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VaQuiTamLaw.com author Zachary Kitts quoted in Virginia Lawyers Weekly on pleading standards under the federal False Claims Act

By Zachary Kitts on January 9, 2019 in ,

 

VaQuiTamLaw.com author Zachary Kitts quoted in Virginia Lawyers Weekly on pleading standards under the federal False Claims Act

cover of Virginia Lawyers Weekly

 

The latest version of Virginia Lawyers Weekly contains a quote by yours truly on the topic of federal pleading standards for federal False Claims Act cases and the recent Fourth Circuit opinion in .  Congrats to reporter Matt Chaney on his fine article, which also appeared in the South Carolina Lawyers Weekly

I do indeed find this opinion troubling.  The opinion is from December 26, 2018, but for the obvious reasons it didn’t get much publicity at first.  The caption of the case is United States ex rel. David Grant v. United Airlines ; the appeal arises from an Order of the U.S. District Court in South Carolina dismissing relator’s Second Amended Complaint.

Relator’s Second Amended Complaint Failed to Allege Sufficient Details

As regular readers know (because it has been a recurring theme on this blog for more than ten years) a well-pled Complaint is critical.  The heightened pleading requirements of Fed. R. Civ. P. 9(b) apply to FCA actions, and failure to comply with Rule 9(b) is treated as a failure to state a claim under Rule 12(b)(6).

Motions to dismiss pursuant to Fed. R. Civ. P. 9(b) are commonplace in FCA litigation, with nearly every defendant in nearly every case arguing that the relator has failed to plead his or her claims with sufficient particularity.  There are several reasons for the heightened-pleading standard under Fed. R. Civ. P. 9(b).   First, the defendant have a right to be on notice of the conduct alleged to be illegal.  Also, a stringent standard helps to eliminate fraud actions in which all the facts are learned after discovery and protects defendants from frivolous claims.

The primary reason why Rule 9(b) motions are common in FCA cases is that such a motion makes a purely legal argument.  The 9(b)/12(b)(6) motion argues that even if all of the facts alleged in the Complaint were true, the Complaint would still not state a case because it is legally deficient.  And the reason why that argument is necessary is because when a qui tam relator is present, there will normally be few — if any — facts in dispute.

Troubling aspects of the Fourth Circuit’s Opinion

Grant worked at United Airlines as a mechanic; his qui tam alleged several ways in which the airline committed violations of its contract with the United States.  For each of the violations, Grant alleged that United falsely certified that it had in fact followed the correct procedures.  In my view, the allegations of the Complaint had the kind of specificity I look for.  Grant alleged that specific tests were not performed, and he named the specific safety standards that were falsely certified; he also included the contractual provisions at issue.

However, Judge Duncan (writing for the majority) held that because Grant, as a maintenance technician, did not have access to evidence of how and if the government received or paid for the services, he could not state a claim under sections 3729(a)(1)(A) or (B).

My quote is as follows:

The majority appears to say that on one hand, you’d have to have boots-on-the-ground knowledge that an airline mechanic would have, and the person would simultaneously need to have knowledge of fairly high-level contractual dealings,” he said, “But it seems to me that they’re requiring a level of knowledge that no one person would ever have.

So yes, I find this troubling, to say the least…stay tuned readers!

 

Virginia False Claims Act Lawyers

 

 

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DOJ Announces False Claims Act Settlement with British Airways and Iberia Airlines

By Zachary Kitts on December 11, 2018 in ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

DOJ accounces settlement with British Airways for falsely reporting international mail delivery times for international mail deliveries

I am always on the look-out for interesting and novel uses of the federal False Claims Act, and last month presented just such a case.

The Justice Department announced last month that British Airways Plc (BA) and Iberia Airlines (Iberia) have agreed to pay $5.8 million to resolve their liability under the False Claims Act for falsely reporting the times they transferred possession of United States mail to foreign postal administrations or other intended recipients under contracts with the United States Postal Service (USPS).

BA and Iberia are international airlines headquartered in Harmondsworth, United Kingdom, and Madrid, Spain, respectively.  BA and Iberia Airlines are both subsidiaries of the International Airlines Group.

The United States contracts with various airlines for the delivery of international mail.  In this case, USPS contracted with BA and Iberia to take possession of receptacles of United States mail at six locations in the United States (or at various Department of Defense and State Department locations abroad.)  BA and Iberia were to deliver that mail to numerous international and domestic destinations within certain timeframes.

