DOJ Secures $5.6 Billion in False Claims Act Recoveries in Fiscal Year 2021 

DOJ Secures $5.6 Billion in False Claims Act Recoveries in Fiscal Year 2021 

On February 1, 2022, the U.S. Department of Justice (DOJ) announced that the Department recovered approximately $5.6 billion in False Claims Act (FCA) settlements and judgments in 2021, the second-highest annual total of FCA recoveries. These recoveries represent a significant increase from fiscal year 2020, during which DOJ recovered approximately $2.2 billion, and it is the most recovered since 2014, when DOJ reported $6.2 billion in FCA recoveries.

DOJ's $5.6 billion in recoveries arose principally from health care fraud. DOJ reported that matters involving the health care industry accounted for approximately $5 billion of last year's settlements and judgments, of which fraud arising from the opioid crisis represents more than half. In October 2020, DOJ entered into an agreement for $2.8 billion with Purdue Pharma LP, the manufacturer of OxyContin, to resolve criminal and civil claims regarding its alleged promotion of the opioid in furtherance of "unsafe, ineffective, and medically unnecessary" prescriptions, though the matter is still in litigation. The government also resolved FCA claims against members of the Sackler family, the founders and owners of Purdue, through a $225 million settlement, plus a $600 million agreement with Indivior PLC for the alleged false marketing of addiction treatment Suboxone. Aside from the opioid crisis, the government investigated alleged fraud surrounding Medicare Advantage, Medicare's managed care program, as well as unlawful kickbacks.  

DOJ also published a statistical sheet reflecting that DOJ filed 203 new FCA cases in 2021, as compared to 259 filed in 2020, which still represents the second-highest number of FCA suits filed by DOJ since 1995. Only 598 qui tam suits were filed in 2021, which DOJ said was the lowest number of whistleblower suits since 2010. All told, whistleblowers recovered close to $1.67 billion in 2021. DOJ stated that the federal government considers the FCA to be "one of the most important tools available to the department both to deter and to hold accountable those who seek to misuse public funds."

Read the Law360 article here.

Former Home Health Agency Owner Pleads Guilty To Misappropriating Funds for COVID-19 Patients

A Michigan-based woman who previously owned 1 on 1 Home Health (1 on 1), a home health agency in LaPorte, Indiana, pled guilty in the Eastern District of Michigan to one count of theft of public money arising from her misuse of COVID-19 funding. As part of her guilty plea, the defendant admitted that 1 on 1 was never operational during the pandemic, yet received approximately $37,657 for the medical care of COVID-19 patients. The defendant admitted that instead of using the funds to treat COVID-19 patients, she issued checks to her family members for personal use. The defendant's sentencing is scheduled for May 19, and she faces a maximum of 10 years in prison.

The charges brought in this case were the first criminal charges for the intentional misuse of funds from the CARES Act Provider Relief Fund, which was designed to provide aid to health care providers to treat patients suffering from COVID-19, and compensate them for that treatment.

Read the press release here.

5th Circuit Considers Securities Fraud Suit Against Former NFL Quarterback, Brett Favre

The Fifth Circuit heard an oral argument on January 31, 2022, to decide whether venture capital firm Callais Capital Management LLC (Callais) adequately pled $16.9 million securities fraud claims against former NFL quarterback Brett Favre and executives of Sqor Inc., a sports-centric social media platform. Callais alleges it was fraudulently induced into investing $16.9 million into the company, which is now bankrupt. Callais's lawsuit alleges that it began investing large sums of money into Sqor beginning in 2015, and learned in April 2017 that Squor's executives had been artificially inflating the company's value, which Callais believes to be $0. The district court dismissed the complaint with prejudice, concluding that the allegations lacked sufficient particularity and failed to meet the heightened pleading standard required by the Private Securities Litigation Reform Act (PSLRA) and Federal Rule of Civil Procedure 9(b).

On appeal, Callais argued before the panel that the district court incorrectly found that Callais failed to identify the "speaker" who made the allegedly fraudulent misrepresentations because the allegations are attributable to the entire group of defendants who executed the plan to defraud Callais. Judge E. Grady Jolly questioned whether that argument was "running around the point of the rule" because the PSLRA requires that a securities fraud claim plead the time, place, and identity of the speaker as well as the context of the misrepresentation and why the challenged statement is false or misleading. Callais responded that its allegations were sufficient because, although it does not yet know who created Squor's allegedly misleading business plan, the false information contained in it was used to procure the investment.

Counsel for the appellees argued that Brett Favre was named as a defendant only because Callais is "looking for deep pockets," noting that the complaint fails to plead how Favre misled Callais or how he was involved in the business plan. The complaint alleges that Sqor misrepresented the number of users on its platform by attributing the social media followings of professional athletes, including Favre's, as its own, in order to inflate the company's value. Sqor also allegedly overstated the extent of its relationship with German soccer club FC Bayern Munich, among other misrepresentations.

The case is Callais Capital Management v. Wilhite, case number 21-30222, in the U.S. Court of Appeals for the Fifth Circuit.
 
Read the Law360 article here.