Identification, Prevention, and Remedies for False Claims in Highway Improvement Contracting (2011)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

45 SECTION XIII. STATE CONSTRUCTION-RELATED FALSE CLAIM STATUTES Comparative Table or Chart of State Statutes OTHER POTENTIALLY APPLICABLE CRIMINAL STATUTES STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES Alaska Alaska Stat. § 36.30.687 Yes. No. Yes, Class C fel- ony, plus for- feiture of claim. Arizona Ariz. Rev. Stat. § 47-9527 Arizona also has a Medicaid FCA. No. Yes, treble damages. No. California Cal. Gov. Code §§ 12650 et seq. enacted 1987, as amended through Stats. 2009, c.277. California also has a Medicaid FCA. Yes, treble damages plus costs, plus civil penalty up to $10,000; must be filed within 3 years after discov- ery and 10 years after oc- currence. Yes, and relator may re- ceive 15% to 33% of re- covery, plus attorneys' fees and costs; State AG may intervene, and may receive up to 33% of re- covery. No. City of Chi- cago Chicago Munici- pal Code §§ 1-22- 010 et seq. See also: Chicago Municipal Code § 2-152-171 (Whistle blower protection) and Chicago Munici- pal Code § 1-21- 010 et seq. (false statements).

46 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES Delaware 6 Del. Code Ann. §§ 1201 et seq. Enacted in 2000. Yes, treble damages, plus attorneys' fees and costs, plus civil penalty of up to $11,000; must be filed within 3 years after discovery and 6 years after occurrence. Yes, and relator may re- ceive 15% to 25% of recov- ery, (up to 30% if alone); plus attorneys' fees, costs, and expenses; State Dept. of Justice may intervene. No. Florida Fla. Stat. Ann. §§ 68.081 et seq. En- acted in 1994. Yes, treble damages, plus attorneys' fees, costs, and expenses, plus civil penalty up to $11,000; must be filed within 3 years after discovery and 10 years after occur- rence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees and costs; State Dept. of Legal Affairs or State Dept. of Financial Svcs. may intervene. No. Hawaii Haw. Rev. Stat. Ann. §§ 661-21 et seq. (false claims—state), enacted in 2000; 46-171 et seq. (false claims— local); §§ 378-61 et seq. (whistle- blowers). Yes, treble damages plus civil penalty of up to $10,000, plus attorneys' fees and costs; must be filed within 6 years after discovery and 10 years after occurrence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees and costs; state may intervene. No. Idaho Idaho Code Ann. §§ 6-2101 et seq. No Whistleblower protection for public employees only. No. Illinois 740 Ill. Comp. Stat. Ann. §§ 175/1 et seq. Yes, treble damages, plus civil penalty of up to $11,000, plus attorneys' fees, costs, and expenses; must be filed within 3 years after discovery and 10 years after occur- rence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, costs, and ex- penses; State may inter- vene. No. Indiana Ind. Code 5-11- 5.5, et seq. Yes, civil penalty of at least $5,000 and up to treble dam- ages, plus costs; AG and IG have concurrent jurisdiction to investigate; must be filed within 3 years after discovery and 10 years after occur- rence; AG and IG may use CIDs. Yes, and relator may re- cover 15 to 25% (up to 30% if alone), plus attor- neys' fees, costs, and ex- penses; State may inter- vene. No.

47 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES Kansas Kansas Stat. Ann. 75-7501 et seq.; Enacted Laws 2009, ch. 103, § 1, eff. April 30, 2009. Yes, treble damages, plus civil penalties of up to $11,000, plus attorneys' fees and costs; must be filed within 3 years after discovery and 10 years after occur- rence; per Kansas Stat. Ann. 75-7508(a)(2), a portion of the recovery goes to the de- frauded State agency. No; Kansas Stat. Ann. 75- 7504 expressly rules out all private causes of action except for whistleblower retaliation suits author- ized by Kansas Stat. Ann. 75-7506. No. Louisiana Two separate statutes: La. Rev. Stat. Ann. 38:2260, penalties for violation of provisions on public contracts for purchase of materials; La. Rev. Stat. Ann. 39:2151, Hurri- cane Relief Pro- grams Integrity Act of 2006. Louisiana also has a Medicaid FCA. La. Rev. Stat. Ann. 38:2260, no; La. Rev. Stat. Ann. 39:2151, yes, treble damages, plus civil fine of up to $10,000, plus attorneys' fees, costs, and expenses; must be filed within 1 year after dis- covery and 10 years after occurrence. La. Rev. Stat. Ann. 38:2260, no; La. Rev. Stat. Ann. 39:2151, yes, relator may receive up to 20% of recovery (up to 30% if alone), plus attorneys' fees, costs, and expenses. La. Rev. Stat. Ann. 38:2260, yes, misde- meanor, fine of up to $500; La. Rev. Stat. Ann. 39:2151. Massachu- setts Mass. Gen. Laws Ann. ch. 12, §§ 5 et seq., enacted in 2000. Massachusetts also has a Medi- caid FCA. Yes, treble damages (includ- ing consequential damages) plus civil penalty up to $10,000, plus attorneys' fees, experts' fees, and costs of investigation; State recover- ies go to False Claims Prose- cution Fund; must be filed within 3 years after discovery and 10 years after occur- rence. Yes, and relator may re- cover 15 to 25% (up to 30% if alone), plus attor- neys' fees and costs; State may intervene. No. Michigan Mich. Comp. Laws §§ 15.361 et seq. See page 52 for Medicaid FCA. No. Whistleblower protection for public employees only. No.