It’s the sneaking around that gets you into trouble

As with most FCA cases, its the sneaking around that got them into trouble.  To obtain payment under the contracts, the airlines were required to submit electronic scans of the mail receptacles to USPS reporting the time the mail was delivered at the specified destinations.  The settlement resolves allegations that scans submitted by BA and Iberia falsely reported the time the airlines transferred possession of the mail.

The U.S. Postal Service contracts with commercial airlines for the safeguarding and timely delivery of U.S. Mail to foreign posts, including the mail sent to U.S. servicemembers deployed to foreign operating bases and other locations abroad.

This matter was handled by the Civil Division’s Commercial Litigation Branch, the USPS Office of the Inspector General, and the USPS Office of General Counsel.

A fine job by all!

Virginia False Claims Act Lawyers

 

 

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Fraudulent heating costs charged to state and local governments in New York

By Zachary Kitts on November 27, 2018 in , , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Fraudulent heating costs charged to state and local governments in New York lead to False Claims Act Settlement

This month saw a new and innovative false claims act case make its way out of New York State.  Congratulations are in order for the law firm of Getnick & Getnick!

As regular readers know, one of the main goals of this blog is to cover and explore novel uses of state false claims acts.  And no state ( to my knowledge) has made better use of its state false claims act than New York.  You can read the settlement agreement here.

The relator’s lawyers boiled this complex fraud down to very simple terms.  From 2004 to 2016, Bottini Fuel improperly held onto customer overpayments and duplicative payments for heating oil. Company officials didn’t tell customers that they had overpaid; instead, the company kept the money and used it to benefit its owners and employees.

It should come as no surprise to readers that the biggest victims of the scam were state and local governments.  According to the settlement, the biggest victims include: the Taconic Developmental Disabilities Services Organization ($281,630), the Greenhaven Correctional Facility ($145,957), Roundout Valley Central School District ($83,044) and Beacon City School District ($10,375).  A number of New York state towns received restitution, including Saugerties, Blooming Grove, Monroe, Hunter, Wappinger and Stanford.

As an interesting aside, according to the U.S. Energy Information Administration, about one-third of the heating oil purchased in the United States each year goes to commercial uses in the Northeast United States, and 84% of the heating oil purchased for residential use is purchased in the Northeast.

Criminal convictions and the New York FCA settlement

This particular 12-year scheme defrauded not only school districts, and local governments in New York’s Hudson Valley; interestingly, individuals and private businesses were also defrauded.  The fraud resulted in a criminal plea agreement for Morgan Fuel & Heating Company, Inc., which conducts business as Bottini Fuel.

Congratulations again to the lawyers of Getnick & Getnick for this groundbreaking settlement!

 

Virginia False Claims Act Lawyers

 

 

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HHS-OIG seeks public comments on health care kickbacks

By Zachary Kitts on October 31, 2018 in , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

HHS-OIG Issues Request for Information on Health Care Kickbacks

The Department of Health and Human Services, Office of the Inspector General (that’s HHS-OIG to regular readers) recently issued a request for information on kickbacks in health care programs.  The public was asked to provide comments about the interaction between the various anti-kickback statutes and how those laws impact the current push for greater “care coordination” in health care programs.  “Care coordination,” consists (I assume) of doctors, hospitals, and other interested parties communicating (at a minimum) with each other about each patient and what the patient needs.  There is also a definite push (by the American Hospital Association, the American Medical Association, etc.) for greater use of and access to electronic health records for patients, the theory being that greater use of electronic records would enable better care coordination.

More specifically, the request for information stated:

“This ‘Regulatory Sprint’ is focused on identifying regulatory provisions that may act as barriers to coordinated care,
assessing whether those regulatory provisions are unnecessary obstacles to coordinated care, and issuing guidance
or revising regulations to address such obstacles and, as appropriate, to encourage and incentivize coordinated
care while protecting against harms caused by fraud and abuse.”

Government efforts to reduce barriers to coordinated care

As with many things in the realm of health care law and regulation, at least some of the health care industry’s goals seem laudable.  After all, who could argue against increased communication between (for example) primary care physicians and diagnostic imaging centers or hospitals?  In fact, according to some of the AHA-aligned comments, certain hospitals and others would just love to give away electronic medical record systems (in case it is not clear, they want to do this for free!) to increase the level of communication between the various providers…more on that in a moment…

Of course, there is nothing in the law as currently written to prohibit greater “care coordination” between providers.  It is, however, a crime for a provider to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients; these same laws severely limit a doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.  So what is at issue is not so much the ability of providers to coordinate the care they provide, but rather the ability of providers to make money by coordinating an individual’s health care.

