2014 was a record-breaking year for whistleblowers, including both the U.S. Department of Justice’s prosecution of cases under the False Claims Act (FCA) and the U.S. Securities and Exchange Commission’s prosecution of cases under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Department of Justice

The U.S. Department of Justice (DOJ) recovered nearly $6 billion through FCA litigation in fiscal year 2014. The recovery—which amounted to a total of $5.69 billion in settlements and judgments—far exceeded the $3.8 billion recovered in 2013.

The FCA is a federal law that imposes liability on individuals or entities who knowingly submit false or fraudulent claims to the federal government. The act allows whistleblowers to bring claims on behalf of the federal government under the FCA’s qui tam provisions. In total, 713 FCA qui tam lawsuits were brought by whistleblowers in 2014, which is slightly fewer than the 754 actions brought by whistleblowers in 2013. Recoveries in these qui tam actions totaled nearly $3 billion, with the actual whistleblowers receiving $435 million of this recovery.

The total amount of recovery strongly suggests that the FCA will continue to be a frequent source of litigation in 2015. In a press release reporting these recovery amounts, Acting Assistant Attorney General Joyce R. Branda stated that the DOJ “will continue to enforce the law aggressively to ensure the integrity of government programs designed to keep us safer, healthier and economically more prosperous.”

What do the statistics released by the DOJ mean for FCA litigation in 2015? Here are a few trends to follow this year:

  • A new leader. In 2014, the financial services industry surpassed the healthcare industry as the largest source of the government’s recovery. The Department recovered a record $3.1 billion from banks and financial institutions. Actions in this sector focused primarily on false claims for federally insured mortgages and loans. They included settlements of $1.85 billion and $614 million respectively from two of the nation’s largest financial institutions. Given this record amount of recovery, companies in the financial services industry should prepare to be the continued focus of attention in 2015. Attorney General Eric Holder stated that the Department has brought more than 60 cases against financial institutions since 2009. Look for this trend to continue in 2015.
  • Healthcare fraud continues to comprise a substantial component of all FCA recovery. In 2014, false claims against federal healthcare programs like Medicare and Medicaid accounted for $2.3 billion of the total recovery. This marks the fifth consecutive year that the DOJ has recovered more than $2 billion for healthcare-related fraud. Of particular note, cases involving hospitals resulted in $333 million in settlements and judgments, which is a substantial amount considering that traditional recoveries in this area have targeted pharmaceutical companies. Given this figure, hospitals should make sure they have a robust compliance program and are prepared for FCA litigation. It is also important to note that the DOJ’s recovery in this industry has declined over the past three fiscal years from $3.1 billion in 2012 to the current $2.3 figure. It will be interesting to see if this trend continues in 2015.
  • Department of Defense Recoveries in Decline? In 2014, the DOJ pursued just 52 FCA actions in which the Department of Defense was the primary contact agency for a total recovery of $65 million. The total recovery in this sector decreased substantially from 2013, when the DOJ recovered a record $716 million from defense procurement fraud. The amount of qui tam actions pursued in this sector also decreased from 78 in 2013 to 44 actions in 2014. It will be interesting to see if the reduced FCA activity in the area of defense procurement continues in 2015, particularly as the United States’ involvement in Iraq and Afghanistan is reduced.
  • Going it Alone. Where a whistleblower brings an FCA action, the government may elect whether to intervene and pursue the claim. Where the government intervened, qui tam settlements and judgments totaled $2.9 billion. Where it did not, the whistleblowers recovered a total of about $52 million (down from $153 million in 2013). The data shows that when the government intervenes the amount of recovery has been substantially larger. However, the $52 million recovered by whistleblowers acting alone is still a significant number. In light of this recovery, expect whistleblowers to continue to bring FCA actions, regardless of whether the government intervenes.

Securities and Exchange Commission (SEC)

In many ways, 2014 was a record-setting year for whistleblowing activity before the SEC. According to the SEC’s fiscal year report, the Office of the Whistleblower received 3,620 whistleblower reports under the Dodd-Frank Act during 2014—a record number of tips from whistleblowers. The number of reports represents a substantial increase from the 3,328 reports the SEC received from whistleblowers in 2013.

It was also a record-setting year for the amount of recovery in the SEC’s whistleblower actions. The SEC has now made a total of 14 whistleblower awards, nine of which occurred in 2014. The SEC made more whistleblower awards in 2014 than in all previous years combined. The awards included an award of $30 million in September 2014—the largest bounty award the agency has made to date. Among the awards was the SEC’s first enforcement action under the anti-retaliation provisions of the Dodd-Frank Act in July 2014, which included an order for Paradigm Capital to pay $2.2 million to settle retaliation and other charges. The SEC also issued orders denying the claims of 12 whistleblowers in 2012.

Sean X. McKessy, chief of the SEC’s Office of the Whistleblower, stated that he hoped the awards will encourage more whistleblowers to come forward and report information to the SEC. McKessy also noted that the awards show “that companies not only need to have internal reporting mechanisms in place, but they must act upon credible allegations of potential wrongdoing when voiced by their employees.” In light of the SEC’s increased focus on whistleblowing, companies should continue to strengthen their internal reporting and response procedures. They can expect the SEC to remain active in pursuing whistleblower tips in 2015.


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