FCA penalties to be increased; government’s negotiation tool becomes more powerful

posted on:
December 1, 2015

author:
Andrew Brashier

On Nov. 2, 2015, President Obama signed the Bipartisan Budget Act of 2015 into law. The Bipartisan Budget Act will increase the civil penalties imposed under the False Claims Act (FCA). The FCA permits the government to collect civil penalties from those who violate the FCA by defrauding the government. These penalties presently range from $5,500 to $11,500 per FCA violation. However, in attempt to keep up with inflation, the Bipartisan Budget Act will allow the government to increase those civil penalties.

The act does not allow civil penalties to be increased to any amount, but does set a cap at a 150 percent increase. This cap allows the government to increase the FCA civil penalties range from $13,750 to $28,750. The expected increases have until Aug. 1, 2016 to be implemented.

Raising the civil penalties strengthens the government’s negotiating position when it brings an FCA allegation against an alleged violator. This strengthened position will help the government procure additional settlements and greater civil penalties in litigated FCA cases, thereby returning additional taxpayer money so it can be used in the way it was intended.

It is easy for one to imagine how these increases to the FCA civil penalties will strengthen an already powerful tool at the government’s disposal. For example, on Nov. 16, 2015, the Department of Justice (DOJ) announced it settled a False Claims allegation against Education Management Corp. (EDMC) for $95.5 million.

Four qui tam cases were filed against EDMC with the main allegation that the company unlawfully recruited students by paying their admissions personnel per the number of students recruited. This act not only violated the FCA but also the Incentive Compensation Ban, the Higher Education Act, and other parallel state statutes. The Incentive Compensation Ban, codified at 20 U.S.C.A. § 1094, forbids providing any commission, bonus or other incentive payment based on success in securing enrollments or financial aid for students.

The U.S. Education Secretary stated, “[t]his settlement should be a warning to other career colleges out there: We will not stand by while you profit illegally off of students and taxpayers. The federal government will continue to work tirelessly with state attorneys general to ensure that all colleges follow the law.”

The $95.5-million settlement was made before the increase in civil penalties. It, along with future increase in the FCA’s civil penalties, will serve as a deterrent to fraudsters who are defrauding American taxpayers through this type of egregious abuse. The four relators (whistleblowers) in the EDMC case will collectively receive $11.3 million and the United States will receive $52.62 million from the total $95.5 million settlement.

Are you aware of fraud being committed against the federal government, or a state government? If so, you may be protected by a powerful tool – the False Claims Act – or other whistleblower statutes. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim.

There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Andrew Brashier, Archie Grubb, Larry Golston, or Lance Gould.

Sources:
H.R. 1314
20 U.S.C.A. § 1094
U.S. Department of Justice
ReedSmith – Health Industry Washington Watch

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