By Asher Alavi of Kessler Topaz Meltzer & Check, LLP
Over the past three decades, the Department of Defense budget has more than doubled, growing from $287.4 in fiscal year 1987 to $723.2 billion in fiscal year 2020. Of the 2020 amount, an estimated $420 billion was spent on private contractors.
As described in yesterday’s post, fraud remains a major area of concern in the defense contracting industry. Yet despite the increased federal spending on defense, the number of False Claims Act cases involving defense contracting fraud has decreased considerably. This is particularly notable given that the False Claims Act was originally passed during the Civil War to incentivize whistleblowers to uncover and deter fraud committed by defense contractors.
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) with a total recovery of $2.0 billion.
However, between 2011 and 2020, there were only a total of 578 False Claims Act cases involving fraud against the DOD (431 of which were filed by whistleblowers). There was a total recovery of $1.5 billion in False Claims Act cases for fraud committed against the Defense Department in that decade.
In fiscal year 2020, only $75.0 million was recovered in DOD cases, $43 Million of which was from cases filed by whistleblowers. That is considerably lower than the $253.0 million recovered in 2019 in DOD cases. In fact, 2020 was the lowest total False Claims Act recovery for the DOD since 2007. Only 35 defense fraud cases were filed by whistleblowers in 2020.
These trends are reversible, and the original purpose of the False Claims Act—to pursue fraudsters profiting from military spending—can be reclaimed. The False Claims Act remains a powerful tool that should be utilized to combat and deter fraud in the defense contracting industry.