Federal Civil Penalties Going Up, Way Up.
The United States Department of Justice (“DOJ”) published an Interim Final Rule on June 30th nearly doubling the per-claim civil penalties for violations of a number of laws, including the False Claims Act (FCA), the Program Fraud Civil Remedies Act, and the Anti-Kickback Act. For example, the FCA provides for mandatory per-claim penalties on top of treble damages. Currently, the FCA penalties are set at a minimum of $5,500 and a maximum of $11,000 per false claim. Under the Interim Final Rule, those penalties, which have not been increased since 1999, will increase to a minimum of $10,781 and a maximum of $21,563.
The adjusted penalties will apply to violations that occur after November 2, 2015 but that have not yet been assessed a penalty. In other words, any FCA violation that occurred after November 2, 2015, but that has not yet been resolved through litigation or settlement, will be subject to the new per-claim penalty. Violations occurring on or before November 2, 2015, and assessments made prior to August 1, 2016, whose associated violations occurred after November 2, 2015, will continue to be subject to the $5,500 and $11,000 penalties.
The increase is mandated by the Bipartisan Budget Act of 2015. This act included a section entitled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which directed federal agencies to update the civil monetary penalties within their jurisdiction, including the penalties under the FCA. Agencies were required to update penalties through an interim final rule (rather than through a proposed rule with a notice and comment period) before July 1, 2016.
The increase, although not unexpected in light of the 2015 legislation, increases the risk faced by corporations and individuals that are alleged to have violated the FCA, increasing the Government’s leverage in negotiating FCA settlements. It remains to be seen how the changes will play out, but the increase may have its greatest impact on those corporations and individuals that submit high numbers of relatively low-value claims to the government, particularly those in the healthcare space, where whistleblowers and the DOJ often take the position that each claim for services rendered gives rise to a separate penalty.
A copy of the Interim Final Rule is available here. Comments are due by August 29, 2016.