Vinson & Elkins is one of the largest law firms in the nation. It didn’t grow so big and powerful representing whistleblowers in False Claims Act lawsuits, however. It makes its money representing big corporations with deep, deep pockets. Knowing a little something about “Big Law” and how it operates, we weren’t surprised when the firm issued a release this week entitled “Because $3 Billion in False Claims Act Recoveries This Year Just Isn’t Enough, DOJ Doubles Maximum FCA [False Claims Act] Penalties to $21,563 per Claim.”
The release was clearly written for big business and not taxpayers and whistleblowers.
Read in a vacuum, it might appear to some folks that the Justice Department is going overboard in its fines. Says the article, “… DOJ’s nearly doubled penalties exacerbate concerns expressed by defendants and some judges that even pre adjustment FCA penalties already violate the Excessive Fines Clause of the Eighth Amendment.”
Should the business community be concerned? Only if they are crooks.
History of the False Claims Act
The False Claims Act was born during the U.S. Civil War. Back then, government resources were stretched to the breaking point. A few greedy vendors decided to take advantage of the situation by selling the government wool blankets that were full of holes, gunpowder that was inert and laced with sawdust and even lame mules. Knowing that government didn’t have enough resources to pursue these crooks, President Lincoln and Congress passed the False Claims Act. That law empowered whistleblowers to become mini “private Attorneys General” and pursue fraud claims in the name of the government. If the case was successful, the whistleblower became entitled to keep a portion of the recovery as a reward.
Fast forward to 2016 and the Act remains alive and well. Already in 2016 this Civil War era whistleblower law has recovered more than $3.2 billion on behalf of taxpayers. And that is just this fiscal year. (Last year the government recovered approximately $3.5 billion.)
The Act allows the government to recover triple damages plus a penalty of up to $11,000 for each fraudulent invoice or “false claim” sent to the government. For example, if a bank knowingly writes 100 questionable mortgages and submits them for guarantee by the FHA, the penalties could be substantial. For each mortgage that defaults and requires the government guaranty to kick in, there could be triple damages. Plus $1.1 million in penalties ($11,000 times 100 bogus claims).
Do we have sympathy for greedy corporations, pharmaceutical companies and banks that rip off taxpayers? Heck no!
Defense lawyers and Big Business are crying the blues because the fines will be doubling. It isn’t the Justice Department that increased the fines, however. Congress last year required agencies to make sure their fines kept pace with inflation. Otherwise, the real dollar cost of the fine or penalty decreases because of inflation. In other words, Congress simply directed agencies like the Justice Department to catch up on fines and make sure they were keeping up with inflation.
The $21,563 penalty is the highest penalty that can be imposed. Those penalties are rarely imposed, however. Did you ever listen to the news and hear how some criminal defendant is facing 20 years in prison on each count of the indictment? We all have. As we all know, however, courts rarely impose the maximum penalty unless the defendant’s conduct was particularly egregious.
We really wonder why Big Business and Big Law are concerned about the False Claims Act penalty increase. Unless these folks are breaking the law, there is nothing to worry about. In fact, legitimate businesses should welcome the increases because it helps level the playing field and keeps crooks from squeezing out legitimate businesses.
We know from our experience with bank cases that big banks simply look at fines and penalties as a cost of doing business. If a corporation can get away with a billion dollar fraud and only have to pay a $100 million fine, that business may conclude that crime does pay! Increased penalties, however, provide a powerful incentive to toe the line and remain in compliance.
Whistleblower Awards Under the False Claims Act
In 2014, the Justice Department handed out $435 million in whistleblower awards. Our clients received over $100 million in awards. Empowering whistleblowers by paying awards has been the engine driving these record recoveries for the government and taxpayers. Under the False Claims Act (sometimes called the Lincoln Law or Qui Tam”), whistleblowers can earn up to 30% of whatever the government collects. With penalties soon doubling, whistleblower awards will also increase over time. There has never been a better time to become a whistleblower!
Think you have information about fraud regarding a government program or funds? Give us a call. Our whistleblower lawyers help you collect the maximum award and put a stop to the fraud. We are also prepared to take on big corporations should they engage in retaliation. (Whistleblower retaliation is against the law and carries even more penalties.)
MahanyLaw – America’s Qui Tam Lawyers