48 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES Minnesota Minn. Stat. §§ 15C.01 et seq.—NEW, effective July 1, 2010. Yes, treble damages, plus civil penalties of up to $11,000, plus attorneys' fees, experts' fees, and costs; must be filed within 3 years after discovery and 10 years after occurrence; actual damages credited to fund that sus- tained damages; portion of balance to false claims ac- count for litigation expenses. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, experts' fees, and costs; State may in- tervene. No. Montana Mont. Code Ann. § 17-8-401 et seq., (false claims— State); Mont. Code Ann. § 7-6- 4311 (false claims—local) Montana also has a Medicaid FCA. Yes, treble damages, plus civil penalties of up to $10,000, plus attorneys' fees, costs, and expenses; must be filed within 3 years after dis- covery and 10 years after occurrence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, costs, and ex- penses; State may inter- vene. No. Nebraska Neb. Rev. Stat. § 23-135.01. Nebraska also has a Medicaid FCA. No. No. Yes, Class IV Felony. Nevada Nev. Rev. Stat. §§ 357.010 et seq., enacted by ch. 824, Laws of 1999. See page 52 for Medicaid FCA. Yes, treble damages, plus civil penalties of up to $10,000, plus costs, with joint and several liability; if AG commences, 33% of recovery to false claims investigation fund. Yes, and relator may re- cover 15% to 33% (up to 50% if alone), plus attor- neys' fees, experts' fees, expenses, and costs; State may intervene. No.

49 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES New Jersey N.J. Stat. Ann. 2A:32C-1 et seq.; enacted by Laws of 2007, ch. 265, eff. March 13, 2008. See page 52 for Medicaid FCA. Yes, treble damages, plus same civil penalties as al- lowed under Federal FCA as adjusted for inflation, plus attorneys' fees, expenses, and costs; AG receives 10% of proceeds to special fund to support false claims investi- gations and prosecutions; must be filed within 3 years after discovery and 10 years after occurrence; AG author- ized to subpoena records and witnesses, enforceable by arrest warrants. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, expenses, and costs; State may inter- vene. No (except that persons failing to comply with AG subpoenas may be ar- rested). New Mex- ico N.M. Stat. Ann. 1978 §§ 44-9-1 et seq., enacted by L. 2007 ch. 40, eff. July 1, 2007. See page 52 for Medicaid FCA. Yes, treble damages plus civil penalties of up to $10,000, plus attorneys' fees and costs; AG may investigate or dele- gate investigative authority to agency defrauded; joint and several liability; actual damages returned to fund defrauded, portion of other proceeds to AG for false claims investigations and prosecutions; no statute of limitations, except that un- derlying conduct must have occurred on or after July 1, 1987. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees and expenses; State may intervene. No. New York City 46 RCNY §§ 3-01 et seq. Yes, complaints reviewed by Depts. of Investigation and Law; City may file civil ac- tion. Yes, City may authorize civil action by complain- ant if City does not file civil action itself. Yes, all com- plaints referred to Dept. of In- vestigation for investigation.

