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What Is the Penalty for Violating the False Claims Act?

violating the false claims act

violating the false claims actViolating the False Claims Act can result in severe financial penalties for those who defraud the federal government by submitting a false claim. The exact penalty will depend on several factors, including the amount of money improperly taken from the government and the amount of cooperation, if any, the violator provides to the federal government.

What Is the False Claims Act?

The False Claims Act is a federal law that punishes those who defraud the government. Often, these are federal contractors and other businesses that sell products or services to the government.

There are two major instances where an individual or company can violate the False Claims Act. The first is by defrauding the government. This means doing something fraudulent that results in the federal government paying more money than it should or preventing the federal government from obtaining the full amount of money it’s entitled to collect.

For example, a shipper overcharging the federal government to send military supplies to an overseas war will be guilty of violating the False Claims Act if that shipper falsified documents to get more money from the government. Another example might be a healthcare provider that bills the government for running medical tests of 2,500 federal employees without ever running those tests.

A second way a violation of the False Claims Act can occur is through retaliation. Since many False Claims Act court cases begin with the help of a whistleblower, the federal government realizes the whistleblower is probably going to be subject to revenge by the individual or business that’s now in trouble. To help protect the whistleblower, the False Claims Act has provisions that punish those who retaliate against the whistleblower.

Penalties for Violating the False Claims Act

Violators of the False Claims Act face financial penalties that consist of two components. The first component is the damages penalty, which triples the actual amount of money defrauded from the government. The second is the claim penalty, which provides for a set penalty amount for each claim that violates the False Claims Act. Each claim penalty can range from around $11,000 to $22,000. The exact amount of these claim penalties will vary each year based on several factors, such as inflation.

Depending on the facts surrounding the False Claims Act violations, one type of financial penalty will be more costly to the violator than the other. We can use the two examples mentioned earlier about a shipper and healthcare provider to illustrate.

Let’s say the shipper charged the federal government $500,000 to ship 100 tanks to a particular battlefield. This price of $500,000 included a requirement that the shipper conduct daily inspections of the tanks to make sure no damage occurred during the long voyage. However, the shipper never conducted these daily inspections and instead only inspected the tanks every week, yet still charged $500,000. If the shipper is liable for violating the False Claims Act, it will have to pay between $1,511,000 and $1,522,000.

Now take the healthcare provider who claimed to have 2,500 federal employees medically tested. Imagine the healthcare provider charged the government $500,000 for all 2,500 medical tests or a bill of $200 for each test. Since no testing actually happened, if the court deems the healthcare provider violated the False Claims Act, it could be on the hook for anywhere between $29,000,000 and $56,500,000. Why is this penalty so much higher than the shipper’s penalty? It’s because each false claim of $200 results in a penalty that will range from $11,000 to $22,000. And since there were 2,500 false claims submitted, you have a lot more damages.

If a violator cooperates with the federal government in its investigation into the fraud, they may reduce the damage penalty by only doubling the amount of money taken from the government instead of tripling it. This is a 33% reduction in damage penalties. However, the claim penalties remain the same.

Penalties for Violating the Anti-Retaliation Provisions of the False Claims Act

To protect whistleblowers, the False Claims Act has an anti-retaliation provision. If an employer fires, demotes, suspends, harasses or discriminates against the whistleblower, the whistleblower can receive reinstatement, double the amount of back pay, interest and special damages. These special damages can include attorneys’ fees and court costs.

Concerned about the Penalties for Violating the False Claims Act?

Calculating the total amount of penalties possible for violating the False Claims Act depends on a lot of facts. If you’re aware of a possible False Claims Act violation and concerned about the total amount of penalties possible, please contact the skilled attorneys at Bothwell Law Group by calling 770.643.1606 today.

