(U.S. Law and Generally) Fraud has always been a serious issue in the United States. There is always someone out there who will attempt to defraud any type of governmental program in an effort to turn a profit. To combat this the False Claims Act was passed in an effort to hold those who choose to defraud the government accountable for their actions.
This act also grants large monetary rewards to the ‘whistleblowers’ who decide to file an action on behalf of the government against an entity engaged in fraudulent activities. The whistleblower often faces some negative consequences, but they are minute compared to what businesses can face if accused of fraud.
Legal Ramifications
The False Claims Act deals mostly with the financial issues related to fraud. It lays forth civil consequences on those who attempt to defraud the government. These fines and penalties, however, are not the full extent of what a company can face. According to the attorneys of Goldberg Kohn, these civil cases are based on fraudulent activities that are considered illegal both in federal and state judicial systems. This means that those involved in the crime can face serious legal consequences.
The legal penalties that affect companies who violate the False Claims Act will vary wildly depending upon the extent of the crime. These consequences will not penalize a company per se, but the executives and employees involved in the scam will face the legal implications that apply to anyone else who commits fraud. In 2011, for instance, Lawrence Duran was sentenced to fifty years in prison after defrauding Medicare of $205 million dollars. Duran was an executive at American Therapeutic Corporation, a Florida mental health provider.
Financial and Economic Ramifications
The financial and economic consequences of defrauding the government are really what the False Claims Act is about. The implicated company may be required to give full reimbursement of their illegally obtained money along with additional fines and penalties. A 1986 update of the law imposed civil fines that could range from five thousand to ten thousand dollars per false claim that the company made. The combined compensation often reaches into the millions of dollars, which has the potential to bankrupt some companies.
The government will often not wish to go through the full hassle of a trial, so the Justice Department sometimes settles with the implicated company. The Department of Justice actually only involves itself in about twenty-five percent of the actions brought forth under the False Claims Act, and these settlements are included in that twenty-five percent.
Settling the case out of court allows the government to avoid a lengthy civil trial while also allowing the business to pay a lower statutory amount than they would likely have to pay after being found liable. This of course in no way pardons the actions of the individuals involved in the crime, who will still likely face criminal charges.
While whistleblowers often face retaliation after revealing fraud against the government; it is the companies involved that face the more serious consequences. The fines and penalties related to a violation of the False Claims Act can literally cripple a company. The legal ramifications are often even worse, sometimes landing those complicit in the scheme in jail for what could be the rest of their lives. Knowing all of the consequences related to a violation of this act, it becomes obvious that everyone involved will need a very good lawyer.
Georgina Clatworthy is a legal writer and former law blog editor. She is a contributing writer for the attorneys of Goldberg Kohn, who have many years experience with handling of cases under the False Claims Act. Anyone considering becoming a whistleblower is advised to seek a consultation with them first, in order to fully understand the process and implications of making a claim.
gclatworthy
Latest posts by gclatworthy (see all)
- Starting A Parcel Courier Business: Have You Considered All The Costs? - April 19, 2013
- Accident And Injury Claims: Is Your Business Protected? - February 3, 2013
- How to Protect your Business from White Collar Crime - December 31, 2012
