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2020 False Claims Act Penalties

False Claims Act penalties are imposed for each violation of the law.  The statute says that someone who violates the False Claims Act “is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, . . . plus 3 times the amount of damages.”

Whistleblowers and even other lawyers mistakenly think that the False Claims Act limits penalties to $10,000.  Often this leads them to ignore the possibility of penalties when valuing a case.  But in reality, the government updates the penalty amounts for inflation each year.

In 2020, penalties can range as high as $23,330. In addition, the law authorizes a penalty for each violation. This can lead to the possibility of total penalties assesments in the millions or tens of millions of dollars.

Penalties are a possibility in every False Claims Act case. But there is a lot of misunderstanding about when and how they apply.  Understanding these nuances is key to properly the impact that penalties may play on a case.

Statutory Penalties Under the False Claims Act

The False Claims Act, 31 U.S.C. §§ 3729, provides that anyone who violates the law “is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, . . . plus 3 times the amount of damages.”  But how does that apply in practice?

Penalties Apply For Each False Claims Act Violation

The False Claims Act imposes a penalty for each violation of the statute.  So, when a defendant makes false claims, a penalty can be imposed for each claim submitted. This was clearly Congress’s intent

each and every claim submitted under a contract, loan guarantee, or other agreement which was originally obtained by means of false statements or other corrupt or fraudulent conduct, or in violation of any statute or applicable regulation, constitutes a false claim.

S. Rep. No. 99-345, at 9, reprinted in 1986 U.S.C.C.A.N. at 5274. For example, in Harrison v. Westinghouse Savannah River Co, the defendant obtained a contract by fraud.  In consequence, the Court imposed a penalty for each of the 25 invoices made under the contract.

These penalties can add up considerably.  For example, in United States ex rel. Bunk v. Gosselin World Wide Moving, N.V a defendant was convicted at trial of submitting 9,136 invoices under a bid-rigging scheme. In that case, the Government chose not to prove any damages at all. Even at $5,000 for each invoice, the defendant faced liability of over $50 million.  Ultimately the government agreed to accept $24 million.

The Penalty Amounts Adjust for Inflation

The 1986 law set penalties at $5000 to $10,000 for each violation.  Subsequent federal law changed these amounts to account for inflation.  In 1999 Congress increased the penalties to $5,500 to $11,000.  In 2015, the inflation adjustment law was amended again and now federal agencies are responsible for updating the penalties annually.

Now both the date of violation and assessment matter for calculating penalties.

Violations Ocurring before November 2, 2015:

  • Before August 1999: $5,000 to $10,000;
  • September 29, 1999 to November 2, 2015: $5,500 to $11,000.

For violations after November 2, 2015 the date of assessment matters:

  • Assessments before August 2016: $5,500 to $11,000.
  • August 2016 to February 3, 2017: $10,781, to 21,563.
  • Feburary 4, 2017 to January 29, 2018: $10,957 and $21,916.
  • After January 30, 2018: $11,181 to $22,363.

DOJ sets the penalties for most of the False Claims Act.  However the Commerce Clause sets the penalties for Reverse False Claims under 31 U.S.C. § 3729(a)(1)(G).  This is because attempts to avoid customs duties fall result in reverse false claims.

While DOJ stopped adjusting most False Claims Act penalties in 2018, the Commerce Department has continued to increase the penalties for reverse false claims.  In January 2020, the Commerce Department increased the reverse false claims penalties to $11,665 to $23,331.

Conclusion

Penalties under the False Claims Act can amount to huge portions of a recovery.  When evaluating whether or not to bring a case, understanding penalty calculation is vital.

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