Abbott Laboratories, the Illinois-based healthcare company that manufactures and sells infant formula and nutritional therapy products, agreed to pay $384,999,040 to settle federal and state allegations that it billed Medicaid and the WIC nutrition program for powder infant formula manufactured at a Michigan plant that failed to meet safety requirements between January 2018 and December 2022, the Justice Department announced September 14, 2026. Under the settlement, $348.7 million goes to the federal government and $36.3 million is split among states whose Medicaid and WIC programs paid for the products. Abbott did not admit liability, and the allegations were resolved through a civil False Claims Act settlement rather than a criminal conviction.
The complaint centered on contamination risk at Abbott’s Sturgis plant
The government’s case traces back to a Complaint in Intervention the United States filed November 13, 2025, alleging that Abbott caused government health programs to purchase powder infant formula from its Sturgis, Michigan facility despite the product’s failure to meet statutory, regulatory and contractual requirements. The complaint alleged Abbott knowingly manufactured infant formula purchased with taxpayer dollars in an environment that put the products at unacceptable risk of microorganism contamination.
The specific allegations, laid out in the Justice Department’s press release announcing the settlement, describe a plant with recurring maintenance failures. Roof leaks were common at Sturgis, with water running and dripping over production equipment; rather than fixing the underlying problem, Abbott allegedly used temporary “roof leak umbrellas” even after corporate leadership understood the wet environment raised contamination risk. The complaint also alleges Abbott continued running spray dryers, which turn liquid formula into powder, after documenting cracks and pits in the equipment that similarly increased contamination risk, particularly in the presence of moisture.
Prosecutors further allege that Abbott lengthened the number of production batches run between dryer cleaning cycles to increase output, intentionally avoided testing for bacterial growth to avoid generating positive results, and in some instances failed to disclose known contamination test results to the FDA during inspections at Sturgis in 2019 and 2022. USDA Inspector General John Walk said in the release that “USDA OIG remains vigilant against those that would compromise public health and safety by failing to comply with legal standards and put infants at risk,” calling the alleged conduct inexcusable.
Free first-hour card: After a scam call or identity theft, the order of the first steps matters most. Keep the free first-hour action card on hand.
Free download from RetireShield. Getting it also signs you up for the free Retirement Money Brief, a weekday email. Unsubscribe anytime.
Three Abbott employees, not a routine audit, triggered the case
The case began as a qui tam lawsuit, the legal mechanism that lets private individuals sue on behalf of the government over false claims and share in any recovery. Three former Abbott employees — Scott Millard, Kristine Cooper and Loren Cooper — filed the underlying suit in the U.S. District Court for the Western District of Michigan, captioned United States, et al., ex rel. Scott Millard, et al., v. Abbott Laboratories, No. 1:22-cv-994. Under the settlement terms the Justice Department published, the three relators will split $69 million as their share of the federal recovery.
Justice Department officials framed the settlement as part of a broader enforcement push. Acting Deputy Attorney General Trent McCotter said the resolution makes clear “the safety of our children is not negotiable,” while Associate Attorney General Stanley E. Woodward Jr. said the department would “hold accountable bad actors that knowingly misrepresent compliance with essential health and safety standards.” The release ties the case to the Trump administration’s Task Force to Eliminate Fraud and National Fraud Enforcement Division, both launched this year to expand fraud enforcement across federal programs. The department’s release describes False Claims Act enforcement as a recurring tool in that effort, one it says has recovered billions of dollars for taxpayers across a range of federal programs beyond this single settlement.
WIC and Medicaid fund more than half of all formula sold in the U.S.
The scale of government purchasing is what gives a manufacturing compliance failure this much financial reach. The U.S. Department of Agriculture funds and regulates the Special Supplemental Nutrition Program for Women, Infants, and Children, known as WIC, which provides nutritional support, including infant formula, to eligible participants — and more than half of all infant formula purchased in the United States is paid for with USDA funds through WIC. State Medicaid programs separately cover and pay for certain infant formula purchases, which is why the settlement splits recovery between the federal government and individual states rather than routing the entire amount through one agency.
The resolution was handled jointly by the Justice Department’s Civil Division, Commercial Litigation Branch, Civil Fraud Section and the U.S. Attorney’s Office for the Western District of Michigan, with assistance from the USDA’s Office of Inspector General. Civil Fraud Section trial attorneys Asha Natarajan and Erin Colleran, alongside Assistant U.S. Attorneys Whitney Schnurr and Jacob Carlton for the Western District of Michigan, handled the matter. U.S. Attorney Timothy VerHey for the Western District of Michigan said the settlement “demonstrates our commitment to holding manufacturers accountable when the United States pays for noncompliant products.” As the Justice Department’s own release states, the claims resolved by the settlement are allegations only, and there has been no determination of liability against Abbott.
Government Fraud Cases Move Slowly; A Household’s Own Fraud Response Cannot
This case took federal investigators years, a formal complaint and a coordinated multi-agency effort to reach a settlement over money billed to Medicaid and WIC. A fraud aimed directly at an individual’s bank account or benefit check does not come with that kind of runway, and the response window is measured in hours, not years of litigation.
The Senior Fraud Defense & First-Hour Recovery Kit lays out the first-hour recovery plan and a fraud evidence and report log for exactly that narrower window.
Start the first-hour plan in The Senior Fraud Defense & First-Hour Recovery Kit.
This article was produced with the assistance of AI and reviewed by The Money Overview editorial team before publication.
