Virginia Fraud Against Taxpayers Act case filings: The first “Notice of Declination” ever filed under the Virginia Fraud Against Taxpayers Act

Virginia Qui Tam and False Claims Act Lawyers






This will mark the third blog post in our occasional series dealing with filings under the Virginia Fraud Against Taxpayers Act from across the Commonwealth.  In previous posts, I shared the first complaint filed under the VFATA, along with the first “Notice of Intervention” ever filed by the Office of the Attorney General in Commonwealth of Virginia ex rel. Va. Turf Management v. Resolute, et al.

As a recap, and because this blog is intended to be an introduction to qui tam practice, cases proceed in the following manner:

(1) a private party with evidence of wrongdoing hires private counsel, assembles his or her evidence with their counsel, prepares a lengthy, detailed disclosure of all of the material evidence they have, and submits this disclosure to the Virginia Office of the Attorney General. The party initiating the action is often called the “relator” instead of “plaintiff.”  At this time, of course, the entire case is not to be discussed with anyone outside the Office of the Attorney General and the relator’s counsel.  To do so could derail the entire case.

(2)  After serving the disclosure statement and all of the evidence in a relator’s possession, the relator, through counsel, files the Complaint under seal in the appropriate Circuit Court.  See my earlier posts on filing under seal for more information here.

(3) The sealed Complaint is served on the Office of the Attorney General, who will then have 120 days to investigate.  At the end of the 120 day period, the Commonwealth with do one of three things.

The three choices of the Commonwealth are to either file a “Notice of Intervention” (which means that the AGs office will take over prosecution of the case) or the Commonwealth can move to dismiss the entire case, on the grounds that the Complaint is not well-founded, or for some other reason.  Finally, the Commonwealth can file a “Notice of Declination.”  If the Commonwealth files a Notice of Declination, it means that they are not going to take over prosecution of the case, but that the relator and his counsel should be allowed to prosecute the case on behalf of the Commonwealth as well as on behalf of the private relator.

As noted earlier, it was not until last year that the Commonwealth filed its first notice of declination, which required an Order to unseal the case and issue the summonses, which you can view here.  This is my case, and it is still in litigation, so I am somewhat limited in what I can say here, except that I hope this contributes to the public understanding of the statute.

Virginia False Claims Act Lawyers



Rebuttal to D.C. Examiner’s so-called “Editorial” of May 6, 2008

While I am as big a fan of the D.C. Examiner as anyone–and I especially enjoy the work of William Flook, one of their staff writers–I cannot let the blather that was passed off as an editorial yesterday stand without comment.

Of course, I realize that editorials are specifically intended to take controversial positions on pressing issues of the day.  Editorials are intended to spark letter writing, discussion, and debate.  Moreover, there is no doubt that the False Claims Correction Act of 2007 is among the pressing issues of the day, regardless of whether you agree or disagree with it, so it is fair game for editorial writers. 

My problem–and the reason I label the editorial as blather–is not that the article takes a position I disagree with.  The article yesterday is blather because it is not an editorial at all.  In fact, the article yesterday does a grave disservice to the art and tradition of editorializing in the American press. I would have enjoyed reading a well-written, intelligent editorial raising good arguments against the False Claims Correction Act–although I would still reserve the right to blog in response. 

The simple fact is that this editorial was written by someone without any understanding at all of basic legal terminology and basic legal concepts–never mind the political history and economics of the False Claims Act.  It was obviously written by someone with an obvious bias who was not concerned with being taken seriously by educated readers–in other words, someone with no business writing editorials for a D.C. area newspaper.     

First, the author’s complete ignorance of basic legal terminology is offensive.  The article consists of 408 words total, and the words “class action” appear no less than seven times.  This is complete stupidity, because the FCA does not, never has, and never will, have anything to do with class actions.  Rather, I mention this first because it shows the author’s obvious ignorance, and highlights his or her efforts to trot out the old familiar terminology instead of actually contributing something to the debate.  Any further discussion of this logical error would quickly devolve into dry legal stuff, so I will move on. 

Second, the politics and history of the False Claims Act was profoundly botched. The author fails to recognize that the FCA is a bipartisan issue that crosses party lines.  The author refers to Sen. Grassley (R-IA) and Sen. Specter (R-PA), both Republicans, as if they were turncoats who are hurting their own party in an effort to cater to “plaintiffs lawyers.”  (By the way, the phrase “plaintiffs lawyers” is used no less than eight times in the 408 word essay.) 

