Federal False Claims Act Investigations Can Lead to Substantial Civil or Criminal Penalties
The False Claims Act is a federal statute that applies to government contractors, Medicare and Medicaid-participating healthcare providers, and other entities and individuals that do business with the federal government. It prohibits the submission of “false or fraudulent” claims for payment by the federal government, and it imposes substantial penalties for contractors, providers, and others that improperly bill the U.S. Department of Defense (DOD), Centers for Medicare and Medicaid Services (CMS), and other departments and agencies.
These penalties can either be civil or criminal in nature.
Many executives and healthcare professionals are surprised to learn that improperly billing the federal government can lead to criminal prosecution. But, while most False Claims Act investigations are civil in nature, criminal prosecution is a possibility. When facing a False Claims Act investigation, it is critical to discern the nature of the government’s inquiry, as civil and criminal cases present very different risks—and require very different defense strategies.
Dr. Nick Oberheiden
Founder
Attorney-at-Law
John W. Sellers
Former Senior Trial Attorney
U.S. Department of Justice
Local Counsel
Joanne Fine DeLena
Former Assistant U.S. Attorney
Local Counsel
Lynette S. Byrd
Former Assistant U.S. Attorney
Partner
Amanda Marshall
Former U.S. Attorney
Local Counsel
Aaron L. Wiley
Former Federal Prosecutor
Local Counsel
Roger Bach
Former Special Agent (OIG)
Gamal Abdel-Hafiz
Former Supervisory Special Agent (FBI)
Chris Quick
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
Who Is At Risk for False Claims Act Penalties?
The False Claims Act applies to all private-sector entities and individuals that bill the federal government for goods or services, or that seek payment from the federal government for other reasons. Broadly, those subject to the False Claims Act fall into three categories: (i) government contractors, (ii) healthcare providers, and (iii) government benefit claimants.
Government Contractors
All federal government contractors are subject to the False Claims Act. This includes (but is not limited to) companies that have contracts with:
- Centers for Medicare and Medicaid Services (CMS)
- Federal Aviation Administration (FAA)
- Federal Emergency Management Agency (FEMA)
- General Services Administration (GSA)
- National Aeronautics and Space Administration (NASA)
- Office of Management and Budget (OMB)
- U.S. Department of Agriculture (USDA)
- U.S. Department of Defense (DOD)
- U.S. Department of Energy (DOE)
- U.S. Department of Homeland Security (DHS)
- U.S. Department of Housing and Urban Development (HUD)
- U.S. Department of the Interior (DOI)
- U.S. Department of Labor (DOL)
- U.S. Department of Transportation (DOT)
When billing for goods delivered or services rendered, contractors must ensure strict compliance with the terms of their federal contracts. Billing for substandard materials, billing for services not rendered, double billing, and billing at excessive rates are all common issues that can lead to False Claims Act penalties.
Healthcare Providers
All healthcare providers that participate in federal programs are subject to the False Claims Act as well. This includes providers that bill Medicare, Medicare, Tricare, and the U.S. Department of Labor’s (DOL) healthcare program. The U.S. Department of Justice (DOJ) and U.S. Department of Health and Human Services Office of Inspector General (DHHS OIG) routinely pursue civil and criminal False Claims Act investigations targeting:
- Physicians and Physician Groups
- Hospitals, Clinics, and Other Healthcare Facilities
- Pharmacies and Compound Pharmacies
- Toxicology and Clinical Laboratories
- DNA Testing Facilities
- Healthcare Executives
- Telemedicine Consultants
- Healthcare Marketers
For participating healthcare providers, common billing errors such as upcoding, unbundling, and billing for ineligible items or services can trigger scrutiny under the False Claims Act. Healthcare providers remain directly responsible for billing compliance even if they engage third-party billing administrators; and, while criminal prosecution requires proof of intent, inadvertent Medicare, Medicaid, Tricare, and DOL billing mistakes can lead to civil False Claims Act penalties.
Government Benefit Claimants
The False Claims Act also applies to businesses and individuals that falsely or fraudulently claim federal government benefits. For example, the DOJ has relied heavily on the False Claims Act to pursue civil and criminal charges under the Paycheck Protection Program (PPP). The DOJ has prosecuted cases involving fraudulent applications for PPP loans as well as fraudulent certifications for PPP loan forgiveness. Both businesses and individuals have faced scrutiny, and the DOJ has pursued charges in cases involving false and fraudulent claims ranging from tens of thousands to tens of millions of dollars.
What Are the Penalties Under the False Claims Act?
