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False Claims Act Penalties Double as of August 1, 2016

On June 30, 2016, in connection with the November 2015 enactment of the Federal Civil Penalties Inflation Adjustment Act Improvements Act (the “2015 Civil Penalties Amendments,” 28 U.S.C. § 2461), the Department of Justice (DOJ) issued an Interim Final Rule with Request for Comments (Interim Rule) that adjusts for inflation civil monetary penalties, including almost doubling penalties for False Claims Act violations. The Interim Rule goes into effect on August 1, 2016.  

The 2015 Civil Penalty Amendments substantially revised the prior provisions of the Inflation Adjustment Act and substituted a different statutory formula for calculating inflation adjustments on an annual basis.

Background

The False Claims Act is a federal law that prohibits anyone from submitting false or fraudulent claims to the federal government for payment. Specifically, the False Claims Act imposes liability on any person who “knowingly presents or causes to be presented a false or fraudulent claim for payment or approval; knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim; conspires to commit a violation of the False Claims Act….or knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” See 31 U.S.C. § 3729(a). 

The False Claims Act also contains explicit provisions that provide financial incentives for individuals, known as relators or “whistleblowers,” to allege fraud on behalf of the federal government and receive a percentage of the monetary recovery for their efforts and information. 

Current False Claims Act penalties 

The current False Claims Act civil penalties are between $5,500 to $11,000 per claim, plus three times the amount of damages which the federal government sustains because of the false claim.

Increased False Claims Act penalties effective August 1

As of August 1, 2016, False Claims Act civil penalties increase to between $10,781.40 and $21,562.80 per claim, plus three times the amount of damages that the federal government sustains because of the false claim. It is important to note that when False Claims Act penalties increase, so do the financial rewards for whistleblowers, increasing their incentive to allege false or fraudulent claims. 

DOJ requests comments on the Interim Rule on or before August 29, 2016.

Copyright © 2018 Godfrey & Kahn S.C.

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About this Author

Wendy K. Arends, Government Attorney, Godfrey Kahn Law Firm
Special Counsel

Wendy Arends is special counsel in the firm’s Madison office where she advises businesses, organizations and trade associations regarding their interactions with local, state and federal government. Her practice focuses on matters involving antitrust and consumer protection, health care, and international trade compliance. Prior to joining Godfrey & Kahn, Wendy practiced for more than four years at a large national law firm in Washington, D.C. where she worked on a variety of complex commercial litigation and regulatory matters.

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Molly R. Berkery, Godfrey Kahn, Federal Health Care Litigation Lawyer, Wisconsin, Anti-Kickback Statute Attorney
Associate

Molly Berkery is an associate in the firm’s Health Care Practice Group. Molly advises hospital and other health care industry clients on a wide range of corporate and regulatory matters, including Federal health care program fraud and abuse, the Physician Self-Referral (Stark) Law, the Anti-Kickback Statute and Medicare and Medicaid reimbursement issues. She also counsels clients on issues related to compliance with the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act.

Molly is a member of the American Health Lawyers Association. She also lectures on health law and public health as an Assistant Clinical Professor at the Medical College of Wisconsin and serves on the Board of Directors of the American Foundation of Counseling Services.

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Sean O.D. Bosack, Litigation Attorney, Godfrey Kahn Law Firm
Shareholder

Sean O'D. Bosack is a shareholder in the Litigation Practice Group in the Milwaukee office and a member of the White Collar Defense and Investigations Practice Group. Since joining the firm in 1997, Sean has focused his practice on complex business and corporate civil and criminal litigation. Sean devotes a substantial portion of his practice representing corporations conducting internal investigations involving various forms of fraud and corporate governance issues, and representing corporate and individual clients in white collar criminal matters in industries including health care,...

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Thomas Shorter, Healthcare Attorney with Godfrey Kahn
Shareholder

Thomas N. Shorter is a shareholder in the firm's Madison office and Chair of the Health Care Team. Tom represents hospitals, physicians' groups, research institutions and health care related organizations, as well as other businesses, providing counsel on health care, corporate, labor and employment and regulatory matters. For clients in the health care industry, Tom handles matters regarding Medicare compliance, Health Insurance Portability and Accountability Act (HIPAA), Emergency Medical Treatment and Labor Act (EMTALA), Physician Self-Referral (Stark), and Anti-Kickback. Additionally,...

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