October 3, 2023
The False Claims Act (FCA) provides steep penalties, including significant financial fines for defendants, which have been levied against businesses of all sizes across numerous industries in the over 150 years that the law has been in existence. In total, over $72 billion in financial penalties have been imposed on FCA defendants over the years, with numerous individual cases involving the payment of hundreds of millions of dollars. FCA defendants face additional penalties beyond monetary fines, including criminal penalties such as jail time.
The same financial penalties that act as a deterrent for potential defendants to avoid violating the FCA also act as a strong incentive for potential whistleblowers to come forward with knowledge of acts that violate the FCA. Pursuant to the FCA, a plaintiff in a successful FCA lawsuit has the potential obtaining a financial reward between 15% and 30% of the total penalties levied against the defendant. Thus, where a defendant is fined $20 million for violations of the FCA, the whistleblower who pursued the FCA lawsuit could potentially receive between $3 million to $6 million in a reward for having done so.
Thus, both FCA defendants and whistleblowers alike should be cognizant of the penalties involved with a successful FCA lawsuit, and work with experienced FCA counsel to fully assert their rights in such an FCA proceeding.
Understanding the False Claims Act
An FCA claim essentially involves an allegation that a company or individual has defrauded the federal government (note that many states, including California, have their own versions of FCA laws relating to defrauding of state governments). Any number of situations might qualify as grounds for a successful FCA claim, but often such a situation involves an individual or entity receiving federal government funds or reimbursements for goods or services that were not provided, not necessary, not what they purport to be, or of inferior quality.
Common examples of FCA violations forming the basis of a success FCA lawsuit include:
- A healthcare company submitting Medicare reimbursement claims for a higher rate than is warranted by the actual procedure
- A doctor or dentist submitting Medicare reimbursement claims for medical services or goods that were either unnecessary or not actually provided
- A company fraudulently obtaining a PPP loan
- A pharmaceutical company paying kickbacks to doctors and pharmacies to promote its prescription drugs, which are in turn reimbursed by Medicare or Medicaid
- A clothing importer falsely estimating the value of its products to lower its import duties
- A defense supplier making false statements to the federal government to win federal contracts
In an FCA lawsuit, a private individual with knowledge of the fraudulent activities will typically work with FCA counsel to gather evidence and draft a complaint which is then submitted under seal, and the Department of Justice will determine whether to join in the lawsuit or not. The case will then proceed to trial or settlement. Again, if successful, the private individual whistleblower has the opportunity to collect between 15% and 30% of the total financial penalties recovered.
Financial Penalties for False Claims Act Violations
The financial penalties imposed upon those who are found to violate the FCA are substantial: currently, an offender faces penalties between $13,508 and $27,018 for each false claim submitted to the federal government as well as three times the damages (“treble damages”) incurred by the government due to the false claims.
Although those numbers may not appear large, many FCA lawsuits involve many thousands of individual false claims, and the total financial penalties can exponentially rise. For example, in the context of a Medicare FCA claim where a physician conducted 500 unnecessary and/or misclassified medical procedures and submitted each procedure for reimbursement under the Medicare program, that physician could face a potential penalty of $13,509,000 in addition to three times the amount of the harm suffered by the federal government for reimbursing the false claims.
In one significant example, GlaxoSmithKline in 2012 paid $3 billion in penalties to resolve its criminal and civil liability related to illegal marketing practices involving its drugs Paxil, Wellbutrin, and Avandia, among others. That same year, Johnson & Johnson paid $2.2 billion as part of an FCA settlement related to its actions related to certain drugs. Notably, both those cases were pursued by private whistleblower plaintiffs who were able to obtain enormous financial rewards for their efforts: an estimated $250 million in the case of GlaxoSmithKline and $167 million in the case of Johnson & Johnson.
Additional Penalties Related to Violations of the FCA
In addition to the financial penalties discussed above, a person found to have violated the FCA could also face imprisonment. Furthermore, those found to have violated the FCA can often find themselves barred from participating in federal programs such as Medicare, which, for certain professionals and organizations in the healthcare industry could prove fatal for those parties’ ongoing financial viability.
Contact an Experienced FCA Attorney Today
For both whistleblower plaintiffs and defendants alike, the process of litigating an FCA claim is often long (many such lawsuits average 3-5 years in length) and filled with risk. It is important to work with experienced FCA counsel from the earliest stages of either asserting or responding to a FCA claim to protect your interests and maximize your chances of a positive outcome. Our attorneys have combined decades of experience in both the federal government and in the highest levels of private practice, and are ready to work with you to counsel you and/or your business on any FCA issues you may be facing.
