DOJ Doubles FCA Statutory Penalties

June 30, 2016
4:30 am

The statutory penalties for each false claim or false statement will nearly double as the U.S. Government adjusts the False Claims Act fines for inflation. Under the Civil Monetary Penalties Inflation Adjustment pursuant to the provisions of the Bipartisan Budget Act of 2015, the new minimum fine for each violation of the FCA will be $10,781, with a maximum of $21,563.

The current minimum is $5,500 and the maximum is $11,000, according to 28 C.F.R. 85.3(a)(9). The new penalties will go into effect on August 1, 2016.

The current inflation adjustments will apply to violations on or before November 2, 2015, as well as to assessment before August 1, 2016 when the violation occurred after November 2, 2015. In other words, the statutory fines of $5,500 and $11,000 will continue to apply under the rule to conduct on or before the adoption of the Bipartisan Budget Act of 2015.

Defendants will be subject to the treble damages provision without change. This is one of the most powerful aspects of the law in the fight against government fraud.

The release of the interim final rule with request for comments included updates to the penalties of other laws that are familiar to whistleblower lawyers, including the Anti-Kickback Act and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

For additional information about the changes, please contact one of our False Claims Act attorneys.

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Understanding the False Claims Act and Its Importance

The False Claims Act (FCA) is a crucial piece of legislation that empowers whistleblowers to report fraud against the government. It allows individuals to file lawsuits on behalf of the government when they have evidence of fraud, thereby protecting taxpayer funds and promoting accountability in government contracts.

Since its enactment, the FCA has been instrumental in recovering billions of dollars for the government. Whistleblowers, often referred to as "relators," can receive a percentage of the recovered funds, incentivizing them to come forward with information about fraudulent activities. This act not only serves as a deterrent against fraud but also fosters a culture of transparency and integrity in public service.

Recent Changes to Statutory Penalties Under the FCA

Recent adjustments to the statutory penalties under the FCA have significantly increased the financial consequences for violators. As of the latest updates, the minimum fine for each violation is now set at ,781, while the maximum fine can reach up to ,563, reflecting the adjustments for inflation mandated by the Bipartisan Budget Act of 2015.

These changes, effective for violations occurring before November 2, 2015, as well as assessments prior to August 1, 2016, underscore the government's commitment to ensuring that penalties remain a strong deterrent against fraud. Legal professionals and potential whistleblowers must stay informed about these updates, as they directly impact the risks and rewards associated with reporting fraudulent activities.

The Role of Whistleblowers in Protecting Public Funds

Whistleblowers play a vital role in safeguarding public funds by exposing fraudulent activities that might otherwise go unchecked. Their insights and firsthand knowledge of wrongdoing are invaluable in holding corporations and individuals accountable for their actions, ultimately leading to significant financial recoveries for the government.

For instance, whistleblowers have contributed to landmark cases that resulted in substantial settlements, such as the recent 5 million recovery involving Merrill Lynch. By coming forward, whistleblowers not only protect taxpayer money but also promote ethical behavior within organizations, reinforcing the importance of integrity in both public and private sectors.

Implications of Increased Penalties for Whistleblower Cases

The recent increase in penalties under the FCA has profound implications for both whistleblowers and defendants. For whistleblowers, the heightened stakes may encourage more individuals to report fraudulent activities, knowing that the potential financial repercussions for violators are now more severe.

Conversely, defendants facing these increased penalties may be more inclined to settle cases out of court to avoid the risk of hefty fines. This shift can lead to more favorable outcomes for whistleblowers, as companies may choose to resolve allegations swiftly rather than face the uncertainty of litigation. Understanding these dynamics is essential for anyone involved in whistleblower cases.