False Claims Act Penalties

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 What is the False Claims Act?

The Federal False Claims Act imposes penalties upon individuals or organizations that provide false or fraudulent information to the government. Specifically, the Act is aimed at preventing claims where the motivation is to receive property or funds from the United States government.

The Act is also sometimes referred to as the Lincoln law because it harkens back to the Civil War. This Act is the federal government’s best tool for preventing government waste due to payments that were fraudulently obtained from the government is numerous areas of business, including:

  • Health care;
  • Housing; and
  • Contracting.

Claims under this Act typically related to a service that was overpaid, a service which was never rendered but for which payment was received, or a service that was in some way inferior. The Act may also apply in situations where the government is owed money but the violator takes action to avoid paying the government, such as reverse false claims.

The False Claims Act is an example of a qui tam law. In the majority of cases, false claims under the Act are brought by a whistleblower pursuant to the qui tam provision of the Act. Qui tam laws allow private citizens to step into the shoes of the government and to bring a lawsuit on behalf of the government.

This means that an individual who reports their employer under the Act is entitled to a percentage of the money which the government recovers in a court of law, typically anywhere between 15 and 25% of the amount of the award.

The Act also protects whistleblowers who report their employers from retaliation from those employers. In other words, an employer is not permitted to take any actions against that employee including firing or withholding back wages from the employer who reported the employer.

What States Have False Claims Statutes?

In addition to the False Claims Act, there are also certain states which have exacted their own version of a qui tam type false claims statute, including:

  • California;
  • Connecticut;
  • Delaware;
  • District of Columbia;
  • Florida;
  • Georgia;
  • Hawaii;
  • Illinois;
  • Indiana;
  • Louisiana;
  • Massachusetts;
  • Michigan;
  • Minnesota;
  • Montana;
  • Nevada;
  • New Hampshire;
  • New Jersey;
  • New Mexico;
  • New York;
  • North Carolina;
  • Oklahoma;
  • Rhode Island;
  • Tennessee;
  • Texas;
  • Virginia; and
  • Wisconsin.

The false claims laws in these states also protect whistleblowers from retaliation by their employers. In recent years, many of the states have adopted statutes which specifically provide for whistleblower protections in health care employment settings. It is important for an individual to consult with a local attorney for details regarding the false claims regulations in their state.

What is a False Claim?

If a company knowingly presents, causes to be presented, or conspires with other individuals to present a fraudulent or false claim for payment from the federal government, that business may be liable for submitting a false claim under the False Claims Act.

The government is not required to show that a defendant intended to defraud the government. It is only required to show that the defendant knowingly performed the violating action.

It is important to note that, as noted above, states may also have false claims laws. Because of this, a company or business may be potentially found liable under both the state and federal laws.

Some of the most common false claims relate to health care. For example, when a pharmaceutical company fails to disclose safety data or engages in illegal off-label promotion, the government may initiate a false claim investigation against that company.

Another example may include a situation where a medical office submits a claim for Medicare reimbursement for unnecessary procedures or for tests which were never performed. Nurses who are aware of these false submissions may report these instances to the government and the government may seek to initiate the claim itself. If the government does not initiate the claim, the nurse may seek to prosecute the false claim on their own.

What are the Penalties for a False Claim?

The penalties and fines for filing a false claim may be quite hefty for a business. Examples of awards that have been received include:

A court may reduce the amount of damages which are awarded to the government in certain cases. This may occur if the violator, after becoming aware of the false claim, timely presents all information which was known to them to the government as well as fully cooperates with the government’s investigation.

An employee is incentivized to bring a whistleblower claim because they and the individual who is best able to bring to light information which the government would normally not be in the position to discover on its own. In order to recover under the whistleblower provisions, however, it is not sufficient that the employee simply informs the government regarding the fraudulent submission.

A qui tam lawsuit must be presented and the plaintiff will recover to the extent that it is successful in recovering from the violator. Following a settlement or a trial with a positive result, an employee may be able to recover between 15 and 30 percent of the amount which is recovered by the government, in addition to attorney’s fees and costs.

If an action is litigated by a whistleblower, the potential award is between 15 and 25 percent. If the action is prosecuted by the government, the potential award is between 25 and 30 percent. A court may reduce the amount which is awarded to a whistleblower based upon the level of wrongdoing of the employee as well as whether the employee substantially contributed to the prosecution of the case.

As a further incentive to bring this type of claim, a whistleblower is protected from retaliatory actions by their employer. For example, suppose an employee is working on a government contract for the construction of helicopters and discovers that their employer has failed to adequately meet testing guidelines and that those helicopters have failed the required testing.

Also suppose that the employer has submitted a claim for payment which asserts that the helicopters have, in fact, passed such tests. If an employee is successful in bringing a qui tam claim and they played no part in knowingly submitting the false documentation, the employee will recover fully to the extent that the government is successful in recovering against the employer.

If their employer then retaliates against the employee by demoting or firing them, that employee may seek additional damages, including:

  • Reinstatement to the same senior status;
  • Two times the amount of back pay as well as compensation for special damages;
  • Interest on the back pay; and/or
  • Compensation for special damages, which may include litigation costs and attorney’s fees.

Should I Talk to an Attorney About False Claims Act Penalties?

It is essential to consult with an wrongful termination lawyer for any false claims act issues, questions, or concerns you may have. If you believe your employer has engaged in misconduct, you should make a written record which outlines the events, details, and incidents.

This information will be used if you file a claim with an administrative agency, such as the Occupational Safety and Health Administration (OSHA) or if you file a lawsuit. Your lawyer will assist you with gathering documentation, filing your claim, as well as represent you during any court appearances.

If you are being investigated or prosecuted for a false claim, you should contact an attorney as soon as possible. Your attorney will advise you of your rights, your potential liability, and defend you in court.

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