Regardless of whether a False Claims Act investigation involves a federal contract, healthcare benefit program, or other federal government program, the potential penalties are the same. As discussed above, the key distinction is whether the government’s investigation is civil or criminal in nature. Whether a False Claims Act investigation is civil or criminal will determine what penalties are on the table, and it will determine what defenses the target of the investigation has available.
False Claims Act Penalties in Civil Cases
In civil False Claims Act cases, targeted entities and individuals can face four primary types of penalties. These are:
- Treble damages (three times the government’s losses resulting from the false or fraudulent claim)
- Civil fines of $12,537 to $25,076 per violation
- Loss of eligibility (i.e., eligibility for federal contracts or for Medicare or Medicaid reimbursement)
- The government’s costs of enforcement
Crucially, the civil fines for False Claims Act violations apply on a per-claim basis. This means that if a healthcare provider, for example, makes the same mistake on hundreds of Medicare beneficiaries’ bills, the provider can face millions of dollars in civil monetary penalties. This is in addition to liability for treble damages and the possibility of facing loss of eligibility; or, alternatively, denial of pending claims, prepayment review, and other administrative consequences.
It is also noteworthy that entities and individuals that inadvertently violate the False Claims Act will be eligible for reduced penalties in some cases. Specifically, 31 U.S.C. Section 3729(a)(2) provides that “the court may assess not less than 2 times the amount of damages which the Government sustains because of the [false or fraudulent] act” if a business or individual cooperates with the government’s investigation. To be eligible for these reduced False Claims Act penalties:
- “[T]he person committing the violation [must] furnish[] officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;
- “[S]uch person [must] fully cooperate[] with any Government investigation of such violation; and
- “[A]t the time such person furnishe[s] the United States with the information about the violation, no criminal prosecution, civil action, or administrative action [must have] commenced under this title with respect to such violation, and the person [must] not have actual knowledge of the existence of an investigation into such violation.”
While cooperating with the federal government during a False Claims Act investigation can be beneficial, it can also be risky. As a result, before voluntarily disclosing any records or information to federal investigative authorities, businesses and individuals should seek advice from experienced federal defense counsel.
False Claims Act Penalties in Criminal Cases
In cases involving intentional false or fraudulent claims, federal prosecutors can pursue criminal charges under the False Claims Act. In criminal cases, potential penalties include fines and prison time.
Criminal fines under the False Claims Act can be as high as $500,000 for businesses and $250,000 for individuals. For individuals, criminal convictions under the False Claims Act can also carry up to five years behind bars. These penalties apply to each individual count filed, and they are in addition to the penalties prosecutors may seek for conspiracy to defraud the United States, mail fraud, wire fraud, or other federal crimes.
FAQs: Understanding False Claims Act Penalties
How Do I Know if I am Facing Civil or Criminal False Claims Act Penalties?
It isn’t necessarily easy to discern whether a False Claims Act investigation is civil or criminal in nature. When a government contractor, healthcare provider, or other client engages us for a False Claims Act case, we examine the government’s investigative tactics, communicate with the investigating agents, and rely on our lawyers’ and consultants’ remarkable and relevant experience to determine what penalties our client is facing.
What are the Maximum Penalties for False Claims Act Violations?
Technically, there are no maximum penalties for False Claims Act violations. Civil fines are imposed on a per-claim basis (up to $25,076 as of 2022), and federal prosecutors can pursue multiple counts in criminal cases. This makes facing any False Claims Act investigation extremely risky, and it makes it important for targeted businesses and individuals to engage defense counsel as soon as possible.
Is It Possible to Avoid Penalties Entirely When Facing a False Claims Act Investigation?
At Oberheiden P.C., we have helped many of our clients avoid False Claims Act penalties entirely. However, the potential outcomes of any individual case depend on the specific facts and circumstances involved.
Do the False Claims Act Penalties Change?
The civil fines for False Claims Act violations are adjusted annually for inflation, while the criminal fines are set by statute. However, it is possible that the federal government could increase the criminal fines for False Claims Act violations over time.
Can a Defense Lawyer Help Me Avoid False Claims Act Penalties?
Whether a defense lawyer can help you avoid False Claims Act penalties depends on the unique circumstances of your individual case. To find out what defenses you have available, you should schedule a complimentary initial consultation promptly.
Speak with a Federal False Claims Act Defense Attorney at Oberheiden P.C.
If you need to know more about the risks of facing a False Claims Act investigation, we invite you to get in touch. To speak with a federal False Claims Act defense attorney at Oberheiden P.C. in confidence, call 888-680-1745 or request an appointment online now.
