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False Claims Act Statistics, News & Analysis

Up-Up-And-Away: $92.9 Million FCA Verdict Balloons to $295.5 Million Judgment After Court Imposes Treble Damages and Near-Max FCA Penalties

On Friday, a Houston federal court entered judgment totaling $295.5 million in an FCA and FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989) case, up from the jury’s verdict of $92.9 million. The case is United States v. Allied Home Mortgage Corporation, et al., 4:12-cv-02676-GCH (S.D. Tex.), and it centers around defaulted home mortgage loans insured through the U.S. Department of Housing and Urban Development (HUD). We here at LLB previously wrote about the jury’s verdict in this intervened qui tam (available here).

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Franks and the False Claims Act? District Court Uses Familiar Fourth Amendment Remedy to Dismiss Deceptive FCA Case

An “elaborate series of falsehoods, misrepresentations, and deceptive conduct” perpetrated by a relator’s counsel culminated last Friday with dismissal of a relator’s False Claims Act complaint by the U.S. District Court for the District of Massachusetts. In U.S. ex rel. Leysock v. Forest Labs., Inc., No. 12-11354, 2017 WL 1591833 (D. Mass. Apr. 28. 2017),  relator alleged off-label promotion of an Alzheimer drug, and to get over the Rule 9(b) “hump,” relied on a purported nationwide study of physician prescribing practices for the medication.  The study results were featured prominently in the complaint – including details about particular physicians and patients.  Turns out, however, that the “study” at issue was sponsored and directed entirely by relator’s counsel under false pretenses.

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Supreme Court Nominee Judge Gorsuch on the False Claims Act

President Trump recently announced that he was nominating Judge Neil M. Gorsuch to fill the Supreme Court seat vacated one year ago by the death of Justice Antonin Scalia. We at LLB went to work researching what a Justice Gorsuch might mean for future case law construing our favorite statute, the False Claims Act. Here is what we found.

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Fifth Circuit Reaffirms that Speculative Penalty Exposure Does Not a "Reverse False Claim" Make

In the context of an environmentally-based FCA case, the Fifth Circuit held last week that a contingent penalty cannot create reverse false claim liability because it is not an “obligation” to pay the government. This holding marks at least the third time in as many months that a circuit court has addressed the FCA’s reverse false claim provision and is the second of those decisions construing the definition of “obligation” under the FCA as amended by the 2009 Fraud Enforcement and Recovery Act (“FERA”). The two decisions resulted in different outcomes, however: one handed the defendant a resounding victory, and the other breathed life back into the relator’s case. Is this yet another circuit-split and potential fodder for Supreme Court review? Not so fast.

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Rare FCA Jury Verdict Finds $92 Million in Damages Caused by "Shadow" Mortgage Offices and Reckless Underwriting Policies

A Houston federal jury in United States v. Allied Home Mortgage Corporation, et al., 4:12-cv-02676-GCH (S.D. Tex.) returned a verdict on November 30 in favor of the government on all counts, finding two mortgage brokers and their CEO liable for over $92 million in damages for violations of the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). The government started off its fiscal year 2017 of FCA recoveries with this huge victory before a jury, at a time when FCA jury trials are becoming increasingly rare. The hefty damages figure here could balloon much further yet: Factoring in potential treble damages and penalties under the FCA, the FCA price tag alone could hover close to $300 million. And adding FIRREA penalties to the mix could potentially push the total to $1 billion or more. The verdict hit the crescendo in a more than five-year litigation battle and five-week trial against defendants Americus Mortgage Corp. (formerly Allied Home Mortgage Capital Corporation or “Allied Capital”) and AllQuest Home Mortgage Corp. (formerly Allied Home Mortgage Corporation or “Allied Corporation”) (collectively “Allied”) and their president and CEO, Jim C. Hodge.

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I Knowingly Drank Coffee With Cream Today . . .

Because I knew both that I was drinking coffee and that it contained cream. The Sixth Circuit applied similar reasoning in its most recent False Claims Act decision, U.S. ex. rel. Harper v. Muskingum Watershed Conservancy District, No. 15-4406, 2016 WL 6832974 (6th Cir. Nov. 21, 2016), in which it decided—as a matter of first impression—construction of the FCA’s scienter requirements for a reverse false claim (31 U.S.C. § 3729(a)(1)(G)) and a conversion  (31 U.S.C. § 3729(a)(1)(D)), as amended in 2009 by the Fraud Enforcement and Recovery Act (“FERA”). Construing the FCA’s reverse false claim prohibition against knowingly avoiding an obligation to the United States, the court held that liability will attach only if the offender knows both of the obligation and that he avoided it. Similarly, to be liable for a conversion under the FCA, the offender must know both that he caused to be delivered “less than all” of certain property to the government and also that the property at issue belongs to the government. With these holdings, the Harper court reaffirmed the important threshold scienter distinctions separating an ordinary breach of contract from a violation of the FCA.

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