Penalties and Damages under the False Claims Act
The False Claims Act (FCA) is a important law that allows the government to recover money lost to fraud. It was originally passed during the Civil War to stop defense contractors from overcharging the Union Army. But today it applies to any company or person that tries to get money from the federal government through lies or deception.
The FCA sets up big punishments for fraud to try and deter people from doing it. Companies found guilty under the law have to pay back triple the amount they stole. Plus extra money called “civil penalties” that can range from around $5,000 to $11,000 per lie they told.
With huge construction projects or Medicare billing, one scheme can include thousands of individual false claims. So the damages and fines can really add up! In 2022 alone, cases under the False Claims Act recovered over $2 billion dollars for U.S. taxpayers.
Calculating FCA Damages
Courts decide the size of False Claims Act judgements on a case-by-case basis. But they tend to focus on two main questions:
- How much money did the fraud cost taxpayers?
- How many false statements or bogus claims were made?
The law defines a “claim” pretty broadly. Basically any time someone asks the government to pay them money, that’s a claim. And every lie used to support that request is a false claim. So big complicated schemes can rack up tons of individual false claims.
Lets look closer at the two pieces of a False Claims Act penalty – damages and civil fines.
Treble Damages
The FCA says any guilty company has to pay back “3 times the amount of damages sustained by the government.” So if a construction contractor over-billed the Army by $5 million, they’d be on the hook for $15 million in treble damages.
The point is the punishment should hurt more than the crime benefited them. Treble damages help undo the profit motive that drives people to defraud taxpayers in the first place.
Civil Penalties
In addition to damages, the law imposes stiff monetary penalties. The FCA sets penalty amounts between $5,000 and $11,000 per false claim. The Justice Department adjusts the range yearly for inflation. So in 2023, civil penalties span from $5,500 to $11,000 per lie.
When deciding penalties, courts look at stuff like:
- How much did the fraud hurt the government?
- How many false statements were made?
- How long did the illegal scheme run?
- Was this the first violation or has the company done this before?
Judges tend to hit repeat offenders with bigger fines. And schemes that went on for years rack up way more false claims, so they warrant stiffer penalties.
Do FCA Penalties Violate the Constitution?
With civil fines running thousands of dollars per lie, False Claims Act judgements can eclipse hundreds of millions. So do huge judgments like that violate the Constitution’s ban on “excessive fines?”
Companies found guilty under the law sometimes argue these mammoth penalties qualify as excessive. But judges almost always disagree. Still, courts do consider some factors to decide if FCA damages cross any Constitutional line:
- How much did the fraud actually harm the government?
- What’s the maximum penalty allowed under the law?
- What amount is needed to deter future violations?
- What penalty would deprive the defendant of their livelihood?
So penalties that seem really extreme compared to the actual damage may get reduced. But massive judgments are allowed as long as they seem proportional and necessary to deter future fraud.
Getting Help with an FCA Case
The False Claims Act is a powerful tool, but the law can be super complex in practice. These cases often involve intricate schemes with thousands of moving parts. So having an experienced attorney is critical.
Specialized FCA lawyers can help calculate damages, negotiate settlements, and design trial strategies focused specifically around the law’s unique procedures. Qui tam whistleblowers can also get a cut of whatever money the government recovers. So having legal advice early on is key to fully understand your rights.
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