The New York Metropolitan Area’s Three Main United States Attorneys’ Offices Handle a Large Percentage of the Nation’s Qui Tam Cases
In our last blog, we heard from Nate who grew up in “The Little Apple,” a.k.a. Manhattan, Kansas, and eventually settled in the Washington, D.C. metro area.
I grew up in the small, seaside village of Port Jefferson, NY in the long shadow of the “Big Apple,” a.k.a. New York City. Though I loved growing up in such a scenic spot, I loved the City and vowed to live there one day. After a peripatetic path, I finally made it here in 2005. And after working in a myriad of Plaintiff-side litigation areas, I discovered the False Claims Act and the joys of helping courageous whistleblowers expose fraud. I knew that was what I was meant to do.
False Claims Act Filings in the NYC Metropolitan Area
Three United States Attorneys’ Offices in the New York Metropolitan area have the most False Claims Act filings: the Southern District of New York (SDNY), the Eastern District of New York (EDNY), and the District of New Jersey (DNJ).
Wait-New Jersey? Although there are four federal district courts in New York, the Northern District (with offices in Albany, Auburn, Binghamton, Malone, Plattsburgh, Syracuse, Utica, and Watertown) and the Western District (with Buffalo, Canandaigua, Elmira, Jamestown, and Rochester) are in relatively less-populated areas and thus see fewer False Claims Act filings than those districts that surround the City.
Like the D.C. area, the United States Attorneys’ Offices in SDNY, EDNY, and DNJ are used to a high volume of False Claims Act filings and thus have experience navigating the often complicated waters of a False Claims Act investigation.
According to a recent Freedom of Information Act (FOIA) request, these three districts were in the top 15 of the 93 federal judicial districts in the United States with the largest volume of False Claims Act lawsuits in the 2013-2017 fiscal years.
The total number of lawsuits filed in each district during this five-year period as well as each district’s share of all lawsuits filed during this period are:
- SDNY: 171 False Claims Act lawsuits filed representing a 4.9% share of the total.
- DNJ: 115 False Claims Act lawsuits filed representing a 3.3% share of the total.
- EDNY: 84 False Claims Act lawsuits filed a 2.4% share of the total.
The Southern District of New York
The Southern District of New York is the busiest of the three districts. It covers two of the five boroughs of New York City (New York County (i.e. Manhattan) and Bronx County) as well as the counties of Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester, which are the suburban areas immediately to the north of New York City.
The two Southern District United States Attorney Offices (USAO) are located in Manhattan and White Plains (in Westchester County). In my experience, the Southern District of New York takes False Claims Act filings very seriously, and many flock to file there because of its reputation for excellence.
In 2010, the SDNY USAO formed a “Civil Frauds Unit” within its civil division to zero in on civil frauds, such as fraud that is subject to the False Claims Act. This effort yielded a bevy of notable settlements encompassing a wide range of fraudulent activity, including:
- In 2019, the SDNY settled two fraud lawsuits in the healthcare industry against the Walgreens pharmaceutical chain. The payout totaled $269.2 million which related to their improper billing of insulin pens to government healthcare.
- The SDNY sued the group formerly known as Allied Home Mortgage Capital Corporation and Allied Home Mortgage Corporation. This lawsuit was brought against alleged fraudulent misconduct concerning the Federal Housing Administration mortgage insurance program. The 2017 settlement was over $296 million.
- The largest settlement obtained was from a lawsuit with Wells Fargo Bank, N.A.. The Civil Frauds Unit of SDNY sued using the False Claims Act and FIRREA, resulting in a payout of 1.2 billion.
The Eastern District of New York
EDNY covers three of the five boroughs of New York City (Kings, Queens, and Richmond Counties) as well as the suburban Long Island counties of Nassau and Suffolk. The EDNY USAOs are located in Brooklyn and Central Islip, NY.
The EDNY collected 1.1 billion in both criminal and civil lawsuits in the fiscal year of 2019, and the majority was collected in civil actions enacted just by the Eastern District in the amount of $1.093 billion.