Top 3 Examples of False Claims Act Violations and Penalties

False Claims Act Violations

False Claims Act ViolationsIf you are seeking information about False Claims Act Violations, it will help to have some real life examples about these violations and penalties. Before we get into those, let’s get a basic understanding of what the False Claims Act is:

  • The Act, also known as the Lincoln Law, was created in 1863 under Abraham Lincoln’s administration, to expose fraud and profiteering during the Civil War.
  • It allowed people to expose others who made a false claim against the government.
  • The Act provided protection from retaliation actions such as job loss or other damages.
  • In 1989, the Qui Tam Law was added, allowing private citizens to sue on behalf of the US government, keeping a percentage (usually 15-30%) of the recovered money for themselves.

How Are False Claims Act Violations Investigated?

The Qui Tam Law allows for a private citizen to bring evidence of a violation to the government, to request they investigate the allegation and potentially join the lawsuit. The Qui Tam is a civil suit. The investigation is confidential. Not even the person or organization under investigation is informed of the probe.

This confidentiality allows the US Justice Department to investigate the allegations with no harm or repercussions to either party. Once the inquiry is complete, the government decides if they will intervene. If the federal government chooses not to go forward with the action, the private citizen (and their attorney) may continue on their own. The chance of success is much higher when the government is a party to the lawsuit.

Who Are the Top False Claims Act Violators?

Qui Tam Law is used to bring some of the violators to justice, including Medicare and Medicaid Fraud, prescription drug fraud, and defense contractor fraud. These three areas commit the most violations of the False Claims Act. In fact, of the highest paid settlements on record, nine of the top ten involve the health care or prescription drug industries.

For the fiscal year ending September 2015, the top violator by far was the healthcare industry, accounting for nearly half of the $3.5 billion recovered in False Claims Act violations. Charges included inadequate or unnecessary medical procedures and treatments, kickbacks to medical providers and overcharging for Medicare/Medicaid programs. The government recovered $1.9 billion in these health care violations.

Some of the largest violations occur in the area of prescription drugs. The FDA authorizes all prescription drugs for specific uses and conditions. A doctor may make a decision to use a drug for a different condition than its original use. This prescribing is known as an off-label use of the medication and does not violate any law.

However, the drug manufacturer may not promote the drug for an off-label use. Doing so is a violation of the False Claims Act. Any kickback or benefit offered to a doctor, by a drug manufacturer is considered evidence of the breach.

Drug manufacturers are also in violation if healthcare providers receive kickbacks for prescribing certain drugs. While providing samples or referring patients can be done, doing so to provide a payback for prescribing certain drugs is fraud and is provided for under the False Claims Act and Qui Tam Law.

Other top offenders include government contract workers. Cases of government contractors who fail to fulfill the requirements of the contract yet bill for the fulfillment of the deal are standard. These violations can include substituting lower quality materials than what is required or failing to perform quality assurance checks.

Government contract violations include the implicit agreement to provide what the contract states, without substitution. Even if the substitution is of equal quality, it is not allowed and is a violation.

Contract violations include actions such as inflating bids with false information, awarding bids based on falsified information, and failing to comply with contracts available only to minority-owned businesses, female-owned businesses, or small businesses.

How Large Can the Penalties Be for False Claims Act Violations?

Penalties for False Claim Act violations can be astronomical, with the largest on record against pharmaceutical giant GlaxoSmithKline who paid out $3 billion in civil and criminal penalties. Some of this money was then passed onto the whistleblowers in each case. There were several cases involved that included the company pleading guilty to falsifying and fabricating research, bribing doctors with luxury vacations and of providing marketing kits packed with unproven claims, specifically regarding nine different drugs.

False Claims Act violations come from employees working for and with the violators. They have first-hand knowledge. One of the most important reasons to report false claims is for your own protection. All investigations, under the Qui Tam Law, are kept sealed. If your place of employment is under scrutiny, your position in the company could make you complicit. By coming forward with the information, you are protecting yourself from being inadvertently charged as part of the fraud.

If you think you have information regarding a False Claims Act violation, the best first step is to call an attorney who is informed and experienced in Qui Tam Law cases. These laws are influx on a regular basis, so choose lawyers who committed and dedicated to this type of work and up-to-date on any changes. Call (770) 643-1606 to find out more about False Claims Act violations by contacting Bothwell Law Group online.