In remarks delivered at the Federal Bar Association’s (FBA) annual Qui Tam Section Conference, Deputy Assistant Attorney General Michael Granston reiterated the US Department of Justice’s (DOJ or the Department) commitment to robust enforcement of the federal False Claims Act (FCA). The message to conference attendees was clear: the fraud section’s “return on investment” makes investment in DOJ’s FCA enforcement efforts a worthwhile use of government resources.
Although these remarks and reiterated commitment come during a period of turnover at all executive agencies, they are hardly a surprise given the US administration’s stated focus on combatting fraud, waste, and abuse in government—including by creating the Department of Government Efficiency (DOGE).
In his prepared remarks, Granston emphasized that FCA enforcement will remain a “permanent fixture” of the government’s efforts to combat fraud and abuse, highlighting the substantial outlay of government funds and the well-established utility of the FCA in combatting fraud on the government fisc. In conjunction with the taxpayer dollars recovered through FCA enforcement, Granston highlighted the non-monetary harms that result from alleged fraud and abuse and how enforcement under the FCA also redresses those harms. He cited, as examples, patient harm perpetuated by alleged illegal prescriptions of opioids and defective equipment provided under US Department of Defense (DOD) procurement contracts.
Granston proceeded to identify current FCA enforcement priorities and the variety of the Fraud Section’s tools for combatting fraud. He emphasized the fiscal year 2024 FCA enforcement statistics as demonstrating that fraud was “on the upswing,” and the Department was seeing novel fraud schemes. Unsurprisingly, he highlighted healthcare as an area the Department views as ripe with fraud. He pointed to the large outlay of government funds for Medicare Part C as inviting fraud and abuse schemes. He further cited the recent Patient-Driven Payment Model (PDPM) for reimbursement and related regulations for services at skilled nursing facilities (SNFs) as additional areas the Department believes are subject to novel fraud schemes.
Notably, Granston also identified customs and tariff evasion as an area where the Department would be using the FCA to protect against illegal foreign trade practices and attempts to fraudulently avoid the payment of import duties and tariffs when importing products into the United States. The emphasis on tariffs and trade continued at the conference, with Jamie Ann Yavelberg, director of the Fraud Section of the Civil Division, identifying tariff evasion as a “key area” for enforcement, with a focus on country of origin, declared value of goods, and the “number of goods” involved.
As an example of the types of cases DOJ plans to pursue, Yavelberg highlighted a 2023 $22.8 million settlement with a vitamin importer that admitted to misclassifying its imports to avoid duty obligations. We previously predicted that this would be an area of increased FCA enforcement focus, given the US administration’s economic and foreign policy priorities.
Granston concluded with championing the public-private partnership between the Department and relators utilizing the qui tam provisions of the FCA. As expected, Granston noted that DOJ has, and would continue to, defend the constitutionality of the qui tam provisions as the US Court of Appeals for the Eleventh Circuit prepares to hear arguments on this issue this year. He did, however, urge relators to file well-pled complaints and to meaningfully assist DOJ’s assessment and investigation of their allegations.
Along with Granston’s prepared remarks, multiple government representatives at the conference repeatedly emphasized the Fraud Section’s focus on fraud and abuse in managed care under Medicare Part C. Yavelberg touted DOJ’s fiscal year 2024 enforcement activity in this area and promised further investigative and enforcement efforts in the space. A panel dedicated solely to FCA enforcement in Medicare Part C reiterated that DOJ has seen alleged fraudsters target Medicare Advantage Organizations (MAOs) and providers because of the potentially lucrative incentives in the managed care reimbursement structure.
Specifically, government representatives identified cases involving upcoding and addition of diagnoses codes as part of the Medicare Part C risk adjustment process as an area of focus. There was also a discussion of more “traditional” kickbacks in the form of fees paid to providers and third-party actors such as insurance brokers to improperly steer beneficiaries to managed care plans. Such kickback schemes were identified as an area of continued enforcement.
In another panel focused on the impact of artificial intelligence (AI) in FCA cases, managed care remained a prevalent focus. Panelists noted that the limited number of ongoing and public FCA litigation involving AI-related technology—including natural language processing— mostly involved the alleged improper use or manipulation of such technology as part of the risk adjustment and diagnostic review process associated with managed care. The overlap of increased DOJ scrutiny of activity in the managed care space along with the use and involvement of AI technologies should be notable for stakeholders, especially as compliance guidance from relevant agencies on the use of AI in compliance programs continues to lag behind the actual use of technologies in healthcare.