50 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES New York State N.Y. Finance Law §§ 187 et seq., enacted L. 2007 c. 58, eff. April 1, 2007. Yes, treble damages, plus civil penalties of up to $12,000, plus attorneys' fees, expenses, and costs; must be filed within 3 years after discovery and 10 years after occurrence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, expenses, and costs; State may take over action or intervene. No. North Carolina N.C. Gen. Stat. Ann. Art. 51 §§ 1- 605 et seq. and Art. 2 §§ 108A- 63.1 et seq., en- acted by Session Law 2009-554, Aug. 28, 2009, eff. January 1, 2010. Note: appears to reflect FERA amendments to Federal FCA. North Carolina also has a Medi- caid FCA. Yes, treble damages, plus costs, plus civil penalty of up to $11,000; AG may retain a portion of recovery as reim- bursement for costs; AG au- thorized to issue CIDs; must be filed within 3 years after discovery and 10 years after occurrence. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, costs, and ex- penses, if alone; State may intervene. No. Ohio Ohio Rev. Code Ann. §§ 4113.52 et seq. Ohio also has a Medicaid FCA. No. Whistleblower protec- tion only. No. Rhode Is- land R.I. Gen. Laws §§ 9-1.1-1 et seq., Enacted P.L. 2007, ch. 73, eff. Feb. 15, 2008. Yes, treble damages plus civil penalties of up to $10,000, plus costs; must be filed within 3 years after discov- ery and 10 years after oc- currence; AG or State Police may issue subpoenas; recov- eries deposited into special State False Claims Act fund. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees, expenses, and costs; State may inter- vene. No.

51 STATE CITATION(S) GOVERNMENT CIVIL ACTIONS QUI TAM ACTIONS CRIMINAL PENALTIES Tennessee T.C.A. §§ 4-18- 101 et seq., en- acted by ch. 367, Laws of 2001. Tennessee also has a Medicaid FCA. Yes, treble damages, plus civil penalty of up to $10,000, plus costs; AG receives 33% of recoveries to support ongo- ing investigation and prose- cution of false claims; must be filed within 3 years after discovery and 10 years after occurrence. Yes, and relator may re- cover 25% to 33% (35% to 50% if alone); State may intervene. No. Virginia Va. Code Ann. §§ 8.01-216.1 et seq., enacted by ch. 842 of the Laws of 2002, eff. January 1, 2003. Yes, treble damages, civil penalty up to $11,000, plus attorneys' fees and costs; must be filed within 3 years after discovery and 10 years after occurrence; AG may use CIDs. Yes, and relator may re- cover 15% to 25% (up to 30% if alone), plus attor- neys' fees and costs; State may intervene. No. Washing- ton D.C. D.C. Code Ann. §§ 2-308.03 et seq. Wyoming Wyo. Stat. Ann. 1977 § 6-5-303. No. No. Yes, felony, prison up to 2 years, fine of up to $2,000, or both.

52 STATE MEDICAID-ONLY FALSE CLAIMS STATUTES Arizona Ariz. Rev. Stat. § 36-2901 et seq. Arkansas Ark. Code Ann. § 20-77-901 et seq. California West's Cal. Welf. & lnst. Code § 14107.5 and § 14115.75 Colorado Colo. Rev. Stat. Ann. §§ 25.5-4-304 et seq. Connecticut Conn. Gen. Stat. Ann. §§ 17b-301b et seq. Georgia Ga. Code Ann. §§ 49-4-168 et seq. Kentucky Ky. Rev. Stat. Ann. § 304.1-190 Louisiana La. Rev. Stat. Ann. 46:437.1 Massachusetts Mass. Gen. Laws. Ann. 175H § 6 Michigan Mich. Comp. Laws §§ 15.361 et seq.; see also Mich. Comp. Laws Ann. §§ 400.111e, 400.111f, 550.1408 Missouri Mo. Ann. Stat. 191.905 Montana Mont. Code Ann. 15-61-205 Nebraska Neb. Rev. Stat. § 68-934 et seq. Nevada Nev. Rev. Stat. 422.540 New Hampshire N.H. Rev. Stat. §§ 167:58 et seq. New Jersey N.J. Stat. Ann. 30:4017 New Mexico N.M. Stat. Ann. 1978, §§ 27-14-1 et seq. North Carolina N.C. Gen. Stat. Ann. §§ 108A-70.10 et seq. Ohio Ohio Rev. Code Ann. § 5111.101 Oklahoma Okla. Stat. Tit. 63 §§ 5053 et seq. Oregon Or. Rev. Stat. §§ 165.690 et seq. Tennessee Tenn. Code Ann. §§ 71-5-181 et seq. Texas Tex. Hum. Res. Code Ann. §§ 36.101 et seq. Utah Utah Code Ann. 1953 §§ 26-20-1 et seq. Washington State Wash. Rev. Code Ann. 48.80.030 West Virginia W.Va. Code § 9-7-5 Wisconsin Wis. Stat. § 20.931

