by Ben Vernia | December 9th, 2012
Comment: As anyone familiar with pleading under the False Claims Act can attest, the FCA provides a penalty of $5000 to $10,000 for each violation. In January 1990, Congress passed the Civil Monetary Penalties Inflation Adjustment Act (CMPIAA), Pub. L. 104-134, which purported to adjust civil monetary penalties for inflation. In August 1999, the Department of Justice issued regulations (28 C.F.R. Part 85) that raised the FCA’s penalty to range from $5500 to $11,000. Twelve and a half years later, however, no further increases. What gives?
In September, University of Louisville Law School Professor James Ming Chen, writing in a report for the Administrative Conference of the United States, described the problem with the CMPIAA as three-fold:
- An “inflation gap” created by a 10% cap on the initial upward adjustment under the Act
- A lag in the Consumer Price Index incorporated by the gap, as long as 18 months
- A rounding mechanism that only permits upward adjustments in large steps
The result of these factors (particularly the rounding one) is that the Department of Justice cannot adjust the FCA’s penalty upward until the cumulative (under the lagging CPI) effect of inflation would increase the penalty by nearly $500. Professor Chen suggests that Congress amend the law to replace the initial 10% upward adjustment with an annual limit of 10% (the CPI has averaged 2.5% over time, so this should not substantially restrict the Government’s ability to raise penalties).
Nevertheless, the cumulative inflation rate since DOJ last increase the FCA’s penalties is approximately 35% (June 1999 to June 2011). The time is past, it seems, for DOJ to adjust the FCA’s penalties under the CMPIAA.