False Claims and Other Frauds
By
Phil Mattera in the Dirt Diggers
Digest
The False Claims Act sounds like the name of a Donald Trump
comedy routine, but it is actually a 150-year-old law that is widely used to
prosecute companies and individuals that seek to defraud the federal
government.
It is also the focus of the latest expansion of Violation Tracker, the
database of corporate crime and misconduct we produce at the Corporate Research
Project of Good Jobs First.
The resource now contains 112,000 entries from 30 federal
regulatory agencies and all divisions of the Justice Department. The cases
account for some $300 billion in fines and settlements.
Through the addition of some 750 False Claims Act and related
cases resolved since the beginning of 2010, we were able to identify the
biggest culprits in this category. Drug manufacturers, hospital systems,
insurers and other healthcare companies have paid nearly $7 billion in fines
and settlements.
Banks, led by Wells Fargo, account for the second largest portion of False Claims Act penalties, with more than $3 billion in payments.
More than one-third of the 100 largest federal contractors have
been defendants in such cases during the seven-year period.
Among the newly added cases involving healthcare companies, the
largest is the $784 million settlement the Justice Department reached last
April with Pfizer and its subsidiary Wyeth to resolve allegations that they
overcharged the Medicaid program.
DaVita HealthCare Partners, a leading dialysis provider, was
involved in the next two largest cases, in which it had to pay a total of $800
million to resolve allegations that it engaged in wasteful practices and paid
referral kickbacks while providing services covered under Medicare and other
federal health programs.
Wells Fargo accounts for the largest banking-related penalty and
the largest False Claims Act case overall in the new data: a $1.2 billion
settlement earlier this year to resolve allegations that the bank falsely
certified to the Department of Housing and Urban Development that certain
residential home mortgage loans were eligible for Federal Housing
Administration insurance, with the result that the government had to pay FHA
insurance claims when some of those loans defaulted.
Thirty-five of the 100 largest federal contractors (in FY2015)
have paid fines or settlements totaling $1.8 billion in False Claims
Act-related cases since the beginning of 2010. The biggest contractor, Lockheed
Martin, paid a total of $50 million in four cases, while number two Boeing paid
a total of $41 million in two cases.
The database has also added new search features, such as the
ability to search by 49 different types of offenses, ranging from mortgage
abuses to drug safety violations. Users can view summary pages for each type of
offense, showing which parent companies have the most penalties in the
category.
Penalty summary pages for parents, industries and agencies now also
contain tables showing the most common offenses. Users can add one or more
offense type to other variables in their searches.
Among types of offenses, the largest penalty total comes from
cases involving the packaging and sale of toxic securities in the period
leading up to the financial meltdown in 2008. The top-ten primary case types
are as follows:
- Toxic securities abuses: $68 billion
- Environmental violations: $63 billion
- Mortgage abuses: $43 billion
- Other banking violations: $18 billion
- Economic sanction violations: $14 billion
- Off-label/unapproved promotion of medical products: $12 billion
- False Claims Act cases: $11 billion
- Consumer protection violations: $9 billion
- Interest rate benchmark manipulation: $7 billion
- Foreign Corrupt Practices Act cases: $6 billion
We also added a feature allowing for searches limited to
companies linked to parent companies with specific ownership structures such as
publicly traded, privately held, joint venture, and employee-owned. That’s in
addition to updating the data from the agencies already covered and increasing
the size of the parent company universe to 2,165.
The uproar over the Wells Fargo sham accounts scandal is
heightening the discussion of corporate crime. Violation Tracker hopes to be a
tool in efforts to turn that discussion into lasting change.