TAFEF’s response to the AHA, AMA, etc.

No doubt about it, the health care industry can make some pretty powerful arguments; they certainly have enough money to pay the very best lawyers, lobbyists, wordsmiths, etc. to put a favorable spin on things.  For that reason among others I am glad to belong to Taxpayers Against Fraud, and I am glad that  TAF prepared this response to the request.  

Take for instance the desire of some hospitals to “donate” electronic health care records systems to medical groups to allow for better “coordination” in care.  As the TAF letter states, among many other problems, hospitals would have to institute some kind of eligibility criteria for a medical group to qualify for these free systems; otherwise they would be forced to provide expensive software and training to every two-bit practice that sends even one patient to the hospital.  The most likely criteria would be the volume of referrals the practice makes to the hospital, and that is where the problems start, because providers would be required to refer patients based not on the needs of the patient but rather on the needs of the practice to get the free software.

(As an aside, I was supposed to provide some assistance with this effort, but I got tied up unexpectedly in court; more on that subject later.  Extra special thanks to Ed Baker, Shelley Slade, Claire Sylvia, and Jackie DeMar and Bob Patten from TAF.)

Stay tuned, more on these developments will follow….

Virginia False Claims Act Lawyers

 

 

 

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Supreme Court of Virginia Issues First Bona Fide Qui Tam Opinion

By Zachary Kitts on September 20, 2018 in , , , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Supreme Court of Virginia Issues First Bona Fide Opinion on the Qui Tam Provisions of the Virginia Fraud Against Taxpayers Act  — PART ONE OF TWO

At long last we have a bona fide Supreme Court of Virginia opinion concerning the qui tam provisions of the Virginia Fraud Against Taxpayers Act.  Not only that, but SCOVA really came through with an opinion that will benefit qui tam relators and whistleblower lawyers everywhere.

Mind you, this is just the first SCOVA opinion concerning the qui tam provisions, but it is not the first opinion concerning the VFATA – that distinction belongs to my own Lewis v. City of Alexandria, which interpreted the equitable remedies portion of VFATA in the anti-retaliation context.

This is, by the way, the last word on a case that has been going on for some time now – I first covered this case back in 2016 (!) when the hot topic in the case was jurisdictional matters.

This case presents an important issue of first impression.  In FCA litigation involving health care claims, as regular readers know, most cases have both a federal component (for payment coming from Medicare, the federal half of Medicaid, Tricare, etc.) and a state component (which covers the other half of the state’s Medicaid expenditures).

State Attorney Generals sometimes make the argument that a state is not required to pay a full relator’s share, but only a share based on what the state received. The two things are very different, as we shall see…

(As an aside, back in February of 2008 I organized the first-ever continuing legal education course on the topic of the Virginia Fraud Against Taxpayers Act.  There were only two or three people in attendance, but one of them was Mark Friedlander, who told me during a break that he had recently filed a qui tam case in the Circuit Court for Fairfax County, Virginia.  The case was still under seal, so he was limited in what he could say about the case, of course, but I didn’t forget…well, it turns out this was the case. Congrats to Mark, as well as to Eric Buescher, Niall McCarthy, and the team at Cotchett Pitre & McCarthy LLP.)

The case was filed back in 2007 against a number of labs alleging that Virginia’s Medicaid program had been defrauded when it was overcharged for certain lab tests.  The Commonwealth declined to intervene and the case was unsealed.  Ultimately, the relators settled with the defendants in the amount of $1,250,000.  The Commonwealth’s approval was required, and given.

The relators and the Commonwealth agreed, prior to finalization of the settlement, that the relators would receive 28% of the settlement proceeds.  After settlement, however, there was a disagreement about how that 28% should be calculated.  Specifically, they disagreed about whether that 28% share should come out of the total, or gross, proceeds of the settlement, or whether the 28% share should come out of the Commonwealth’s net share of the proceeds — in other words, what remains of the $1.25M after the Commonwealth has refunded a portion of the proceeds to the United States.

The Virginia Attorney General took the position the Relator was not entitled to any portion of the funds that Virginia must repay to the federal government.  (Bear in mind, Medicaid in Virginia is a 50/50 proposition, with the Commonwealth paying half and the feds paying half).  The Virginia Attorney General also argued  that relators were not entitled to any payment from that “portion” of the settlement that addressed conduct before the VFATA was enacted.  These two arguments reduced the relator share from the agreed-upon 28%, down to 11%.

