There are two types of government contractors: those that have been accused of violating the False Claims Act and those that will be someday. In fiscal year 2017 alone, there were 799 new FCA cases filed, and the U.S. Department of Justice obtained more than $3.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government.  This is no mere blip — over the past six years, we have seen an average of 811 new FCA cases filed and recoveries of over $4.3 billion per year. Most of this money is, not surprisingly, collected through settlement agreements. Last month alone saw an $84.5 million settlement by a hospital system in Michigan,  a $65 million settlement by hospitals in California and a $21 million settlement by an ambulance company in Texas. Settling an FCA case has implications beyond the bottom-line dollar figure. Two such implications are insurance and taxation. When you settle a case, will you have to pay the money out of pocket, or could some or all of it be covered by insurance? Can you write off some or all of the amount from your taxes? This article provides an overview of the salient points of settling an FCA case and a high-level survey of the relevant case law. Damages and Penalties The statute is simple enough: A person who violates the FCA “is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000 [as adjusted over time] plus 3 times the amount of damages which the Government sustains because of the act of that person.” Yet calculating the “damages” can prove anything but straightforward. “There is ‘no set formula for determining the government’s actual damages’ for an FCA claim.”

Co-Authors: Andy Liu, Jason C. Lynch.

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