Is Enforcement Just the Cost of Doing Business for Repeat Offenders?

Opponents of the False Claims Act (FCA) and other whistleblower programs often deride whistleblowers as disgruntled employees or those just looking to make a buck, but the fact is that whistleblowers uncovering fraud on the government and financial markets do not stand to profit anywhere near as much as the corporations behind the fraud schemes they expose. One way to measure this is in the number of defendants who are repeat offenders, settling case after case despite enforcement efforts aimed at stopping bad behavior.

We rely on large healthcare organizations to provide quality, streamlined care, but often they are putting profits over patients over and over again. For instance, according to a non-profit organization that maintains a database of reported FCA violations and how they are resolved, Tenet Healthcare or its subsidiaries have settled at least 14 FCA cases in the past 20 years, including for sums as large as $900 million. Despite paying out well over a billion dollars to settle FCA allegations, just this May, Tenet settled a case alleging kickbacks – a common theme among Tenet’s settlements – for almost $30 million.

At a time when drug prices are at an all time high and the government has made it a priority to rein them in, it may be hard to believe that those corporations need to game the system in order to make even more money. However, Pfizer or its subsidiaries have settled at least 18 FCA cases in the last 20 years, including for sums as large as almost $800 million. Other pharmaceutical giants, Merck and Novartis and their subsidiaries, have settled at least 12 FCA cases each over the last 20 years. A look at the numbers for almost any of the large drug companies will yield similar results, often with cases involving adulterated drugs, promotion of drugs for improper uses, and billing the government inflated prices.

As we explained in a post earlier this month on Fraud by the Numbers, the United States outpaces the rest of the world in defense spending many times over, but there is very little enforcement in the area of defense fraud. Even so, government contractors providing weapons and systems to the Department of Defense continue to receive contracts even after settling multiple FCA actions. For instance, Boeing, one of the country’s most prolific military contractors has settled at least 12 FCA cases in the last 20 years, including allegations that the company provided the United States with military aircraft containing faulty parts.

While whistleblowers usually get only one shot to attempt to end fraudulent – and sometimes unsafe – conduct on the part of these large corporations, many defendants continue to violate the FCA many times over, often changing schemes over time when they are discovered.

However, that is not to say that all is for naught. Much higher fines and penalties, including jail time for executives who oversee these schemes, may go a long way to changing behavior. Additionally, more United States Attorney’s Offices and state Attorney General’s Offices are requiring defendants to admit the truth of the allegations in settlement agreements when cases are resolved. But whistleblowers are already responsible for changing behavior. Dangerous and costly fraud schemes are being brought to light and stopped. Whistleblowers are becoming nimble right alongside fraudsters, uncovering new types of schemes and bringing them to the attention of the government and the public. Whistleblowers bringing and pursuing novel cases are changing the way industries function and the way enforcement looks. Corporations may continue to attempt to defraud the government, but whistleblowers will be there to make sure they don’t get away with it.

Jacklyn DeMar is the Director of Legal Education at The Anti-Fraud Coalition