The False Claims Act is a broad federal statute that allows for both civil and criminal enforcement in appropriate cases. As the U.S. Department of Justice (DOJ) explains, the statute was “originally enacted in 1863 in response to defense contractor fraud during the American Civil War.”
Today, the DOJ continues to use the False Claims Act to fight fraud, waste, and abuse (FWA) in the federal defense contracting sector. But, it uses the statute to combat (and prosecute) many other types of government fraud as well. As a result, many types of federal white-collar cases can involve False Claims Act allegations—from those involving government contracts to those involving Medicare, Medicaid, and other government healthcare programs.
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The federal False Claims Act appears in several sections of the U.S. Code. However, for purposes of understanding the statute’s prohibitions and its implications for those targeted in government fraud investigations, we can focus on two key sections: 31 U.S.C. Section 3729 (the civil enforcement section) and 18 U.S.C. Section 287 (the criminal enforcement section).
The False Claims Act’s civil enforcement provisions appear in 31 U.S.C. Section 3729. It establishes several acts that warrant civil enforcement, imposing civil penalties for any individual or company that:
As you can see, “false claims” under the civil enforcement provisions of the federal False Claims Act can take many different forms. As a practical matter, however, most civil enforcement actions under the False Claims Act tend to focus on the prohibitions in subsections 3729(A), (B), and (C). These provisions focus on the submission of fraudulent claims for payment, submission of false records in support of fraudulent claims for payment, and conspiracy to submit false and fraudulent claims.
These three provisions of 18 U.S.C. Section 3729 allow the DOJ and other federal agencies to pursue civil enforcement actions in most cases involving government contract and government program fraud. For example, under these provisions, federal authorities can impose civil penalties for acts including (but by no means limited to):
There are many more examples of False Claims Act violations that can lead to civil enforcement under 31 U.S.C. Section 3729. As discussed below, these violations (among others) can lead to criminal prosecution in many cases as well.
Under 18 U.S.C. Section 287, the DOJ can pursue criminal charges against individuals and businesses accused of knowingly submitting false and fraudulent claims to the federal government. This provision of the law states, in relevant part:
“Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be [punished as provided for herein].”
Unlike many other federal criminal statutes, the False Claims Act does not require evidence of specific intent to defraud. Instead, Section 287 employs the reduced standing of “knowing” conduct. This creates a much lower burden of proof for the government, and it allows for prosecution in a wide range of cases. This breadth is amplified by the fact that knowledge can be imputed from a target or defendant’s deliberate ignorance or reckless disregard for the truth.
An individual’s or company’s risk in a federal False Claims Act investigation depends on whether the investigation is civil or criminal in nature. While both types of investigations can lead to substantial fines, these fines are calculated differently in civil and criminal cases. Additionally, when the DOJ files criminal charges under 18 U.S.C. Section 287, federal prison time is also on the table.
Under 31 U.S.C. Section 3729, civil violations of the False Claims Act carry fines of up to $13,508 per violation (as of 2023). Since each individual false claim constitutes a separate violation, healthcare providers, government contractors, and other entities that submit numerous claims for payment can easily face six or even seven-figure liability. The False Claims Act also allows the DOJ to pursue recovery of treble (triple) damages in civil False Claims Act cases, as well as recovery of the government’s costs of prosecution.
Under 18 U.S.C. Section 287, criminal violations of the False Claims Act carry fines and prison time. This includes a fine of $250,000 for individuals ($500,000 for companies) in felony cases, or a fine of $100,000 individuals ($200,000 for companies) for a misdemeanor conviction. The maximum prison sentence for a criminal False Claims Act violation is five years. Here, too, these penalties apply on a per-claim basis.
Due to the substantial risks involved in facing civil or criminal allegations under the False Claims Act, individuals and entities targeted under the statute need to execute a comprehensive and strategic defense. This starts with assessing the applicability of the specific defenses that are available. Generally, defenses to alleged False Claims Act violations include (but are not limited to):
In criminal cases, targets and defendants can also raise constitutional issues to prevent the DOJ from meeting its burden of proof. For example, if the investigating agency conducted an invalid warrantless search, illegally seized evidence, or interrogated a suspect in violation of the suspect’s Fifth Amendment rights, these are all issues that could render the government’s evidence inadmissible in court.
In certain circumstances, it may not be possible to prevent the government from proving a False Claims Act violation. When this is the case, targets and defendants must work closely with their defense counsel to determine the best path forward. Oftentimes, it will be possible to settle False Claims Act cases without formal charges; but, in some cases, prosecutors may insist on a plea deal that results in a criminal conviction.
Defending against civil or criminal allegations under the False Claims Act requires a strategic and proactive approach. At Oberheiden P.C., we have extensive experience representing clients in False Claims Act cases, and we have resolved the majority of our clients’ cases without charges being filed. To speak with a senior lawyer at Oberheiden P.C. in confidence, please call 888-680-1745 or request a complimentary consultation online today.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.
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