September 20, 2022
What Is The False Claims Act
The federal False Claims Act – or FCA as it is commonly known – is a law originally enacted during the Civil War as a way of preventing unscrupulous private suppliers to the Union Army from defrauding the federal government by providing inferior goods. The FCA was notable in providing a mechanism by which individual whistleblowers with knowledge of fraudulent activity targeting the federal government (and therefore U.S. taxpayers) could bring a lawsuit to recover damages, a portion of which would be received by the private whistleblower personally.
Over the last century and a half, FCA litigation has become commonplace, and each year many whistleblowers with knowledge of such fraudulent activity – most often in the form of Medicare and Medicaid fraud, customs fraud, and military procurement fraud – successfully pursue FCA lawsuits, with many individual whistleblowers collecting multi-million dollar rewards for doing so in the process.
A number of states have followed suit in enacting their own state law versions of the FCA, and California was indeed the first state to enact a state-level FCA statute by which individuals with knowledge of fraud perpetrated against California taxpayers can bring a successful California FCA claim to both fight taxpayer fraud and collect a sizable financial reward for their work.
What Is The California False Claims Act
California’s False Claims Act (CFCA) was enacted into law in 1987 as a way of combating fraud perpetrated against local and state entities. Initially, there was little litigation based on the CFCA, but numerous CFCA claims have been brought in recent years.
Typically a person with knowledge of fraud will work with experienced CFCA counsel to develop the facts necessary for their claim and then file a suit. A CFCA complaint is then drafted and provided to the California state Attorney General’s Office. State prosecutors will then determine whether to join the CFCA complaint. Regardless of whether the state joins the lawsuit, the CFCA complaint may continue against the alleged offenders. Penalties for a successful CFCA lawsuit include three times the amount of damages suffered by the state government in addition to fines.
Financial Compensation for CFCA Whistleblowers
Like its federal counterpart, the CFCA provides significant financial incentives for whistleblowers with knowledge of fraud targeting the state government, and which are actually more generous by percentage than those provided by the FCA. Under the CFCA, a whistleblower who pursues a successful claim can receive as a financial reward anywhere between 15% to 33% of the financial penalties and fines levied against a defendant where the state government is a party to the litigation, and between 25% and 50% of such penalties and fines when the state government does not choose to join the litigation.
Since the enactment of the CFCA, over $2 billion has been levied against CFCA defendants, thus the financial rewards available to those who pursue a successful CFCA claim can be significant.
Foundations of a CFCA Claim
The elements of a successful CFCA claim are similar to those under the FCA. In proving a CFCA claim, a whistleblower plaintiff (and/or the state government) must allege facts relating to one of the following eight scenarios involving an individual or entity that:
- Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval;
- Knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim;
- Conspires to commit a violation of the CFCA;
- Has possession, custody, or control of public property or money used or to be used by the state or by any political subdivision and knowingly delivers or causes to be delivered less than all of that property;
- Is authorized to make or deliver a document certifying receipt of property used or to be used by the state or by any political subdivision and knowingly makes or delivers a receipt that falsely represents the property used or to be used;
- Knowingly buys, or receives as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property;
- Knowingly makes, uses, or causes to be made or used a false record or statement material to an obligation to pay or transmit money or property to the state or to any political subdivision, or knowingly conceals or knowingly and improperly avoids, or decreases an obligation to pay or transmit money or property to the state or to any political subdivision; OR
- Is a beneficiary of an inadvertent submission of a false claim, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery of the false claim.
Any number of situations might qualify as grounds for a successful CFCA claim, but often such a situation involves an individual or entity receiving state government funds or reimbursements for goods or services that were not provided, not necessary, not what they purport to be, or of inferior quality.
Who Can File A Claim Under the CFCA?
Often, employees and managers of a business engaged in fraud targeting the state government bring CFCA claims, but anyone with knowledge of the underlying fraud who is able to provide sufficient evidence to begin the process of initiating a lawsuit may be eligible to do so, even in some cases where the plaintiff had some participation in the fraud itself.
Potential CFCA whistleblowers should be aware of the applicable statute of limitations, which requires that a suit be filed either within 6 years of the underlying fraudulent activity, or 3 years after the plaintiff became aware of the activity (or reasonably should have become aware of the activity), whichever comes first.
If you believe you have a knowledge of fraud that may form the basis of a successful CFCA claim, you are highly encouraged to work with experienced CFCA counsel to discuss and prepare your claim in a completely confidential environment.