Following the procedural wrangling mentioned in previous posts, the trial court — now the Circuit Court for Fairfax County — found in favor of the relators, concluding that they were entitled to receive 28% of the gross proceeds of the settlement.

Incredibly, the Commonwealth did not make any arguments based on the plain language of the Virginia Fraud Against Taxpayers Act.  I say “incredibly” because in Virginia Courts, arguing about the plain language of the statute will get you a long, long way, and they must have known that.

An appeal to the Supreme Court of Virginia followed, and the Supreme Court Decision was announced this month.  In a strongly worded opinion, Justice McCullough had things like the  following to say:

The Commonwealth chose not to intervene in this matter and as a result, it would be inequitable for the Relators to be undercut for performing a valuable service on behalf of the government, pursuant to the VFATA.  Inevitably, such a result could create a chilling effect on the willingness of whistleblowers to bring claims under the VFATA….

And my personal favorite:

The Commonwealth maintains that we should construe the VFATA in a way that maximizes the recovery of funds and, to accomplish this objective, we should interpret Code § 8.01-216.7(B) to reduce the relator’s share. But it is not obvious that, in the aggregate, the Commonwealth’s proposed reduction in the relator’s share will produce more revenue from qui tam actions than construing “proceeds” to mean gross proceeds. A significant reduction in the relator’s share will discourage relators from bringing these lawsuits. The Commonwealth receives nothing when a relator decides to stay home and foregoes the risk and expense associated with a qui tam suit…

In part two we will look at the Commonwealth’s arguments a bit more…as well as the arguments raised in the amicus brief submitted by the United States…

Virginia False Claims Act Lawyers

 

 

 

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K&G Law Group included in the 2019 Edition of Best Lawyers in America

By Zachary Kitts on July 27, 2018 in , , ,

Virginia Fraud Against Taxpayers Act lawyers

 

 

 

K&G Law Group included in the 2019 Edition of Best Lawyers in America

I am pleased to announce my inclusion in the 2019 edition of Best Lawyers in America.  It is always an honor to be included in such publications, and I especially like the fact that Best Lawyers in America has a bona fide qui tam practice category.

A few words about honors like Best Lawyers in America

When I talk to potential new clients, they have often read about the results obtained by my firm in past cases, or about some honor or other I received.   People sometimes ask “You handled such-and-such case and were responsible for the outcome, right?”

Well, sort of.

Yes, my firm has obtained some good results in cases over the years, but the outcome of these cases is dependent on many factors.  When I have a good result in a case — and this is true for every kind of lawyer in every kind of case — it is because I had a good client.

Stated a slightly different way, I believe in the old wisdom that the outcome of any given case is usually about 75% client, 25% lawyer.

Why is the term qui tam so important?

I usually prefer to call my practice a qui tam practice because, as regular readers know, the term “whistleblower” is  rather generic.   To some people Edward Snowden is a heroic whistleblower.  Other people think of tobacco whistleblower Jeffrey Wigand; still others think of Harry Markopolous.  All of these people are indeed whistleblowers, but none of them were qui tam whistleblowers.

So maybe the best way to put it is to say that all qui tam relators are whistleblowers, but not all whistleblowers are qui tam relators.  To me — and to many others — the term qui tam is preferable, as it refers to what is really going on in these cases; that is, someone brings suit on behalf of the government to enforce a right belonging to the government.

 

Virginia False Claims Act Lawyers

 

 

 

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VaQuiTamLaw.com Author Zach Kitts named to 2018 edition of Virginia Super Lawyers

By Zachary Kitts on June 21, 2018 in

 

 

 

 

 

 

 

 

VaQuiTamLaw.com Author Zach Kitts named to 2018 edition of Virginia Super Lawyers

I am pleased to announce that I was once again included in the 2018 version of Virginia Super Lawyers magazine.  And make no mistake about it, it is indeed an honor — according to Superlawyers.com, no more than 5% of the lawyers licensed in a state can recieve this honor.

Moreover, being selected and listed one year does not by any means guarantee selection in later years.  This is my fifth year being named to Super Lawyers magazine; for two years before that I was included in the Rising Stars section based on my age.

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas.   Lawyers included have attained a high degree of peer recognition and professional achievement.  The annual selections are made using a patented multiphase process. The process includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area.  The result is a credible, comprehensive and diverse listing of exceptional attorneys.  Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law.

