As we have so often reported in the past, the False Claims Act and its state-level counterparts are some of the most successful pieces of legislation in American history. Beginning in the Civil War era, the FCA has proven integral in recover billions of U.S. tax dollars from the hands of unscrupulous thieves and con artists. Most recently, the FCA has helped to eradicate hundreds of cases of healthcare billing fraud against Medicare and Medicaid.
Why is it, then, that a group of legal experts convening at the U.S. Chamber of Commerce’s Institute for Legal Reform believe it best to change and amend the FCA?
The ILR points to a number of reasons why the FCA is in need of a tune-up, many of which are explained in its white paper entitled “Fixing the False Claims Act: The Case for Compliance-Focused Reforms,” available here. In this paper, the ILR lays out its suggestions for changes to the FCA, particularly with regard to companies having implemented a certified compliance mechanism within the corporate structure.
We plan to review the ILR’s proposed changes in four parts, beginning with today’s installment covering a proposed calibrated liability approach congruent with the defendant’s culpability, thereby eliminating the dreaded treble damages judgment.
Proposed Change #1: “Calibration of Multiplier to Culpability”
Under the current FCA provisions, violators face a potential treble (triple) damages penalty if found to be defrauding the federal government and its taxpayers. The ILR further points out that under the current system, an intentional, wanton or malicious FCA defendant faces the same treble damages penalty as one meeting the mere “reckless” or even negligent threshold.
The ILR has suggested an alternative damages calculation scheme designed to punish FCA defendants in congruence with their culpability. Specifically, the report offers the following solution:
Treble Damages: Actions with the clear intent to defraud the U.S. government;
Double Damages: Companies who have made a good faith attempt to comply with regulations, but whose employees have engaged in misconduct;
One and One-Half Times Damages: Companies that promptly disclose wrongdoing to the U.S. government;
These proposed multipliers are to be assessed only against companies with certified compliance regimes already in place. The ILR further contends that this plan comports with other institutions’ plans already in place, including the IRS’s differentiation between negligent and purposeful errors on tax returns or the Model Penal Code, which imposes harsher criminal penalties dependent upon the defendant’s mental state.
Should ‘Honest’ Fraud be Subject to Fewer Sanctions?
Some might assert that the ILR’s proposed scheme fails to take into account the issue underlying all of the above conduct: dishonesty. Should it matter whether a company lied and promptly reported the lie? Further, is it fair for one company to escape triple damages merely because it had compliance mechanisms in place but was unable to properly manage and oversee employees from committing fraud?
If you are aware of fraudulent conduct, regardless of how seemingly insignificant or severe, contact a whistleblower attorney right away. We can help you determine if the conduct is, in fact, prohibited by the FCA and help you commence a whistleblower lawsuit right away.