Click Fraud Protection Understanding False Claims Act Penalties
TZ Legal – Fraud Fighters Logo
HomeThought LeadershipUnderstanding False Claims Act Penalties

Understanding False Claims Act Penalties

The False Claims Act (FCA) is one of the most powerful tools at the disposal of the U.S. government to combat fraud, waste, and corruption. The FCA penalizes companies and individuals who attempt to defraud the government out of taxpayer money by making false claims or reneging on contracts. This federal law has certain provisions in order to make it as wide-ranging and potent as possible.

Individual Penalties and the False Claims Act

One important element of the False Claims Act is that it assesses penalties for each individual false claim made to the government. Therefore, the financial repayment due is not a simple one-time fee as a deterrence against future fraud. Instead, penalties under the FCA take the form of a series of fees due for each individual attempt to defraud taxpayer funds, as well as each violation of the act overall.

7 Types of False Claims Act Violations

There are seven different kinds of violations that the False Claims Act prohibits.

  1. False claims: The most clear-cut kind of violation, false claims are those presented knowingly to the government for payment when the party or person filing the claim is not entitled to the funds that they are requesting.
  2. False records or statements: The making, using, or causing others to use or make false records or statements that are material to a false claim is also prohibited under the FCA. Materiality in this instance means having significant influence over the amount involved.
  3. Conspiracy: Conspiracy in this instance means not a conspiracy against the government in general, but conspiring specifically to violate the False Claims Act.
  4. Conversion: Purposefully keeping government funds or property that should legally be returned is also prohibited under the FCA.
  5. Issuing false receipts: The person, party, or company that is authorized to make or deliver a document that certifies the return of the total amount of government funds or property must make every effort to know that all of the information on the receipt is true.
  6. Unlawful purchase of government property: Knowingly purchasing government property from a government employee, officer, or member of the Armed Forces who may not legally sell said property is illegal under the FCA.
  7. Reverse false claims: Attempting to avoid payment due to the government by making false claims or statements or falsifying records is prohibited.

Every time a false claim is submitted to the government, each individual instance may be in violation of several components of the False Claims Act.

For instance, a doctor who overbills Medicaid for one patient’s procedure may be found to be in violation of several counts under the False Claims Act. For this one act of fraud, the doctor may be found to be in violation of:

  • Issuing false receipts
  • Conspiracy
  • Making false records or statements
  • Making a false claim

If the same doctor overbills many patients many times, each instance of overbilling may also accumulate multiple penalties. The way the False Claims Act is structured can lead to hefty financial penalties for even relatively small cases of fraud.

Judge and Jury Decisions in False Claims Act Cases

Should the government decide to settle the case out of court, there may not be any individual penalties assessed in a case of fraud. However, should the case go to court, there is a role for both the judge and jury to play in deciding the overall outcome.

The jury is largely responsible for deciding how many violations have occurred. U.S. juries are dedicated to deciding questions of fact—if the wrongdoing occurred, and how many times it did. Judges, on the other hand, are tasked with applying the law once guilt is established. Therefore, a judge would assess how many penalties can be applied for each violation.

Various court cases have set precedents allowing judges to exercise some discretion in how they assess the number of penalties per violation. Some factors that may influence their consideration may be:

False Claims Act Penalty Amounts

Originally enacted in 1863 to deter defense contractor fraud during the American Civil War, the False Claims Act has been amended several times over the years. Some of the most notable changes have been to increase the number of financial penalties, as well as to tie the amount due to inflation rates.

Currently, each violation of the False Claims Act creates a possible liability to the United States Government for a civil penalty of no less than $5,500 and no more than $11,000. In addition to this base amount, there is a possible penalty of three times the amount of damages that the government has sustained because of the fraud, a provision known as “treble damages.” If the party who has perpetrated the fraud reports it to the government themselves or cooperates substantively in the investigation, then the penalty may be reduced to only double the amount of damages.

How is Inflation Calculated For False Claim Penalties?

The passage of the Bipartisan Budget Act of 2015 influenced the way that False Claims Act penalties are calculated. Inflation is now reassessed every year, which adjusts the civil penalties range regularly. This law also replaced the previous 10% cap with a 150% cap on inflation. This has led to a dramatic increase in the amount that penalties can vary from year to year.

As of November 2015, any fraud found to be perpetrated after this date is subject to penalties assessed under the new guidelines. Inflation adjustments are publicly available in the Code of Federal Regulations.

Whistleblower Percentages of the False Claims Act

The text of the False Claims Act currently states that if the government intervenes in the action, the relator (or whistleblower) is eligible to receive between 15 to 25% of the total amount recovered through the qui tam suit. This includes the sum of the individual damages assessed for each violation of the False Claims Act. At times, this amount can stretch from thousands to even millions of dollars.

If the government does not intervene in the qui tam suit, the whistleblower can receive an even higher amount of the total damages incurred with a guilty verdict. In this case, the whistleblower can receive up to 30% of the total amount that the defendant is ordered to pay.

However, if the whistleblower planned or initiated the fraud, the court may use their discretion to reduce the possible amount of financial reward.

Speak to a Qui Tam Attorney

For more information about possible damages and financial payments under the False Claims Act, speak to an experienced qui tam attorney today. The whistleblower lawyers at Tycko & Zavareei LLP are available to answer any questions you may have, as well as to consult with you about the specifics of your case. Speak out against corruption today by filling out our confidential, no-cost case evaluation form.

How can we help you?

Confidential Case Evaluation

Our experienced qui tam attorneys are available for a confidential, no-cost, no-commitment, initial evaluation of your case. Call us now at (202) 973-0900, or begin the process by completing our Confidential Case Evaluation Form.
Start The Process