If the government wins, they get to keep the takings and are in a better spot than they were.
If the government loses, they only have to repay the takings that they werent entitled to anyway. That doesnt put the country into a deeper hole...it restores the size of the hole to what it should have been.
As for the cost of the lawsuit, the government is sued hundreds of times per year and rarely settle. I dont see a difference here.
That is a decision and a consequence the government is willing to take. In effect its gambling with taxpayer money committing this fraud. It really is not excusable.
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