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Difficulty: MediumFraud and False Statements (18 U.S.C. 1033 and 1034)

David, a licensed insurance producer, is found guilty of violating 18 U.S.C. 1033 by intentionally misappropriating $15,000 in client premium payments. Following this discovery, the U.S. Attorney General decides to pursue a civil action against him under 18 U.S.C. 1034. Based on federal law, which of the following describes the maximum civil penalty David could face for this single violation?

  1. Up to 50,000,becausethelawauthorizesacivilpenaltyof50,000, because the law authorizes a civil penalty of 50,000 or the amount misappropriated, whichever is greater.Answer
  2. B
    Exactly $15,000, because federal civil penalties are strictly limited to the exact amount of the stolen funds to provide restitution.
  3. C
    A financial assessment determined and collected by the State Guaranty Association to restore the missing premiums.
  4. D
    State-level administrative fines only, because federal authorities only have jurisdiction to pursue criminal imprisonment.

Answer

Up to 50,000,becausethelawauthorizesacivilpenaltyof50,000, because the law authorizes a civil penalty of 50,000 or the amount misappropriated, whichever is greater.
Under 18 U.S.C. 1034, the U.S. Attorney General may bring a civil action against any person who engages in conduct constituting an offense under 18 U.S.C. 1033 (such as embezzling premiums). Upon proof of such conduct, the individual is subject to a civil penalty of not more than 50,000foreachviolation,ortheamountofcompensationthepersonreceivedorofferedfortheprohibitedconduct,whicheveramountisgreater.BecauseDavidmisappropriated50,000 for each violation, or the amount of compensation the person received or offered for the prohibited conduct, whichever amount is greater. Because David misappropriated 15,000, which is less than the 50,000baseline,themaximumpenaltydefaultstothegreateramountof50,000 baseline, the maximum penalty defaults to the greater amount of 50,000.

Step-by-Step Solution

1
Identify the applicable federal statute for civil penalties related to interstate insurance fraud.
18 U.S.C. 1034 governs the civil penalties for any violations of 18 U.S.C. 1033.
The stem specifically asks about the civil action filed by the U.S. Attorney General under Section 1034.
2
Recall the statutory limits for civil penalties under Section 1034.
The maximum civil penalty is $50,000 per violation, or the amount of compensation received/misappropriated for the prohibited conduct, whichever is greater.
This rule determines the exact federal financial exposure for the offender.
3
Compare the misappropriated amount to the statutory baseline to determine the maximum penalty.
Since the 15,000misappropriatedislessthan15,000 misappropriated is less than 50,000, the maximum allowable civil penalty defaults to the higher cap of $50,000.
The 'whichever is greater' clause in the statute mandates using the $50,000 figure in this scenario.

Key Concept

Civil Penalties under 18 U.S.C. 1034
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Topics

Fraud and False Statements (18 U.S.C. 1033 and 1034)

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