The Law Firm of Piacentile, Stefanowski & Malherbe LLP

Inflation Adjustment Act Raises False Claims Act Penalties

Also known as Lincoln’s law, The False Claims Act (FCA) is the oldest whistleblower law in the United States. It was enacted in 1863 in response to the rampart fraud that defense contractors were committing during the civil war. The law is intended to incentivize individuals with knowledge of fraudulent activities to blow the whistle and receive an award of 15% – 30% of whatever the government recovers in penalties and back payments from these fraudsters. This law has been so effective that many other whistleblower laws are based on it and according to the Department of Justice, in 2021, there have been over $5.6 billion in settlements from civil cases involving fraud and false claims to the government.

An important aspect of the law that is often overlooked, other than the fact that the Government can recover up to 3 times the amount it was defrauded, is that it includes an extra penalty that was originally $5,000 to $10,000 for each false claim but is thankfully tied to inflation. This penalty is intended to be one of the main deterrents of committing fraud because as mentioned before, the penalty is per false claim and is tied to inflation. This has led to cases where the fraud is valued at millions of dollars, but the penalty itself ends up being in the hundreds of millions of dollars range. The fact that this penalty is tied to inflation guarantees that the penalty essentially maintains the same value as it is adjusted for inflation. Currently, we have been experiencing accelerated inflation that has increased the range from $11,665 – $23,331 in early 2021 to the current amount of $11,803 – $23,607 at the end of 2021. The current amount in 2022 has not been revised yet, but we can expect that amount to rise significantly. 

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