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.”

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Photo of Robert Huffman Robert Huffman

Bob Huffman counsels government contractors on emerging technology issues, including artificial intelligence (AI), cybersecurity, and software supply chain security, that are currently affecting federal and state procurement. His areas of expertise include the Department of Defense (DOD) and other agency acquisition regulations governing…

Bob Huffman counsels government contractors on emerging technology issues, including artificial intelligence (AI), cybersecurity, and software supply chain security, that are currently affecting federal and state procurement. His areas of expertise include the Department of Defense (DOD) and other agency acquisition regulations governing information security and the reporting of cyber incidents, the proposed Cybersecurity Maturity Model Certification (CMMC) program, the requirements for secure software development self-attestations and bills of materials (SBOMs) emanating from the May 2021 Executive Order on Cybersecurity, and the various requirements for responsible AI procurement, safety, and testing currently being implemented under the October 2023 AI Executive Order. 

Bob also represents contractors in False Claims Act (FCA) litigation and investigations involving cybersecurity and other technology compliance issues, as well more traditional government contracting costs, quality, and regulatory compliance issues. These investigations include significant parallel civil/criminal proceedings growing out of the Department of Justice’s Cyber Fraud Initiative. They also include investigations resulting from False Claims Act qui tam lawsuits and other enforcement proceedings. Bob has represented clients in over a dozen FCA qui tam suits.

Bob also regularly counsels clients on government contracting supply chain compliance issues, including those arising under the Buy American Act/Trade Agreements Act and Section 889 of the FY2019 National Defense Authorization Act. In addition, Bob advises government contractors on rules relating to IP, including government patent rights, technical data rights, rights in computer software, and the rules applicable to IP in the acquisition of commercial products, services, and software. He focuses this aspect of his practice on the overlap of these traditional government contracts IP rules with the IP issues associated with the acquisition of AI services and the data needed to train the large learning models on which those services are based. 

Bob writes extensively in the areas of procurement-related AI, cybersecurity, software security, and supply chain regulation. He also teaches a course at Georgetown Law School that focuses on the technology, supply chain, and national security issues associated with energy and climate change.

Photo of Peter B. Hutt II Peter B. Hutt II

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui…

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui tam matters brought under the False Claims Act, including matters alleging cost mischarging, CAS violations, quality assurance deficiencies, substandard products, defective pricing, Iraqi procurement fraud, health care fraud, and inadequate subcontractor oversight. He has testified before Congress concerning proposed amendments to the False Claims Act.

Peter has also conducted numerous internal investigations and frequently advises clients on whether to make disclosures of potential wrongdoing.

Peter also represents clients in a wide range of accounting, cost, and pricing matters, as well as other contract and grant matters. He is experienced in addressing issues concerning pensions and post-retirement benefits, contract formation, TINA and defective pricing, claims and terminations, contract financing, price reduction clauses, subcontracting and supply chain compliance, specialty metals compliance, and small business and DBE compliance. He has litigated significant cost, accounting, and contract breach matters in the Court of Federal Claims and the Armed Services Board of Contract Appeals.

Peter is recognized for his work both in government contracts and in False Claims Act disputes by Chambers USA, which notes that he is “whip-sharp, wicked smart and will advocate to the hilt for his clients.” Chambers also notes that “Peter brings a lot of thoughtfulness and creativity to cases. He is extremely clear in his communications and very responsive.”

Photo of Frederic Levy Frederic Levy

Frederic Levy is one of the nation’s leading suspension and debarment lawyers, focusing his practice on the resolution of complex compliance and ethics issues. He has successfully represented numerous high-profile corporations and individuals under investigation by the government in civil and criminal matters…

Frederic Levy is one of the nation’s leading suspension and debarment lawyers, focusing his practice on the resolution of complex compliance and ethics issues. He has successfully represented numerous high-profile corporations and individuals under investigation by the government in civil and criminal matters, including False Claims Act cases, and in suspension and debarment proceedings to ensure their continued eligibility to participate in federal programs. He has also conducted numerous internal investigations on behalf of corporate clients, particularly in the areas of program fraud and export controls, and often involving sensitive personnel or fiduciary matters. He has also advised corporations in voluntary or mandatory disclosures to a variety of federal agencies. Mr. Levy regularly counsels clients on government contract performance issues, claims and terminations, and he litigates such matters before the boards of contract appeals and in the Federal Circuit.

Photo of Michael Wagner Michael Wagner

Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes.

Combining deep regulatory knowledge with extensive investigations experience, Mr. Wagner works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government…

Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes.

Combining deep regulatory knowledge with extensive investigations experience, Mr. Wagner works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government investigations, including False Claims Act cases. He has particular expertise representing individuals and companies in suspension and debarment proceedings, and he has successfully resolved numerous such matters at both the agency and district court level. He also routinely conducts internal investigations of potential compliance issues and advises clients on voluntary and mandatory disclosures to federal agencies.

In his contract disputes and advisory work, Mr. Wagner helps government contractors resolve complex issues arising at all stages of the public procurement process. As lead counsel, he has successfully litigated disputes at the Armed Services Board of Contract Appeals, and he regularly assists contractors in preparing and pursuing contract claims. In his counseling practice, Mr. Wagner advises clients on best practices for managing a host of compliance obligations, including domestic sourcing requirements under the Buy American Act and Trade Agreements Act, safeguarding and reporting requirements under cybersecurity regulations, and pricing obligations under the GSA Schedules program. And he routinely assists contractors in navigating issues and disputes that arise during negotiations over teaming agreements and subcontracts.