 

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Upcoming VaCLE Seminars on Hanging a Shingle and Reasonable Attorney Fees in Virginia

By Zachary Kitts on May 31, 2018 in , , ,

 

 

 

 

 

 

 

Upcoming Continuing Legal Education Seminars on Starting a Law Firm and Reasonable Attorney’s Fees in Virginia

As many of you know, for the last three years John Bredehoft and I handled the most difficult and involved part (even though I do say so myself) of three important Virginia CLEs — the Annual Employment Law Update in May of each year (through VaCLE) and then in the fall we did the annual case law update for the Virginia Bar Association’s Annual Conference of Labor Relations and Employment Law.

In all three seminars, we were responsible for reviewing interpreting the previous-year’s new case law, and it was a real pleasure to work with my good freind Bredehoft.  For decades (three decades in the case if VaCLE, and nearly five decades in the case of VBA) these seminars have been indispensable educational and networking opportunities for Virginia lawyers practicing in, or wanting to learn more about, employment law.  I myself attended these conferences from the very start of my legal career, and I have always found them to be top-notch education and social opportunities.

Prior to John and I taking over, Eddie Isler and Harris Butler handled the update portion of all three seminars for as long as I can remember, which is to say at least 12 or 13 years.  Under a new policy, however, responsibility will change every few years for this part of the seminar beginning this year.  This certainly didn’t hurt my feelings, however, because (1) it was indeed an enormous amount of work and (2) it basically took up all of the time I could afford to spend, annually, preparing and speaking at CLEs.

Alas, parting is such sweet sorrow…

So, because Bredebear and I do not have to prepare an enormous volume of new employment law cases, I am now free to speak at numerous other seminars on different topics, including two upcoming seminars through Virginia CLE — the first will be the semi-annual Hanging a Shingle seminar on July 11, 2018 and the second is Attorney Fee Awards in Virginia on August 23, 2018.  Video replays of both seminars will also be available throughout the Commonwealth at various times.

The Attorney Fee Awards in Virginia program is an updated version of a program I first put together back in 2011 — it has been quite popular over the years so we decided to do it again…

Spots are selling out fast, hope to see some or all of you there!

 

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Healthcare Records, Qui Tam Whistleblowers and HIPAA

By Zachary Kitts on April 29, 2018 in , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

 

Healthcare Records, Qui Tam Whistleblowers and HIPAA

This month I published an article in the Journal of the Virginia Trial Lawyers Association entitled Healthcare Records, Qui Tam Whistleblowers and HIPAA.  

Regular readers of this blog will be familiar with much of the article’s content.  In a nutshell, the article examines the text of HIPAA itself and looks at the “privacy rule” portion of HIPAA — found at 45 CFR 164.502(j) — and explains why that rule is important to qui tam practice under the federal False Claims Act and the Virginia Fraud Against Taxpayers Act.

Why are copies of medical records so important to health care qui tam cases anyway?

The article looks at the reason — or rather, reasons — why it is important for relators to copy healthcare records in the first place. In the opinion of this writer, there are two primary, interrelated reasons for relators to copy documents like healthcare records.

First, qui tam litigation under the FCA and VFATA is a practice heavy on forensic investigation skills. Unlike most civil litigation, much of the real work of a qui tam case is done by the relator’s lawyers in the early stages of the case, before the Complaint is ever filed.  Copies of documents assist the relator’s lawyers in their efforts to flesh out and master every nuance in the case.  Such information can also help to establish their client’s position as the original source of the information.

Moreover, even the most sophisticated clients tend to combine emotions with their facts.  Copies of documents and other evidence assist the relator’s lawyers in their efforts to assemble the bigger picture and its potential implications.  Copies of relevant documents also can help lawyers identify other individuals or companies who may share liability.

Second, government lawyers handling qui tam cases essentially do battlefield triage when they sort through new cases.  In other words, they have to make quick decisions about which cases get attention and which cases do not.  Cases which can be presented to the government in a well-documented and thoughtful manner stand a much greater chance of receiving attention than those that do not.

For lawyers, this should be easy to understand — the government’s lawyers look at cases much in the same way that we do when a new potential client approaches us.  So just try to imagine your ideal client and how you would like to have the information about a potential case presented to you.

HIPAA protects qui tam whistleblowers who engage in very specific types of “protected activity”

Next the article looks at what is — and what is not — protected activity under HIPAA.  There are very few cases examining whistleblower activity in the context of the HIPAA privacy rule.  The cases that do exist bear few surprises.  For example, in Howard ex rel. U.S. v. Arkansas Children’s Hosp., 2015 WL 4042170 (E.D. Ark., 2015) two whistleblowers survived a summary judgment motion asserting that they were not “whistleblowers” as defined by the FCA and were therefore not entitled to have the PHI in their possession.

