Federal Agency Doubles FCA Civil Monetary Penalties With Passage of Interim Final Rule
By Brian F. McEvoy
and Emma R. Cecil
Pursuant to a provision of last November’s Bipartisan Budget Act of 2015, federal agencies are required to make, by August 1, 2016, inflationary adjustments to civil monetary penalties. With the passage of an interim final rule on April 29, the Railroad Retirement Board, which administers benefit programs for railroad workers and their families, became the first federal agency to amend its regulations
to provide for adjustments in the minimum and maximum amounts of civil monetary penalties under the Board’s jurisdiction, including penalties authorized by the False Claims Act, 31 U.S.C. § 3729(a). The RRB’s new rule would adjust the minimum and maximum per claim penalties for false claims under § 3729 to $10,781.40 and $21,562.80, respectively. The RRB’s new penalties were determined by multiplying the pre-adjustment penalty amount or range ($5,500 minimum and $10,000 maximum) by the percent change in the CPI-U over the relevant time period (2.15628), and rounding to the nearest dollar.
Although we predicted last year that penalties would increase to a minimum of $7,850 and a maximum of $15,700 per claim, these estimates were based on the percent change between the current CPI-U and the CPI-U for 1996, when FCA penalties were last updated. The RRB’s penalties, however, are based on adjustments for inflation from 1986, since, for purposes of the initial adjustment under the 2015 Act that was when the Board last set or adjusted the amount of civil penalties. According to the Board, the 1996 adjustment was to be disregarded because it was made pursuant to the Inflation Adjustment Act and subject to the 10 percent cap imposed by the Debt Collection Improvement Act of 1996, which was eliminated by the 2015 Act.
It remains to be seen whether the DOJ’s calculations will mirror those of the RRB’s, but if the RRB’s new penalties are any indication, FCA defendants could soon be facing awards that are even more disproportionate to the actual loss amount or degree of culpability than they already are under the current penalty amounts.
The impending increase in penalty amounts also implicates Eighth Amendment concerns that remain largely unresolved by the courts. Although the Fourth Circuit in 2013 held that actual loss to the government remains at least part of the inquiry into whether a civil penalty violates the Excessive Fines Clause, it nevertheless failed to offer any meaningful guidance as to when civil penalties under the FCA would cross the line from constitutionally permissible to unconstitutionally excessive, leaving unresolved the increasing tension between the FCA’s mandatory civil penalty provision and the Eighth Amendment’s constitutional guarantee against the imposition of excessive fines. This tension is particularly palpable in health care cases alleging fraud in Medicare billing since they often involve the submission of thousands and thousands of claims for payment, thus resulting in statutory penalties that far eclipse the actual loss to the government and bear little relation to the extent of the defendant’s wrongdoing.
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