by Steve Priest, President of Ethical Leadership Group, a Global Compliance Company

A US Department of Justice press release this month trumpeted the $1.34 Billion it has collected in settlements and judgments in the fiscal year ended September 30, 2008. "Now, more than ever, it is crucial that taxpayer dollars aren't lost to fraud," said Gregory G. Katsas, Assistant Attorney General for the Department's Civil Division. "The billion dollars collected this year is only part of the story. By rooting out fraud and vigorously pursuing it, the Department, with the help of concerned citizens who report fraud in hotline calls and in qui tam complaints, undoubtedly saves the country many times that amount in aborted schemes and misconduct."

The government notched its belt by noting cases against Merck ($361M), Cephalon ($258M), Amerigroup ($225M), Kyphon (now Medtronic Spine LLC) ($75M), Staten Island University Hospitals ($74M), Lester E. Cox Medical Centers ($60M), Pratt & Whitney ($50M), PCC Airfoils ($2M), St. Joseph’s Hospital of Atlanta ($26M), Bechtel + PB Americas ($23M US and $40M Mass.), and CVS/Caremark ($21M). Most of these cases originated years earlier, so for those students of the field these are old news.

What is most notable about this press release, however, is the extent to which the DoJ celebrates the role of relators in these cases. Relators are the individuals, usually employees but sometimes contractors or other informed (or semi-informed) parties, who file suit on behalf of the government against those who have fraudulently claimed federal funds.

Assistant Attorney General Katsas paid tribute to Senator Charles Grassley of Iowa and Representative Howard L. Berman of California, sponsors of the 1986 amendments to the False Claims Act. "Without this important legislation strengthening the Act and, in particular, the qui tam provisions which encourage private citizens to uncover government fraud, such recoveries would not have been possible."

The DoJ highlighted the fact that almost 78 percent of this year's recoveries were associated with suits initiated by relators. They celebrated that relators received over $198 million dollars. And in most of the cases cited above, they noted the amount the relator received. (e.g., Amerigroup $56M, Merck $46M).

We don’t quarrel with the ultimate goal of the Department of Justice to minimize fraud against taxpayers. Indeed, that is one of our goals too. However, as a result of our fifteen years of work in the field, we know about the ethics and compliance efforts of some of the companies on the DoJ list. While no individual or company is perfect, some of these programs are quite good. And we wonder whether the companies involved were given the opportunity to put their own houses in order. Did these relators give the internal systems a chance? Or were they so tempted by the multi-million dollar lottery ticket offered by the government that they did not use the internal helpline or other internal systems?

That is a frightening thought for companies trying to do the right thing. Here’s one more: this press release came from the DoJ during an administration where deregulation was the animating philosophy, at least for a long while. What happens next year?

I humbly suggest that it is time to do a thorough examination of your compliance and reputational risks. A pretty small price to pay vs. the alternatives. Please contact me at steve.priest@ethicalleadershipgroup.com if you have any questions about conducting a forward looking risk assessment.