As DOJ Gets Tough on Fraud, Compliance Needs to Ramp Up

By Pamela J. Bethel

On September 17, 2014, Leslie Caldwell, assistant U.S. attorney general in charge of the Criminal Division, addressed many key issues about the federal False Claims Act in a major speech at the Taxpayers Against Fraud Education Fund Conference in Washington, D.C.

The Taxpayers Against Fraud Education Fund brings together whistleblowers who bring cases against government contractors concerning alleged fraud in defense procurement and other government programs such as Medicare. Most of these are qui tam cases – in which a private individual brings a lawsuit on behalf of the United States concerning the submission of false or fraudulent claims.

In her speech, Caldwell made it clear that the Obama administration takes fraud very seriously and is prepared to move against it both in civil and in criminal cases and to respond to qui tam filings.

“We in the Criminal Division have recently implemented a procedure so that all new qui tam complaints are shared by the Civil Division with the Criminal Division as soon as the cases are filed,” Caldwell said in her speech. “Experienced prosecutors in the Fraud Section are immediately reviewing the qui tam cases when we receive them to determine whether to open a parallel criminal investigation. Those prosecutors then coordinate swiftly with the Civil Division and U.S. Attorney’s Offices about the best ways to proceed in the parallel investigations.”

“We have a wealth of experience in successfully bringing parallel investigations,” Caldwell said. “We do this in many contexts, not only with the Civil Fraud section and U.S. Attorney’s Offices, but with the SEC and other regulatory agencies, here and abroad. We know how to make it work.”

Caldwell urged those present at the session: “When you are thinking of filing a qui tam case that alleges conduct that potentially could be criminal, I encourage you to consider reaching out to criminal authorities, just as you now do with our civil counterparts in the department and the U.S.  Attorney’s Offices.”

Among other topics, Caldwell touched on defense fraud.

“Since 2009,” she said, “the Fraud Section has housed a cadre of prosecutors dedicated to pursuing fraud and corruption affecting the United States’ operations in Iraq and Afghanistan. Prosecutors assigned to the Fraud Section by Special Inspector General Offices team up with Trial Attorneys from the Criminal Division’s Fraud and Public Integrity Sections to combat fraud against our nation’s armed forces. Since 2009, these prosecutors have charged more than 100 defendants with procurement fraud and corruption.  The cases include multi-million dollar bribery conspiracies affecting U.S. military contracts, and the theft of critical military goods, like fuel. We also are looking at a proliferation of sales to the military of counterfeit intellectual property and technology.”

Here’s our take. The department is quite serious in this effort. Any qui tam case filed by a self-styled whistleblower is going to receive very careful scrutiny by the Department of Justice, which always has the option of joining the case on the whistleblower’s side and even filing a criminal case for fraud. Companies therefore need to amp up their compliance efforts so they’re not the target of a case that alleges fraud in a contract or in a bill sent to the federal government. Regardless of the merits, no one wants to face the department’s resources in a lengthy proceeding, civil or criminal.

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