By Asher Alavi of Kessler Topaz Meltzer & Check, LLP
Although we’ve been discussing healthcare fraud a lot during this month, the original purpose of the 1863 False Claims Act and the 1986 amendments that modernized the statute had one particular aim: to combat fraud in defense spending.
Since 1986, defense spending has continued to grow, as has the reliance on private contractors. Over the past two decades, private contractors have made up an increasing percentage of the overall military budget.
According to a Brown University study, in FY2019, $370 billion was spent on defense contracts, more than half of the overall defense budget of $676 billion and 164% higher than defense spending on federal contracts in 2001, the spending was $140 billion for private defense contractors.
More recently, in FY2020 alone, the Department of Defense (DOD) obligated $420 billion to federal contracts, more than all other federal agencies combined.
In 2021, the False Claims Act is still the government’s best tool against fraud in defense spending. While we’re no longer discussing emaciated mules and sawdust instead of gunpowder, a recent $50 million settlement illustrates the fraud in defense contracting is still alive and well.
Between 1987 and 1996, there were a total of 1,478 False Claims Act cases filed involving fraud against the DOD, 521 of which were filed by whistleblowers. During this same time frame, DOD recovered $810 million in cases brought by whistleblowers, about 39.4% of the total recovery.
From 2011 to 2020, there were 578 False Claims Act cases involving fraud against the DOD, 431 of them were filed by whistleblowers. During this same time frame, DOD recovered $1.1 billion in cases brought by whistleblowers, about 73% of the total recovery.
While the number of False Claims Act cases decreased, the trend shows how whistleblowers are increasingly crucial to fighting defense fraud as they now account for 75.3% of DOD recoveries in False Claims Act cases over the past decade.
According to the August 2011 report of the Commission on Wartime Contracting in Iraq and Afghanistan, between $31 and $60 billion had been lost to contract waste and fraud related to contingency operations in Iraq and Afghanistan. While the exact estimates are not available for the last decade, according to a March 2021 Government Accountability Office report, Department of Defense (DOD) contract management remains a high risk area for fraud, waste and abuse.
With 75 cents of every dollar recovered by the Department of Defense is attributed to cases brought by whistleblowers over the past decade, the numbers show how crucial they are to recovering amounts lost to defense contracting fraud. This is a call to arms for more whistleblowers to step forward.