In Monarch Fire Protection Dist. of St. Louis County, Missouri v. Freedom Consulting & Auditing Services, Inc., 678 F.Supp.2d 927 (E.D.Mo. 2009) the Court held that the whistleblower exception in HIPAA applies only to an individual showing the information to his or her own attorney.  Parties are not, therefore, protected when they show the records to the attorney for a third-party.   Nor is a disclosure of PHI to the EEOC in support of an individual’s employment-discrimination claim protected.  That is because the EEOC does not enforce laws against fraud on the government.  Vaughn v. Epworth Villa, 537 F.3d 1147, 1153 (10th Cir. 2008).

As always, don’t forget the relevant lawyer ethics opinions

Finally, the article examples Virginia Legal Ethics Opinion 1786 and its guidance for qui tam relators. Simply put, LEO 1786 is a must-read for lawyers practicing in this area.  The hypothetical deals with a client who brings a collection of healthcare records to her lawyers to evaluate a potential case.   The client considers the documents to be confidential; the client had access to the documents as part of her work for the target defendant.

In formulating its answer, the Committee identified four factors as important ethical considerations: (1) the nature of the documents, (2) the nature of the sources of the information, (3) the method used by the client to gather the information, and (4) whether the attorney directed the client to gather the information.  The Committee points out that the attorney can only use the information if Virginia Ethics Rules 3.4(a) (which prohibits a lawyer from obstructing another party’s access to evidence and information) and 4.4 (concerning respect for the rights of third-persons) are not violated.

These rules make it clear that potential qui tam relators should never remove original documents from their place of employment.  Doing so would obstruct the defendants’ access to those documents.  Also, in the healthcare context, removing a patient’s medical chart certainly seems to show an utter disregard for the rights of the individual patient.

I would like to thank VTLA for inviting me to write the article and especially Virginia lawyer Richard Armstrong for his work on behalf of VTLA.

 

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Virginia Fraud Against Taxpayers Act Amendments for 2018

By Zachary Kitts on March 30, 2018 in , , ,

Virginia Qui Tam and False Claims Act Lawyers

 

 

 

 

 

Virginia Fraud Against Taxpayers Act Amendments for 2018

I am pleased to announce that important changes to the Virginia Fraud Against Taxpayers Act were made in the 2018 legislative session.  The legislation — SB487 — was sponsored by state Sen. John Edwards (D-Roanoke) and passed both houses of the General Assembly unanimously and was signed into law by the Governor.  These updates were necessary and important because, as reported previously, penalties under the federal False Claims Act increased back in 2016, but there had been no corresponding increase to statutory penalties under the VFATA.  (As regular readers know, the federal False Claims Act and the VFATA both have treble damage provisions in addition to civil penalties in set amounts).

In order for the Commonwealth to qualify for an enhanced share of its Medicaid recoveries our VFATA must match the federal FCA in certain ways; while a discussion of the specifics is beyond the scope of this blog post, regular readers are familiar with the criteria.  In a nutshell, the VFATA must be at least as powerful as the federal FCA, which would include the amount of the civil penalties.

Now you might think amending the VFATA to match the federal FCA would be a no-brainer — the rewards of having a state statute that matches the FCA amount to tens of millions of dollars in an average year in Virginia and it is as close as a state ever gets to free money.  Moreover, Virginia has a long and proud tradition of vigorous law enforcement, which includes a General Assembly that regularly gives the men and women of law enforcement the tools they need to do their jobs.

That being said, Virginia also boasts a very pro-business environment; I therefore did not consider legislation raising the penalty range to be a sure thing.  At first blush, the optics are kind of harsh.  For a number of years now the penalty range has been a minimum of $5,500 and a maximum of $11,000; the General Assembly appeared happy — and comfortable — with that.  SB487, however, raises the range to a minimum of $10,957 and a maximum of $21,916; I imagined a great weeping and wailing from the Chamber of Commerce at the mere suggestion of such an increase.

And of course the legislative process at any level is at best an unsure thing.  Once legislators start tinkering with something, you never know where you will end up.  Amendments can be made by any one of the 140 legislators; and those amendments can range from very unhelpful to disastrous.  Hopefully, this year’s smooth sailing means our Virginia Fraud Against Taxpayers Act has found secure footing in the halls of the General Assembly, but it is certainly best to remain vigilant.

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