On February 1, 2022, the Department of Justice (“DOJ”) released its annual report summarizing False Claims Act (“FCA”) enforcement activity in FY 2021.  The report confirmed what many practitioners already suspected: FY 2021 was another banner year in FCA enforcement.  DOJ’s annual judgments and settlements exceeded $5.6 billion, making FY 2021 the second largest annual recovery ever (and the largest since 2014).  But beyond this top line number, a closer analysis of the figures in DOJ’s report offers additional insight on strategies for preventing and mitigating costly FCA exposure.

There is little doubt that the $5.6 billion in total FCA recoveries will dominate headlines, and understandably so given the 150% increase from FCA recoveries a year ago.  (It bears mentioning, however, that more than half of this total is attributable to few large cases initiated under the prior Administration that were resolved in FY 2021.)  Beyond the overall recovery figure, FY 2021 also saw 801 new FCA matters, which is roughly consistent with recent years but still historically high.  Further, while approximately 75% of new cases were initiated by relators, FY 2021 marked just the second time since 1995 that the U.S. Government initiated over 200 non-qui tam matters.  Debate has already begun about whether this increase reflects more aggressive FCA enforcement under the Biden DOJ or simply normal statistical fluctuation, but the Government’s appetite for identifying and pursuing its own FCA cases is something to watch in the year ahead.

As is typically the case, the vast majority of FCA recoveries arose in the health care space, but there was still plenty of action elsewhere.  In the defense industry, for example, 52 new cases were filed in FY 2021 and recoveries totaled ~$120 million.  These figures are consistent with recent trends, as the ten-year median for new FCA cases and recoveries in the defense industry is ~53 and ~$121 million, respectively.

Notably, 99.9% of the dollars recovered in the defense industry FCA actions last year came from cases where the Government was a party (either from the outset or through intervention), while a mere $35,000 was recovered in declined cases.  This data lends statistical support to the conventional wisdom that the best time to win an FCA case is pre-intervention.  After all, government contracting regulations are extraordinarily complex, and in many cases some initial education about the relevant regulatory scheme can help persuade an investigator or DOJ attorney that a matter does not merit intervention.

Finally, contractors should not miss the prominent reference to DOJ’s new Cyber Fraud Initiative in the press release accompanying the annual report.  DOJ’s decision to devote a separate section of its FY 2021 release to the new initiative is a telling indication of the Government’s enforcement emphasis on cyber issues, particularly given that the Cyber Fraud Initiative was not even announced until FY 2022.  It also is notable that the discussion of the Cyber Fraud Initiative includes a whistleblower reporting link, which reinforces the view of senior DOJ officials that whistleblowers are expected to play a “significant role in bringing to light knowing failures and misconduct in the cyber arena.”