The federal False Claims Act (FCA) penalizes anyone who knowingly makes a fraudulent claim for compensation to the federal government. The penalties can be severe, frequently rising into the millions of dollars and potentially even a prison sentence. Raising an effective defense strategy is essential for anyone accused of violating the FCA.

The Steep Penalties for Violating the False Claims Act

There are four different types of penalties that defendants can face if they are convicted of violating the FCA:

1. Treble damages
2. A statutory penalty
3. Program exclusion
4. Criminal charges

Individually, each type of penalty is enough to deter making fraudulent claims against the government. Together, the costs of a conviction are extreme and draconian.

Treble Damages

First and foremost, the FCA levies treble damages – or three times the amount fraudulently requested – against the defendant. This means that, if the charge alleges that the defendant made $50,000 of false claim submitted, law enforcement will be looking to recover $150,000 in treble damages.

For alleged conduct that created lots of claims for government money, whether because it was extremely widespread or because it lasted for a long period, the underlying claims can easily surpass a million dollars. The FCA allows the government to demand three times what is owed.

Trebled damages are statutorily required by the FCA. The judge does not have the discretion to reduce them. However, 31 U.S.C. § 3729(a)(2) states that the falsely claimed amount is doubled, rather than tripled, if:

• The defendant furnished law enforcement with all the information about the violation known to the defendant within 30 days of the defendant first obtaining the information,
• The defendant fully cooperated with the government investigation, and
• At the time the defendant provided the information, there was no FCA investigation pending.

Statutory Penalties

Defendants facing FCA enforcement actions also face a statutory penalty for each violation of the law. This penalty was set at between $5,000 and $10,000 by the False Claims Amendments Act of 1986. Since then, it has been changed multiple times. Most importantly, the Bipartisan Budget Act of 2015 required that all federal agencies impose civil monetary penalties to adjust them for inflation. Since then, the Department of Justice has calculated the statutory penalty to include inflation. The result has been published at 28 C.F.R. § 85.5. Courts impose the statutory penalty currently in effect at the time of the imposition of the penalty, not at the time of the conviction or when the false claim occurred.

Currently, 28 C.F.R. § 85.5 lists the FCA statutory penalty range as between $11,803 and $23,607.

Importantly, that penalty is assessed for each violation. In United States v. Bornstein, the Supreme Court of the United States government took this to mean each false claim or statement, even if there were multiple such claims on a single form or claim for reimbursement. A doctor who sends a single bill to Medicaid for three medically unnecessary procedures and one legitimate one can face three statutory penalties under the FCA for that single bill.

Because the penalty is for each violation, these amounts can quickly add up.

Exclusion from Government Funding

Violating the FCA often leads to the defendant being kicked out of the government program that had been defrauded. This is especially problematic for healthcare providers who receive money from Medicare or Medicaid. Not only do they face substantial damages and penalties; but they can also get kicked out of one of their primary sources of revenue.

As Dr. Nick Oberheiden, founding partner of the False Claims Act defense firm Oberheiden P.C., says, “The civil penalties and program exclusions that generally come with False Claims Act violations form a powerful tandem that frequently puts a defendant healthcare provider out of business.”

Criminal Charges

Under 18 U.S.C. § 287, FCA defendants can also face criminal sanctions for knowingly making a false claim for compensation from a government program. These criminal convictions carry a significant fine, as well as up to five years in prison.

A Solid Defense Strategy is Essential

Because the penalties of a violation of the FCA are so high, raising an effective defense is extremely important as well as doing some pertinent things to reduce the risk of False Claims Act liability. While the optimal defense strategy is unique to every circumstance, they generally differ based on who is making the allegations:

• A law enforcement agency, like the Federal Bureau of Investigation (FBI) or the Department of Health and Human Services (DHHS), or
• A whistleblower, through a qui tam claim.

If it is a whistleblower who is behind the claim, it provides additional opportunities to defend against the allegations of fraud. Defendants who become aware of the qui tam claim before the government has decided whether to pursue it or not can voluntarily present exculpatory evidence that can deter the government agency from intervening. This is extremely important, as it puts the burden of pursuing the FCA claim on the whistleblower and keeps the extraordinary powers of federal law enforcement agencies on the sidelines. Without the investigatory powers of the FBI or DHHS on their side, most whistleblowers fail to prove their FCA claim.

Of course, reaching out to law enforcement and proffering information is always risky. It is very easy to mistake incriminating evidence for exculpatory evidence, especially when it is unclear what the target of the government investigations is. Defendants who have learned of a qui tam FCA claim against them should strongly consider hiring an FCA-defense lawyer who has negotiated with law enforcement agencies in the past and who has experience in persuading those agencies not to join forces with the whistleblower.

Regardless of who is pursuing the claim, the whistleblower or the government will have to show that the false claims were knowingly made. Billing mistakes or accidents do not suffice. Proving that there was an intent to defraud or a knowledge that the claims were inaccurate can be difficult, and generally has to be done solely with circumstantial evidence. Defendants who have an experienced FCA defense lawyer on their side can benefit from the advocacy and litigation skills that it often takes to prevent the whistleblower or the government from proving this knowledge to a sufficient degree.