Former attorney general under the Obama administration, Loretta Lynch signed a ruling that would double the False Claims Act’s penalties one week before Trump took office.
The False Claims Act, also known the “Lincoln Law,” is an American federal law that imposes a penalty on individuals and companies who defraud governmental programs.
The Washington Free Beacon claims that trial lawyers could likely yield huge profits from this ruling since they overwhelmingly contribute campaign funds to Democrats.
The publication reports:
Under the 2015 Bipartisan Budget Act, it was required for Lynch’s Justice Department to make annual inflation adjustments for civil penalties. Additionally, the department had to make a one-time aggregate penalty adjustment.
When making adjustments, the government typically goes back to the last instance amendments were made to the Act. In the case of the False Claims Act, the last time the statutes were changed was 2009. However, Lynch’s Justice Department went back to 1986, the second-to-last time changes were made to statutes.
Due to Lynch’s Justice Department referencing 1986 for its baseline year on the changes, inflation adjustments were calculated using the Consumer Price Index from that year to the present.
Penalties under the False Claims Act typically range from $5,500 to $11,000 per claim. The newly increased penalties would range from $10,781 to $21,563 for penalties assessed after August 1, 2016, and $10,957 and $21,916 for penalties assessed after February 3, 2017, says the report.
Attorney Peter Hutt II, who specializes in False Claims Act litigation, told reporters: “The way it’s supposed to work is the government is supposed to go back in time to last time that there was a separate statute setting penalties. ” He added, “The last time this happened was 2009, and the government just ignored that and went back to 1986 and they shouldn’t have done that.”
According to Peitragallo law firm’s site: “The success of the False Claims Act has resulted in large measure from lawsuits brought by whistleblowers under the qui tam provisions of the False Claims Act. In general, the qui tam provisions permit any person or entity to file a False Claims Act case on behalf of the federal government.”
Reportedly, lawsuits from whistleblowers have accounted for half of the money recovered by the government since 1986 and paid out nearly $5 billion in rewards.
Hutt also claims whistleblowers are taking advantage of small issues to bring cases forward and collect money.
“Whistleblowers come in and find problems with contract disputes, or garden-variety accounting errors, and just simply allege, ‘We actually think that was knowingly reckless disregard and we want the $22,000 penalty for every invoice that was submitted,'” he said. “Whistleblowers, in too many cases, are really just playing Powerball. They’re just looking for the huge jackpot recovery.”
Hutt suggested that trial lawyers are “undoubtedly salivating at the prospect of these vastly increased penalties.”
However, while the ruling may benefit trial lawyers, Hutt believes small businesses could be negatively impacted by the changes.
“This type of problem touches the small business community greatly. Big corporations have a lot of money and they can defend themselves against meritless lawsuits,” Hutt said. “Nobody bothers going after individuals who don’t have money. It is the small businesses that probably face the most difficulty in combating meritless False Claims Act litigation brought by whistleblowers.”
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