53 B. Benefits to States of Having Own FCAs While states may pursue recoveries under the Federal FCA, enacting their own FCAs allows states to conduct false claims litigation in their own courts, to adjust the statutory provisions governing such litigation, and to allow for municipalities as well as the state to pursue such litigation. In considering state FCAs, it should be noted that there are distinc- tions to be drawn between FCAs of general applica- bility, FCAs applicable solely to Medicaid fraud, and false statements statutes (which are discussed in Sec- tion XIV of this digest). Only a few states have en- acted all three. In particular: • Three states—Arizona, Louisiana, and Ohio—have enacted versions of all three statutes: general FCA, Medicaid FCA, and false statement. • Nine states—California, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, North Carolina, and Tennessee—have enacted both general FCA and Medicaid FCA statutes but may not have en- acted false statement statutes. • One state, Illinois, has enacted both a general FCA and a false statement statute but no Medicaid FCA. • Six states—Colorado, Georgia, Kentucky, Missouri, Nebraska, and West Virginia—have enacted both a Medicaid FCA and a false statement statute but have not enacted a general FCA. • Nine states—Arizona, Connecticut, New Hamp- shire, Oklahoma, Oregon, Texas, Utah, Washington, and Wisconsin—have enacted only a Medicaid FCA, have not enacted a general FCA, and do not appear to have enacted false statement statutes. • Five states—Iowa, Maryland, North Dakota, Penn- sylvania, and South Dakota—have enacted only a false statement statute, and have not enacted either a gen- eral FCA or a Medicaid FCA. C. Common Concepts While the provisions of state FCAs are by no means identical with the Federal FCA or each other, it is fairly typical for a state FCA to authorize the state's AG to pursue civil false claims actions and to recover treble damages, plus civil penalties of up to $10,000 to $12,000, plus attorneys’ fees, expenses, and costs. A number of states also authorize their AGs to issue CIDs, typically modeled on the Federal FCA CID provi- sions. Most states require that FCA actions be filed within 3 years after discovery and within 10 years after commission of the underlying acts. D. Qui Tam Provisions Again, while state FCAs are by no means identical, it is typical for them to authorize private qui tam ac- tions for treble damages plus attorneys' fees and expenses (although Kansas expressly prohibits qui tam actions); to authorize state AGs to intervene in such actions and to control the litigation of those cases they intervene in; and to authorize qui tam rela- tors to receive 15 to 25 percent of the total recovery, or up to 30 percent if proceeding alone without the intervention of the state AG (only Nevada and Ten- nessee offer terms more generous to relators). E. Implementation Based upon the 31 responses received from state DOTs to the written survey of all 50 state DOTs con- ducted in researching this digest, it appears that while some states have taken contractual or other adminis- trative measures to detect or prevent false claims, and a number of states have undertaken recent staff training in conjunction with USDOT Office of the OIG efforts to protect federal stimulus funding from false claims, fraud, and abuse, few states have made active efforts to pursue recoveries for false claims through either federal or state FCA litigation. F. Recent Trends In recent years, seven states—Kansas, Massachu- setts, Minnesota, Nevada, New Jersey, New Mexico, and Rhode Island—have enacted provisions directing that a portion of any funds recovered under a state FCA either be returned to the state fund that was defrauded or be paid into a state fund dedicated to supporting on- going investigations and prosecutions of false claims and fraud by the state AG, or both. G. Municipal False Claim Statutes Chicago, New York City, and Washington, D.C., have all enacted municipal false claims statutes. These are sufficiently new that there does not appear to be much experience with their application as yet. H. Sample of Notable State Case Law With 26 states and at least 3 major municipalities having enacted FCAs, it appears evident that a com- prehensive, in-depth review of state and municipal judicial precedents interpreting those statutes is be- yond the scope of a general survey and would justify its own 100-page legal digest. There are at least two published treatises discussing such issues, and practi- tioners contemplating involvement in false claims litigation at the state level should consult such pub- lications.276 As previously discussed, numerous false claim cases are settled before judicial decisions, and settlements often do not admit liability and do not set precedents. Indicative is our discussion, in Section I of this digest, of the noteworthy settlements in- volving the Central Artery Tunnel Project (the "Big Dig"). The State of California, which reportedly became the first state to enact its own FCA in 1987, 1 year after the 1986 amendments to the Federal FCA, ap- pears to have had significant litigation under its stat- ute, including litigation involving construction pro- 276 See SYLVIA, supra note 7, at 893–938; and Sink & Pages, supra note 130, at 253-310.