It appears that much of the EDNY’s 2019 fraud settlements were criminal or resolved False Claims Act allegations without an underlying qui tam lawsuit. However, other recent notable EDNY False Claims Act case settlements include:
- In 2020, the EDNY and other USAOs settled five False Claims Act lawsuits against San Diego-based ResMed Corp. for $37.5 million to resolve claims that it paid kickbacks to Durable Medical Equipment suppliers, sleep labs, and other health care providers.
- AmerisourceBergen Corporation was sued by EDNY using the False Claims Act for $625 million for illegally distributing improper pre-filled needles that were not approved for use or sale by the FDA.
- In 2017, the EDNY obtained a settlement of $4 million from an Operator of Hospitals In Queens regarding False Claims Act violations arising from improper payments to physicians.
New York also has both New York State and New York City False Claims Acts. The New York False Claims Act (NYFCA) mostly mirrors the federal FCA, but there are a few differences that favor whistleblowers, including:
- Unlike the federal FCA, a whistleblower can bring claims under the NYFCA for tax fraud in certain cases;
- In addition to treble damages, the NYFCA allows for civil penalties of $6,000 to $12,000 per violation (as adjusted for inflation by the Federal Civil Penalties Inflation Adjustment Act of 1990), which is higher than the federal FCA’s $5,500 to $11,000 per violation (also adjusted for inflation); and
- When the government declines to intervene in their case, whistleblowers who have filed under the NYFCA can withdraw their cases while keeping them under seal and protecting their identities, something which is not possible under the federal FCA.
The state’s tax fraud provision opens the door to qui tam cases that cannot be brought anywhere else in the country. For example, in 2018, the state of New York reached a $330 million settlement with Sprint, resolving allegations that it failed to collect state and local taxes on wireless phone calls.
The New York City False Claims Act permits whistleblowers to bring lawsuits to recover damages for fraudulent claims submitted to New York City, one of few municipalities in the country with such a provision. Both the New York State and City False Claims Acts are prosecuted by the New York State Attorney General’s Office.
District of New Jersey
Unlike New York, New Jersey is compact enough to have just one federal judicial district. Although it is compact, New Jersey holds the dubious honor of being the most densely populated state in the country.
New Jersey also hosts a strong biopharmaceutical and medical device industry, including heavy-hitters such as Johnson & Johnson, Merck, Novo Nordisk, and Bayer, each of whom has settled allegations of healthcare fraud under the False Claims Act.
This healthcare fraud, along with all of the other civil frauds brought under the False Claims Act, is handled by the DNJ USAO out of three office locations in Newark (the main office), Trenton, and Camden.
Recent DNJ False Claims Act settlements include:
- In 2020, DNJ settled a False Claims Act lawsuit brought against Caldwell University for more than $4.8 million resolving claims the school tried to defraud the Department of Veterans Affairs (and the veterans themselves) by claiming to offer online classes developed and provided by Caldwell that were, in fact, marked-up offerings by an online correspondence school.
- In 2018, DNJ settled a False Claims Act lawsuit against Beam Bros. Trucking Inc. (BBT), and its principals for $1.025 million to resolve allegations under the Act that BBT overcharged the U.S. Postal Service on contracts to transport mail.
- Four cardiac monitoring companies and one executive were found guilty of billing more expensive services than had been actually ordered, which resulted in DNJ winning a settlement of $13.5 million in their False Claims Lawsuit in 2017.
Like New York, New Jersey also has its own False Claims Act (NJFCA) which is modeled after the federal False Claims Act with some notable differences, including:
- Unlike the federal FCA, the NJFCA allows for false claims act allegations against an “agent of the State, or to any contractor, grantee, or other recipient of State funds.” This means that there can be false claims allegations against a variety of workers who have some sort of contact with the state of New Jersey.
- The NJFCA expressly allows for joint and several liability for all damages and penalties recovered, which means that all named defendants in a whistleblower case are on the hook for them without regard for the extent of their participation in the fraud.
As you can see, the federal and state False Claims Acts are powerful methods for whistleblowers to help the government recover fraudulently obtained taxpayer dollars.
The New York Metropolitan area that I call home boasts some of the highest numbers of False Claims Act filings, and the three resident USAOs have settled many notable cases across the FCA spectrum. I have worked with all three of these USAOs, and I look forward to many more years of representing whistleblowers in these districts and across the country.