Charged Under 18 U.S.C. § 286: Penalties, Schemes, and Civil Liability

18 U.S.C. § 286 is the federal criminal statute that punishes conspiracies to defraud the United States with respect to claims. Anyone who agrees with at least one other person to obtain payment from the federal government on a false, fictitious, or fraudulent claim faces up to ten years in prison and a fine of up to $250,000.¹ It sits alongside 18 U.S.C. § 287, which criminalizes the false claim itself, and the two are the government’s main criminal tools against fraudulent demands on the U.S. Treasury.

What the Statute Prohibits

Section 286 makes it a federal felony to enter into any agreement or conspiracy to defraud the United States, or any of its departments or agencies, by obtaining or aiding to obtain the payment or allowance of a false, fictitious, or fraudulent claim.¹ The statute is written broadly. The conspiracy does not have to succeed. The crime is complete once two or more people agree and one of them takes a step to carry the plan out.

A “claim” here means any demand for money or property directed at the federal government. Filing a fake tax return to grab a refund qualifies. So does submitting an inflated invoice to a federal agency, or billing Medicare for services that were never provided. The type of fraud does not matter. What matters is that the target is a payment from the United States.

Penalties

A conviction under § 286 carries up to ten years in prison, a fine, or both.¹ The fine amounts come from 18 U.S.C. § 3571. For an individual, the maximum is $250,000. For a corporation, it is $500,000. When the scheme produced a measurable financial gain or loss, a judge can instead impose a fine of up to twice the gross gain to the defendant or twice the gross loss to the victim, whichever is greater.²

How Section 286 Relates to Section 287

Section 286 punishes the agreement. Section 287 punishes the act. A person who presents a claim to the federal government knowing the claim is false faces up to five years in prison and a fine, and can violate § 287 acting entirely alone. For false claims connected to a Department of Defense contract, § 287’s maximum fine climbs to $1,000,000.³

Prosecutors regularly charge both together. If two people team up to file phony tax returns, the partnership itself violates § 286 and each fake return filed violates § 287. Stacking the counts gives prosecutors leverage in plea talks and allows judges to impose consecutive sentences in the most serious cases.

Common Schemes Prosecuted Under § 286

Tax Refund Fraud

Section 286 is a workhorse in tax fraud cases. The DOJ Tax Division uses it against groups that file fake returns to steal refunds. A typical scheme involves obtaining stolen names and Social Security numbers belonging to people unlikely to file their own returns, then submitting fabricated returns under those identities to claim refunds.² Some rings use entirely fictitious identities. Because these operations almost always involve multiple participants, they almost always carry § 286 conspiracy counts alongside individual § 287 counts for each return.

Healthcare Fraud

Billing Medicare or Medicaid for services never performed is another common application. Physicians and clinic operators have been prosecuted and imprisoned under the criminal false claims statute for submitting fabricated bills.⁴ Section 286 comes into play when clinic staff, billing companies, or patient recruiters collaborated on the scheme.

Statute of Limitations

Federal prosecutors generally have five years from the date of the offense to bring § 286 charges. That deadline comes from 18 U.S.C. § 3282, the default limitations period for non-capital federal crimes.² For a conspiracy charge, the clock typically starts when the last act in furtherance of the conspiracy occurs, which can push the window well past the date of the original agreement.

A wartime exception can pause the clock. Under 18 U.S.C. § 3287, the limitations period for fraud against the United States is suspended during periods when Congress has authorized the use of the Armed Forces and stays frozen until five years after hostilities end.

Civil Liability on Top of Criminal Charges

A criminal prosecution under § 286 does not foreclose a parallel civil case. The civil False Claims Act, 31 U.S.C. § 3729, lets the government recover a per-claim civil penalty (adjusted periodically for inflation) plus damages equal to three times the amount the government lost.⁵ The two tracks are not mutually exclusive. A defendant can face criminal prosecution under §§ 286 and 287 and a civil suit under § 3729 arising from the same conduct.

DOJ Tax Division Authorization for Tax Cases

Not every U.S. Attorney’s office can open a § 286 tax investigation on its own. The DOJ Tax Division has delegated authority to U.S. Attorneys to open grand jury investigations in certain straightforward cases, specifically when an individual (other than a paid tax preparer) files or conspires to file multiple returns in a single tax year using nonexistent identities or the identities of real people who did not authorize those returns.² Even in these direct-referral cases, the U.S. Attorney must send a copy of the investigation request letter to the Tax Division.

More complex schemes fall outside the delegation. Cases that recruit real individuals to file returns under their own names and Social Security numbers, for example, must be referred to the Tax Division for authorization before a grand jury investigation can begin.²

1
Office of the Law Revision Counsel. 18 USC 286 – Conspiracy to Defraud the Government With Respect to Claims
2
U.S. Department of Justice. Criminal Tax Manual – False, Fictitious, or Fraudulent Claims
3
Office of the Law Revision Counsel. 18 USC 287 – False, Fictitious or Fraudulent Claims
4
HHS Office of Inspector General. Fraud and Abuse Laws
5
Office of the Law Revision Counsel. 31 USC 3729 – False Claims