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False Claims Act Statistics, News & Analysis

  • 31
  • October
  • 2017

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Escobar Continues to Bring More Treats Than Tricks For FCA Defendants — Seventh Circuit Overrules Longstanding Causation Precedent, Adopts Proximate Cause Standard

Handing out a pre-Halloween treat to FCA defendants, the Seventh Circuit last week overruled its 1992 decision adopting a “but-for” causation standard to join its sister circuits in holding that FCA plaintiffs must prove that a defendant’s false claim was both the but-for and proximate (i.e., foreseeable) cause of the government’s loss.

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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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False Claims Act Cert. Monitor: Attorneys’ Fees, Reverse False Claims, Public Disclosure Bar, and Government Employees as Relators Feature in Three New Petitions

Three new FCA relator cert. petitions have landed in the past few weeks, covering the gamut of FCA legal issues.

First, the relator in U.S. ex rel. Harper v. Muskingum Watershed Conservancy District, 16-1278, takes us back to 1L Property, alleging that the Army in 1949 granted the defendant water district a “determinable fee simple estate subject to a possibility of reverter interest retained by the United States.” In other words, the government gave the water district government land to keep so long as the land was used for recreation, conservation, etc. The relator contends that when the defendant entered into oil and gas leases on the land but kept the land and the lease income, it knowingly and improperly avoided an obligation to return the property and income to the government—i.e., a conversion reverse false claim. The question presented to the Court is whether, for a reverse false claim, the relator needed to plead that the defendant subjectively knew that it was violating the terms of the deed and had not committed a mistake of law. A potential difficulty for this petition, however, is that neither Sixth Circuit’s majority nor the dissent focused on the question of subjective knowledge of mistake of law, but rather on whether the relator pleaded sufficient facts from which the court could infer that the defendant “knew or should have known” of the requirement to return the property. The response is currently due June 26, 2017.

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False Claims Act Cert. Monitor: Solicitor General Presents Hurdle to Clearing the Public Disclosure Bar

Several months ago, we reported that the Supreme Court had called for the views of the Solicitor General (“CVSG”) on a relator’s cert. petition about the FCA public disclosure bar in U.S. ex rel. Advocates for Basic Legal Equality, Inc. v. U.S. Bank, N.A. (“ABLE”), No. 16-130. You can read our summary of the case in that blog post here. The Solicitor General has now weighed in.

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A Rebel Claim Without a Cause? Michigan Federal Court Analyzes False Claims Act Causation of Damages Standard

In the recent decision in United States v. Quicken Loans Inc., the district court found the government adequately pleaded that Quicken Loan Inc. (“Quicken”) submitted false claims and made false statements material to false claims for insurance payouts from the Federal Housing Administration (“FHA”) for defaulted FHA-insured loans that Quicken had not properly underwritten. No. 16-CV-14050, 2017 WL 930039 (E.D. Mich. Mar. 9, 2017). As a result, the Court denied most of Quicken’s motion to dismiss except for one theory of liability and certain untimely claims.

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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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