New state laws mimic federal False Claims Act

Over half the states have enacted False Claims Act laws in order to reap federal financial benefits.

Photo by Alno (Wikimedia Commons).

This article is the third in a three-part series on qui tam actions brought under the False Claims Act. You can read Part One and Part Two here.

The recent rise in federal qui tam actions has led state legislatures to enact their own False Claims Act (“FCA”) laws.  Since the federal FCA is limited to false claims against the U.S. Government, many states have passed their own version of the FCA to recover fraud against state and local governments.  In order to bring a state FCA action, there has to be some damage resulting in the loss of money to the state.  Despite this general requirement, state FCA laws may differ by restricting lawsuits based on the type of fraud committed.  While state FCA laws are generally no different than the federal law, some states have focused on allowing an FCA suit only if the state’s health care funds have been lost.

With the passage of the Deficit Reduction Act (“DRA”) in 2005, states have a financial incentive to enact laws “at least as effective” as the FCA to combat fraudulent Medicaid claims.  By doing so, states qualify for a ten percent recovery of federal Medicaid funds.  As a result of the DRA, nearly a dozen states allow for “Medicaid only” FCA cases including, Colorado, Connecticut, Iowa, Louisiana, Maryland, Michigan, New Hampshire, Texas, Washington, and Wisconsin.

However, additional federal legislative activity, such as the Fraud Enforcement and Recovery Act of 2009, the Affordable Care Act of 2010, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, has prompted federal FCA changes requiring states to amend their own laws in order to continue their eligibility for financial incentives.  For instance, Vermont Attorney General Bill Sorrell introduced a new FCA bill patterned on the federal act after the state collected more than $23.5 million through cooperation with the Department of Justice (“DOJ”) on Medicaid fraud cases.

Yet, state FCA lawsuits are not limited to health care fraud cases.  While some states focus their laws solely on recovering from health care FCA cases, other state laws allow lawsuits for any type of fraud.  New York’s FCA now includes a “reverse false claims” provision that imposes liability for avoiding or decreasing payment of money to the state or local government.

Earlier this year, New York Attorney General Eric Schneiderman pursued an FCA case against Sprint Nextel Corporation for “under-collecting and underpaying more than $100 million in New York state and local sales taxes.”  In a complaint filed in August 2005, Schneiderman noted that the unpaid taxes amounted to $100 million since July 2005, but with treble damages and other penalties, the state was in a position to recover up to $400 million.

The year 2014 has been termed the “year of the whistleblower.”  Specifically, whistleblowing against the U.S. Government as well as state governments has gained increased momentum in the past decade through federal and state FCA claims.  As DOJ officials vigorously pursue FCA claims against health care entities, state attorney generals have pursued similar FCA actions.  Alongside government officials, individual plaintiffs stand to receive any recovery bringing their own claims under the authority of qui tam provisions.

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About Snehal Trivedi, Former Senior Staff Writer (16 Articles)
Snehal Trivedi served as a Senior Staff Writer for the Campbell Law Observer. She is originally from New Jersey and received her Doctorate in Pharmacy from the University of the Sciences in Philadelphia. Following her first year of law school, Snehal worked as a Summer Associate for K&L Gates and assisted a local attorney researching relevant case law pertaining to interlocutory appeals. She graduated from Campbell Law School in May 2015.
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