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False Claims Act Statistics, News & Analysis

Three's A Crowd: Potential Third Party Liability in FCA Suits

So often more is merrier, but when it comes to FCA liability, three can be a crowd. The government rarely pursues third-party liability in FCA cases despite the routine involvement of consultants, auditors, and investors with companies alleged to have defrauded the government. In what appears to be an effort to expand the scope of FCA liability to a new class of defendants, the government in February pursued FCA claims against two third parties. On February 16, the government intervened in United States ex. rel. Medrano v. Diabetic Care RX, LLC, No. 15-cv-62617 (S.D. Fla. Feb. 16, 2018) alleging that Riordan, Lewis & Harden, Inc. (“RLH”), the private equity sponsor of the pharmacy now known as Patient Care America (“PCA”), through two RLH partners who oversaw the investment, was responsible in part for an illegal kickback scheme designed to obtain increased prescriptions for compounded creams and vitamins, and thus greater reimbursement from TRICARE. A week later, on February 28, the government announced a $149.5 million settlement with Deloitte & Touche LLP (“Deloitte”) for knowingly deviating from traditional auditing standards which the government argued allowed the mortgage originator Taylor Bean & Whitaker Mortgage Corporation to defraud the government. Though these cases are not directly related, the timing suggests that third-party FCA liability may be a focus of the DOJ moving forward.

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  • 22
  • August
  • 2017

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Government's Trip to Fairyland Comes at a Price: Sixth Circuit Vindicates FCA Defendant's Demand for Attorneys' Fees

The Sixth Circuit on Friday issued a decision holding that where the government had pursued a “nearly frivolous” theory of FCA damages wildly in excess of actual damages, defendants were entitled to recover the costs of defending themselves — even where the fraud itself was substantiated. This decision is welcome news to defendants who may not “prevail” in the common sense of the word (by fending off liability entirely) but for whom the cost of defending is driven disproportionately high by the government’s aggressive and unjustified litigation positions. And in the process, the court cast doubt on some applications of the government’s common “taint” theory of liability, under which it argues that (sometimes minor) frauds deprive the government of the full value of a contract.

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