There are two major, interrelated reasons why government contractors, including Medicare providers, are so afraid of the False Claims Act (FCA). One is the draconian nature of the liability: treble damages plus up to $21,916 in penalties per claim. That means, for example, a knowing overcharge of $5 on a single $20 Medicare claim could generate liability of $21,623—4,395 times the overcharge.
The other reason is the whistleblower bounty—up to 30% of the government’s recovery–that makes contractors vulnerable to qui tam suits by disgruntled former employees and others.
But even by FCA standards the treatment of contractor Circle C Construction was brutal. In a project to build 42 warehouses, a Circle C sub paid two electricians $9,900 less than the Davis-Bacon Act required. The sub settled the claim for $15,000. Nevertheless, the government and a whistleblower sued Circle C for—are you sitting down?–$1.66 million.
Years of litigation later, the government won an award of $14,748—less than 1% of its claim. When Circle C sought reimbursement of its $469,000 in attorneys’ fees, the district court denied the request. But on August 18 the Sixth Circuit reversed and remanded, ruling that Circle C was entitled to recover under the Equal Access to Justice Act.
The case is US ex rel. Wall v. Circle C Construction, No. 16-6169 (6th Cir. Aug. 18, 2017).
