False Claims Act damages awards recovered by the federal government can add up to the billions of dollars.
The False Claims Act damages awards potentially recoverable by the federal government are huge. It’s commonplace for the Department of Justice to collect in the billions each fiscal year. But how much money does the federal government recover and how is this possible?
Recovery Under the False Claims Act
The False Claims Act allows the federal government to not just obtain a recovery on the actual amount of money stolen, but penalties, too. The penalties imposed by the federal government can be much higher than the actual amount of money taken through fraud.
The federal government can recover under the False Claims Act in two primary ways. The first is with treble damages. This just means triple the actual damages. If a hospital defrauds the federal for $1 million, treble damages allow the federal government to collect $3 million.
Next are penalties, which range from around $10,700 to $21,500 (recently adjusted for inflation) per fraudulent act. So if the hypothetical hospital stole the $1 million through 1,000 false billing statements, the federal government could collect anywhere from $10.7 million to $21.5 million in penalties.
This seems a bit unfair, allowing the federal government to collect more than twenty times the amount the fraudsters actually took. But this makes sense for several reasons.
First, it’s expensive to litigate a False Claims Act case.
It can take years of investigation and research before trial. Then even after the trial, if an appeal takes place, it can be another few years until the federal government can actually collect its money.
Second, the perpetrator of fraud must pay an amount of money well in excess of the money actually stolen.
If the perpetrator only had to pay back what it stole, then it has absolutely zero incentive to follow the law. It can ask, “What’s the worst that will happen? I just pay back what I took? If that happens, I have lost nothing.” Therefore, the damages and penalties the government imposes have to be high enough to deter someone who is on the fence about committing fraud.
Third, the False Claims Act has a special provision called the qui tam provision.
This allows whistleblowers to receive a piece of the government’s recovery. This bounty or reward ranges anywhere from between 10 percent to 30 percent and comes from whatever the government can recover from the violator. So just to break even, the federal government must recover the amount of money stolen plus 10 to 30 percent. The government often has to pay this 10 to 30 percent because a large number of False Claims Act cases are successful only with the help of the whistleblower.
How Much Money Does the Federal Government Recover?
The amount of money the Department of Justice recovers each fiscal year varies, but since 2000 the amounts range from just under $690 million to just over $6 billion. The following lists the amount of money that the Department of Justice recovered under the False Claims Act since 2000:
- 2000: $1.6 billion
- 2001: $1.8 billion
- 2002: $1.2 billion
- 2003: $2.2 billion
- 2004: $686 million
- 2005: $1.4 billion
- 2006: $3.2 billion
- 2007: $1.9 billion
- 2008: $1.3 billion
- 2009: $2.4 billion
- 2010: $3.0 billion
- 2011: $3.0 billion
- 2012: $5.0 billion
- 2013: $3.1 billion
- 2014: $6.1 billion
- 2015: $3.1 billion
- 2016: $4.7 billion
- 2017: $3.7 billion
Since 1986, the amount recovered by the Department of Justice is over $56 billion. To further understand these numbers, we can examine the 2017 fiscal year in more detail.
2017 Fiscal Year False Claims Act Recoveries by the Department of Justice
One of the biggest areas of recovery for the Department of Justice under the False Claims Act is the healthcare industry. In 2017, $2.4 billion of the $3.7 billion total recovered came from healthcare. And about $900 million of that came from the pharmaceutical and medical device industry alone.
One of the biggest recoveries came from Shire Pharmaceuticals LLC, which paid $350 million to settle claims that it gave kickbacks to doctors and clinics to overuse its products. One overused product, in particular, was its bioengineered skin substitute. The kickbacks took the form of travel, food, drink, medical equipment, medical supplies and cash.
Another industry making major payouts under the False Claims Act is the housing and mortgage industry. For the 2017 fiscal year, it paid $543 million to the Department of Justice.
It’s easy to see how significant the False Claims Act is for the federal government. And the amazing thing is that there are many instances of fraud the government will not be able to recover or doesn’t even know exist. This is why whistleblowers and the qui tam provision of the False Claims Act are so important.
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