Another healthcare-related panel focused on third parties causing submissions of false claims under the FCA, and the growing circuit split on the causation standard for the 2010 amendment to the Anti-Kickback Statute (AKS). The 2010 amendment provides that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA],” and the causation standard has been hotly litigated.
The panelists, including Brian LaMacchia, chief of the Affirmative Civil Enforcement Unit for the US Attorney’s Office for the District of Massachusetts (USAO), discussed the practical implications for the application of the “but for” causation standard, specifically the US Court of Appeals for the First Circuit’s recent holding in US v. Regeneron Pharmaceuticals Inc. The holding and its application will be covered in a separate LawFlash.
Notably, the panel highlighted recent settlements from the USAO involving pharmaceutical manufacturers and genetic testing labs and how the actions of those parties “caused” false claims to be submitted for drugs used to treat rare diseases. As our healthcare team discussed earlier this year, cases in industry sectors like rare disease involving multiple interrelated parties will likely be a focus of enforcement and regulatory guidance this year.
DOJ representatives also emphasized the Fraud Section’s continued focus on pandemic-related fraud in 2025 and beyond. Colin Huntley, deputy director of the Civil Division Fraud Section, noted that the Department has more than 700 cases involving fraud on COVID-19 pandemic-era programs such as the Paycheck Protection Program (PPP). Deputy Director Huntley and others acknowledged that the low-level fraud schemes involving the PPP and other pandemic-era programs have mostly been resolved.
This continues trends from 2024 that suggest DOJ has been prioritizing investigating and bringing FCA claims based on PPP eligibility. Now, five years since the initiation of the PPP, the cases in this space are going to continue to be “high-dollar” and more complex, especially since, as-described by government representatives, agencies such as the Small Business Administration (SBA) have suffered losses on the improperly gotten loans.
Given the increased sophistication of pandemic fraud cases, the panel also focused on the large increase in “data mining” and qui tam complaints. While government representatives acknowledged the value of information provided by whistleblowers, they noted that baseline conclusions developed through data, without any insider information or context, had limited utility in initiating new enforcement actions.
In another panel, DOJ representatives highlighted FCA enforcement in cybersecurity also will remain a fixture of DOJ’s efforts. Panelists highlighted recent settlements and resolutions in the space, noting that corporate stakeholders doing business with the government are taking steps to increase cybersecurity compliance. The panel specifically discussed the final Cybersecurity Maturity Model Certification (CMMC) rule issued by DOD in October 2024 and its implications for FCA investigations and whistleblower complaints.
The CMMC is expected to become a DOD contract requirement in mid-2025, following finalization of the implementing clauses in the Defense Federal Acquisition Regulation Supplement (DFARS), which were proposed in August 2024. As CMMC requires DOD contractors and subcontractors to perform cybersecurity security assessments and certify the results of those assessments to DOD, it is a potential source of liability under the FCA. DOJ’s emphasis on cybersecurity enforcement coupled with recent rulemaking is likely to fuel continued developments in this space.
The remarks from Grantson and other key DOJ representatives should remind stakeholders that FCA enforcement under the US administration is expected to remain robust. DOJ remains committed to FCA enforcement, and remains focused on more traditional areas, like healthcare fraud and procurement fraud, even though the schemes within those areas may be different from years past.
A notable shift, as we anticipated in prior thought leadership, pertains to the remarks regarding FCA enforcement involving tariffs and customs. This is a development that appears to align with the US administration’s high-level economic and foreign policy. Stakeholders in the import and export space should take these pronouncements under advisement and consider taking steps to increase compliance efforts in these areas.
As DOJ’s priorities continue to focus on areas such as Medicare Part C, pandemic-related fraud, and cybersecurity, along with more complex cases involving more traditional targets of enforcement such as pharmaceutical and medical device manufacturers, stakeholders should carefully take stock of their compliance operations given the continued enforcement risk. This consideration is especially relevant for the use of AI in business operations, which appeared to invariably undergird the topics discussed throughout the conference.
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