False Claims Act Penalties

The False Claims Act (FCA) is a federal law allowing the federal government, and even private individuals, to sue those making fraudulent financial claims against the government.

The U.S. Department of Justice collected more than $2.68 billion in judgments and settlements from civil cases involving false crimes and fraud in the fiscal year ending Sept. 30, 2023. The program has collected more than $75 billion since 1986.

Healthcare fraud is a leading cause of FCA settlements and judgments. The healthcare industry accounted for $1.8 billion of financial recovery in FY 2023. The federal False Claims Act was expanded in 1986 to include federal healthcare programs, such as Medicare and Medicaid programs.

The penalties for knowingly submitting a fraudulent claim can be severe. The FCA imposes treble damages and penalties for violations of the FCA.

Below, you'll find a general overview of FCA penalties and how the False Claims Act works to deter fraud.

False Claims Act Overview

The federal government enacted the False Claims Act in 1863 in response to defense contractor fraud during the Civil War.

For a claim to be fraudulent, the offender must knowingly submit a false statement or invoice or cause someone else to submit it. An inadvertent clerical mistake isn't fraud unless someone knew there was an error and failed to correct it. The FCA defines “knowingly" to include:

• Actual knowledge
• Deliberate ignorance
• Reckless disregard of the falsity of the information submitted

So, knowledge of wrongdoing is a crucial element.

The United States government can pursue fraudulent actors on its own under the False Claims Act. The law also allows private citizens to file suits on behalf of the government. These civil actions are called qui tam lawsuits. Private citizens who bring qui tam actions may receive a portion of the government's recovery.

The private party who initiates the suit is the relator. The private party will collect 30% of the award if the lawsuit is successful.

The relator files the lawsuit in the federal District Court. Only the relator and the government know about the legal action because it is filed under seal. The Department of Justice has 60 days to decide whether to intervene.

If the government intervenes, it takes over the case, and the relator will still receive a portion of the government's recovery. If the government doesn't intervene, the relator may choose to continue the lawsuit without the government. If the relator wins, they will recover up to 30% of the award.

Over $2.3 billion of the settlements and judgments collected in FY 2023 came from qui tam lawsuits. The government paid $349 million to the individuals who filed such lawsuits.

False Claims Act Examples

Common issues that can lead to FCA penalties include:

• Billing for substandard materials
• Billing for services not rendered
• Billing at excessive rates

For example, an accountant could "blow the whistle" on health care fraud if they had information that a medical provider overbilled a government program, such as Medicare or Medicaid. Or the fraud could be a defense contractor overbilling the defense department.

Civil Monetary Penalties Under the FCA

FCA penalties periodically adjust for inflation. As of February 12, 2024, FCA penalties range from $13,946 to $27,894 per violation.

In addition to these civil penalties, the government can recover treble damages or triple the amount of any money it lost due to a false claim.

FCA Penalties in Action

To see how False Claims Act penalties can add up, you can look at a hypothetical Medicare fraud claim.

Corey, a retired construction worker now receiving Medicare coverage, has had ongoing but relatively minor low back pain due to his many years of swinging hammers on job sites. Corey goes to his primary care physician, who refers him to an orthopedic doctor for back treatment.

When he arrives at the orthopedic clinic, the doctor performs a full examination of his back, as well as his knees and neck. The doctor recommends surgery for Corey's back and pain medication for his knees and neck. But Corey never complained of any neck or knee pain. After his back surgery, he sees the Medicare bill. The charges were as follows:

If the government pays these claims and later determines that part of the bill was fraudulent because the pain medication and neck/knee evaluations weren't necessary, then an FCA case could potentially recover triple the government's amount of damages, or $3,366 (since the clinic overcharged by $1,122).

In addition, since there are five different fraudulent claims, the government could recover separate civil penalties of up to $27,894 per claim. So, based on one referral for minor back pain, the orthopedic clinic could face over $140,000 in fines and penalties.

False Claims Act: Related Crimes

Most FCA investigations are civil, but criminal prosecution is a possibility. Criminal penalties for submitting false claims include imprisonment and criminal fines. Crimes often associated with False Claims Act cases include:

• Theft
• Forgery
• Insurance fraud
• Identity theft
• Bribery
• Money laundering
• Wire fraud

Questions About the False Claims Act? Talk to a Whistleblower Lawyer

Fraudulent government claims siphon away taxpayer dollars. The False Claims Act is one deterrent. Blowing the whistle on fraud can get a little complicated, especially if you work for the company engaging in the fraud. Talk with a whistleblower-qui tam attorney near you who can help ensure your rights are protected.