Record-Breaking False Claims Act Recoveries Prompt Scrutiny of Fund Distribution

False Claims Act Enforcement Reaches Record Highs in 2025

The Department of Justice reported unprecedented enforcement activity under the False Claims Act (FCA) in 2025, recovering $6.8 billion from nearly 1,300 cases. This record-breaking figure represents a significant increase from previous years, driven by several major settlements and a surge in private enforcement actions.

“The numbers exploded for 2025,” said Kate Seikaly, a partner at Reed Smith who specializes in defending clients against FCA claims. “Six point eight billion is definitely an eye-catching number.”

The dramatic increase stems from several factors, including a handful of exceptionally large settlements that closed during the fiscal year. However, the underlying trend shows a fundamental expansion in both the volume and scope of FCA cases being filed and resolved.

The FCA’s whistleblower provisions continue to fuel much of this activity. The law allows private individuals to file claims on behalf of the government, which must investigate these allegations of fraud. The government can then either pursue the case or decline to intervene, allowing the whistleblower and their counsel to proceed independently.

“We saw a lot of that in 2025, some really big settlements there,” Seikaly noted. “Government spending increasing, which sometimes brings fraudsters, the whistleblower provisions, and then DOJ and the Trump administration really focusing on fraud, waste and abuse with government spending—all of those are driving these numbers.”

Healthcare fraud remains the dominant source of FCA recoveries, though the focus within this sector has evolved. Managed care has become a particular emphasis as more patients enroll in Medicare managed care plans. The government has targeted schemes where insurance plans manipulate diagnosis codes to increase reimbursements.

“In managed care, what we are seeing are plans reviewing patient files to look for diagnosis codes. That’s how managed care gets paid—the sicker the patients, the more they get paid,” Seikaly explained. “So there’s a natural incentive to look for more illnesses that this patient has that are being treated by the plan.”

One particular practice drawing scrutiny is what the government terms “one-way audits,” where plans review patient records only to add diagnoses that increase payments while ignoring information that might reduce reimbursements. “In the government’s view, that’s fraudulent, because you’re not really playing fair there,” said Seikaly.

Patient enrollment practices have also come under intense scrutiny. The government has warned against potential kickback schemes where plans directly or indirectly offer financial incentives to patients who enroll. These practices violate federal regulations when government funds are involved.

“The government has warned that it believes there might be some kickbacks happening, whether it’s direct payment from a plan or a third party that the plan engages that says they’ll pay patients to enroll in their plan,” Seikaly said.

State governments are increasingly active in FCA enforcement as well. Many states have enacted their own false claims statutes modeled after the federal law, allowing their attorneys general to pursue cases independently or in conjunction with federal authorities.

“We’re seeing increased sophistication of the state attorneys general’s offices in bringing these cases,” Seikaly observed. “Even when the DOJ, the federal government says, ‘We’re not going to bring this case ourselves,’ the states can certainly come in.”

Looking ahead to 2026, Seikaly anticipates several emerging areas of enforcement focus. Customs and tariff enforcement is expected to increase significantly, potentially exposing companies that have never previously dealt with the FCA to substantial liability.

“Companies who are subject to the tariffs are importing goods from all over the world, and they might not ordinarily do business with the government,” Seikaly explained. “With the tariffs, we’re really seeing companies who don’t even know what the False Claims Act is, and it’s not on their radar.”

The Trump administration has also indicated potential FCA enforcement related to corporate diversity, equity, and inclusion (DEI) programs. While the exact parameters remain unclear, early investigations have already begun.

“They put out some executive orders and other announcements about how they view DEI programs within companies, and that they believe that if you’re not complying with their view of that, it could give rise to False Claims Act liability,” Seikaly said. “We’ve started to see subpoenas be issued and investigations happening.”

As enforcement activities continue to expand, companies in sectors with significant government funding or oversight are being advised to review their compliance programs and implement appropriate training to mitigate potential FCA risks.