5 Things You Need to Know About the Federal False Claims Act
1. What Is the False Claims Act?
The False Claims Act (FCA), 31 U.S.C. § 3729 et seq., holds individuals and entities accountable for submitting false or fraudulent payment claims to the government. Claims qualifying under the False Claims Act may include anything from a construction company overcharging for work on a government-funded highway project to a doctor billing Medicare for unnecessary treatments to a patient. The FCA has a unique qui tam provision that allows private citizens to file lawsuits on behalf of the government if they have personal knowledge of false claims being submitted; such suits are often referred to as “whistle-blower” actions.
2. What Is the Knowledge Requirement Under the False Claims Act?
The FCA holds individuals and entities liable for “knowingly” presenting false claims for payment to the government. Therefore, government contractors will not be liable under the FCA if the bill was submitted accidentally. For the purposes of the FCA, a person is deemed to have knowledge of the falsity of information if that person is willfully blind to the truthfulness of the information or even if the person “acts in reckless disregard” of the truth or falsity of the information. In other words, a person already has the requisite knowledge to violate the FCA if that person knew or should have known that the claim for payment was false or fraudulent.
3. What Are the Penalties for Violating the False Claims Act?
In the vast majority of cases, the penalties for violating the FCA are civil in nature, meaning a defendant faces monetary damages but not criminal charges. In particular, the government may recover three times the amount of damages sustained as a result of the false claims, plus a civil monetary penalty of $ 5,500 – $ 11,000 for each violation of the FCA. For example, if a physician fraudulent bills Medicare for $ 1,000 worth of unnecessary services on four separate occasions for a total of $ 4,000 in damages to the government, the doctor could be liable for $ 12,000 (3 x $4,000) plus an additional penalty of $22,000 – $44,000 (4 x $5,500 – $11,000). The government may also recover its litigation costs for prosecuting the case. Additionally, the Department of Health and Human Services’ Office of the Inspector General can exclude violators from participating in any federal healthcare programs or even working for a company that participates in federal healthcare programs. In more extreme cases, the government may open a criminal investigation.
4.What Is the False Claims Act Self-Disclosure Provision?
The FCA contains a limited self-disclosure provision that allows a voluntarily self-report of potential violations. There are three requirements for the reduced damages provision to apply, and all three requirements are strictly enforced. First, the person must fully disclose the violation to authorities within 30 days of learning about it. Second, the person must fully cooperate with the government’s investigation into the violation. Third, the disclosure must be voluntary, meaning that the person did not have actual knowledge of any civil, criminal, or administrative investigation into the violation at the time the person makes the disclosure. If a provider meets all three criteria, the damages for the violation may be reduced to a minimum of twice the government’s damages as a result of the violation. Thus, using the example above, that physician’s liability could be reduced to some amount over $ 8,000 (2 x $4000). In practice, the reduced penalties provision is rarely enforced through adjudication, but it can be an important tool for defendants when they engage in settlement negotiations with the government.
5. How Does the Qui Tam Provision of the False Claims Act Work?
When a private citizen, known as a “relator”, files a qui tam action on behalf of the government under the FCA, the complaint is initially filed under seal, meaning that it is confidential and kept from the public record. The case will remain under seal while the government investigates the merits of the complaint and determines how or if the case should proceed. The government may intervene and assist the relator or may decline to intervene, in which case the relator will have to pursue the case without the help of the government as an ordinary civil lawsuit. In either scenario, as part of the incentive to bring qui tam cases to the government’s attention, the relator will be entitled to a percentage of recovered monies.
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