Civil Penalties on Trial?

On Valentine’s Day, the United States District Court for the Eastern District of Virginia issued an opinion in a False Claims Act case, U.S. ex rel. Bunk v. The Pasha Group et al. denying a request to impose civil penalties upon a Defendant that had been found to violate the False Claims Act.

The Bunk case involved Government contracts for the transportation of military household goods owned by U.S. military personnel and their families moving between the U.S. and numerous European cities. Because of the magnitude of money involved — at least $50 million in penalties – this case will be appealed. It would appear that the real issue on appeal is whether the 8th Amendment entitles a Defendant to a bulk discount for penalties associated with 9,136 false claims. As the Opinion notes, “the Court has (previously) concluded that the evidence was sufficient to sustain the jury’s verdict as to the Defendants’ liability on the DPM claim and that as a matter of law, each of the 9,136 invoices constituted a false claim.” Indeed the parties stipulated that the Defendant had submitted 9,136 invoices.

Rather than looking at each of these civil penalties as a separate attempt to break the law, the court’s analysis focused on aggregating them as one penalty in applying an 8th Amendment analysis. By analogy, it may be a lot of money for a driver to pay $20,000 for 200 speeding tickets. But the 8th Amendment does not give wrongdoers a bulk discount when they repeatedly break the law. Here the court could have found a handful of false claims and yet it did not. It found over 9,000!

Curiously, the Court downplays its own finding that the claims were false. (“Rather, they are deemed to be false as a matter of law based on judicial construction of the FCA. For this reason, the number of invoices, in and of themselves, is not reflective of Defendants’ level of culpability. . . .”)

In this case, the Defendant received a bulk discount rather than be required to pay some penalties. Civil penalties must be imposed if the FCA is to have deterrent value, otherwise corporations will be incentivized to repeatedly submit false and fraudulent claims to the Government.

Click here for a copy of the opinion.