Last year, we reported about a provision buried in the budget bill that called for all federal agencies to issue regulations by July 1, 2016 proposing increases to civil penalties in FCA cases under their jurisdiction. The first of those regulations has just been published, and it confirms that the range of civil penalties is set to almost double this year – with further increases to come in subsequent years.
In an Interim Final Rule published this morning, the Railroad Retirement Board announced that for false claims or statements made on or after August 1, 2016, the range of civil penalties in FCA cases under the RRB’s jurisdiction will increase from the current minimum of $5,500 and maximum of $11,000, to a new minimum of $10,781 and a new maximum of $21,563 – per claim. While the RRB’s jurisdiction over FCA cases tends to be limited to cases against individuals alleged to have fraudulently obtained retirement benefits, this rule is significant for all companies subject to the FCA. That is because the formula used to calculate the new civil penalties is statutory, based on the Consumer Price Index, and applies equally to all agencies. As RRB notes, “the formula used for adjusting the amount of civil penalties is given by statute, with no discretion provided to the Board regarding the substance of the adjustments. The Board is charged only with performing ministerial computations to determine the amount of adjustment to the civil penalties due to increases in the Consumer Price Index for all Urban Consumers (CPI-U).” Accordingly, this is likely a preview of rules to be announced over the next several months by DOJ, HHS, DOD, and other agencies.
The near doubling of what are already astronomically disproportionate civil penalty amounts is sure to add fuel to the fire in the debate over the FCA’s draconian penalties. It also further undermines the argument, made by some, that the FCA’s civil penalties are not punitive in effect. The increase is also certain to result in further challenges to the constitutionality of FCA penalties, particularly in cases where actual damages amounts are small.