What Kind of False Claims Act Damages Are the Most Common?
Violators may be subject to several types of potential False Claims Act damages.
Violators may be subject to several types of potential False Claims Act damages.
Those who defraud the government could face several types of False Claims Act damages. Those who violate the False Claims Act must pay these damages. They are rarely subject to a judge eliminating them. These damages aim to not only make the federal government whole, but severely punish illegal behavior. The following is a description of these damages, as well as how they work.
False Claims Act and Damages
The False Claims Act imposes monetary penalties on individuals who defraud the government. Instances of fraudulent behavior usually revolve around either: overcharging the government, mis-charging the government or avoiding having to pay the government.
- Overcharging occurs when the violator makes the government pay a higher price than the government should pay. This is one of the most common ways fraud occurs against the government.
- Mischarging is the charging for a service or item that they did not actually provide to the government. Mischarging is common in fraud cases involving healthcare services.
- Avoiding having to pay the government is like the reverse of overcharging or mis-charging in that the violator tries to get out of a bill they should pay. In legal circles, we call this a “reverse false claim,” and it often applies to companies hiding overpayments they owe back to federal programs.
Identifying these methods of defrauding the government will help determine what potential damages a violator must pay.
Two Major Types of False Claims Act Damages
The False Claims Act imposes two major types of damages or penalties on a violator. The first are statutory civil penalties. While the original historical baseline sat between $5,000 and $10,000 per claim, federal law requires annual adjustments for inflation. As of recent federal mandates, these per-claim penalties have skyrocketed to a minimum of $14,308 and a maximum of $28,618 for every single false submission.
This penalty will apply to each instance of misconduct. This means if a violator engages in 100 instances of fraud against the government, they don’t face a single $28,618 penalty. Instead, they face a far larger penalty ranging up to $2.86 million—even before calculating actual losses.
The second type of damages under the False Claims Act is treble damages. Treble is a fancy legal word for triple. In other words, treble damages are another way of saying “triple the actual damages.” Treble damages are pretty severe. Many laws only allow for actual damages plus interest or sometimes double damages. Treble damages are usually a sign that Congress wants to severely punish a particular behavior. Let’s look at a simple example to explain how this could work.
An Example of Defense Contractor Fraud
A military contractor overcharges the government $50 for each piece of body armor it manufactures and delivers to military units and federal law enforcement officers. If the government orders 10,000 pieces of body armor, the military contractor overcharged by $500,000. So if the government catches the military contractor, that contractor will have to pay $1.5 million as treble damages, even though the actual damages are only $500,000.
Forcing violators to pay treble damages is very important because it serves as a strong deterrent to potential violators. If the False Claims Act only made the violator pay actual damages, there would be almost no deterrent effect. This is because someone who is thinking about defrauding the government might think the potential penalties are worth the risk. They might think this if they only have to pay the statutory per-claim penalty plus actual damages. We can use another example to show how this is the case.
Military Contractors and False Claims Act Damages
Let’s take another military contractor, but instead of manufacturing and delivering thousands of pieces of body armor, they are only making one nuclear-powered aircraft carrier at a cost of $10 billion. In an attempt to defraud the government, the military contractor actually charges the government $10.1 billion. This results in a $100 million overcharge. The government pays $10.1 billion and doesn’t give it a second thought.
Let’s assume the government eventually discovers the military contractor’s overcharge and successfully prosecutes them under the False Claims Act several years later. Without treble damages, the military contractor would only have to repay the $100 million it overcharged plus the civil penalty for that single invoice.
So in reality, for the opportunity to steal $100 million from the government, the military contractor only lost a few thousand dollars in a singular penalty metric. That’s an amazing deal – consider that a $100 million loan over a term of several years would be impossible to find for that amount in interest. The total interest for a $100 million loan over several years would probably be closer to $10 million or more. But with treble damages, the military contractor isn’t just paying a tiny administrative fee, but rather, faces a $300 million judgment plus penalties. This is a huge difference in monetary consequences that should deter most potential fraudsters.
Need More Information About Damages Under the False Claims Act?
If you possess inside information regarding corporate fraud, mischarging, or procurement scams targeting the federal government, protecting your career and your disclosure requires experienced counsel. Contact our team of skilled trial attorneys at The McCabe Law Firm by reaching out to our national intake division today for a completely confidential case evaluation.
