismissal or declinations to intervene. This is supported by the high number of cases that end in such a manner. The shortcoming, and skewering of the numbers, is the amount of time that DOJ attorneys take from informal decision to decline to the formal filing of declination. A better analysis would look at the length of time taken for investigation in cases where ultimately DOJ joined the case. A case headed for formal declination will certainly find itself on a back burner while attorneys pursue cases with merit.