Leaving aside the fact that the FCA enjoys bipartisan support, Republicans have often been at the forefront of the FCA.  The primary proponent of the original statute was Abraham Lincoln, the very founder of the Republican Party.  In fact, the FCA was known for years as “Lincoln’s Law.”  In 1986, Ronald Reagan breathed new life into the FCA by signing the 1986 FCA amendments.  John Ashcroft, the first Attorney General under President Bush, was a zealous advocate for the FCA–and he was in no way in favor of class actions or plaintiffs lawyers.  These are just two examples that occur to me off the top of my head–the list could go on and on. 

The most offensive part, however, is the following: 
   The details [of the FCA] are a bit abstruse; what’s important is that the bill would enrich 
    the class action plaintiffs’ bar, while encouraging witch hunts against businesses 
    for alleged fraud that in most cases doesn’t even exist.

Fraud against the federal government doesn’t exist?  The author obviously has no clue–about government contracting, healthcare, social security, the budget process, politics, or anything else.  I wonder why the Department of Health and Human Services bothers to publish all of those work plans for fraud investigations if there is no fraud?  Why do we even have an Office of the Inspector General at all?  Why do we have so many criminal laws criminalizing Medicare and Medicaid fraud if there is so little fraud? 

And then I saw the next page, and everything became clear.  The next page features a quarter-page advertisement from the U.S. Chamber of Commerce and the Institute for Legal Reform, two voices against the FCA.  Obviously, this ignorant editorial was quickly written to pander these deep-pocket advertisers, whom the D.C. Examiner can scarcely afford to lose.  

I cannot resist the urge to throw in a jab at the U.S. Chamber of Commerce here.  Government, in all of its forms, does not create wealth; rather, government redistributes wealth.  A large part of politics today turns on the who, where, when, why and how the wealth of the American people is redistributed.  Players like the U.S. Chamber of Commerce, I think it is fair to say, are generally against increased government, and in favor of the privatization of government functions. 

The U.S. Chamber of Commerce would, I think, agree with me that private industry is, as a rule, more efficient and cost effective than government.  So I find it interesting that the U.S. Chamber of Commerce protests so vehemently against the privatization of law enforcement by statutes such as the FCA. 

Could we not get more efficient and cost effective law enforcement through privatization?  You bet, and that is why we have laws such as the FCA.  The U.S. Chamber of Commerce is only in favor of some privatization, however, and they are all in favor of redistribution of wealth, so long as the money is redistributed to business.  

The False Claims Correction Act of 2007, like everything in civil society, is and should be the subject of intelligent debate and discussion.  The D.C. Examiner’s Editorial of May 6, 2008 contributes nothing to the public debate about the False Claims Correction Act.  Moreover, by trotting old familiar emotion-laden words like “class action” that have nothing to do with the FCA, the editorial became nothing more than a rant–and a pandering one designed to keep a deep pockets advertiser happy, at that. 

What a shame.

Zachary A. Kitts
Cook & Kitts, PLLC


The Utility of Private Law Enforcement: Academic Support from the University of Chicago

Virginia Qui Tam and False Claims Act Lawyers


An article published by two professors at the University of Chicago should be of some interest to readers of this blog.  See, Blowing the Whistle: Which External Controls Best Reveal Corporate Fraud?

The link is to a newsletter distributed by the University of Chicago and not to the paper itself.  The sub-title of the linked article says, “New research suggests that the best way to promote fraud detection is to extend the Federal False Claims Act to corporate fraud.”  At the risk of sounding snobby, I would like to point out that is not, strictly speaking, an accurate way to conceptualize what the study says.

The Federal False Claims Act, of course, applies to “any person”–whether a natural person, a corporation or other limited-liability entity, or an unincorporated entity, or any combination thereof–who makes a false claim to the government for money.  The law levels the playing field for the government by removing the more onerous burden of proving fraud — instead, one needs only to prove that a party made a claim to the government that it new was false.

But the real power of the statute lies in its qui tam provisions, which give any person with non-public knowledge of a false claims being made to the government the right to retain a lawyer and prosecute the case in conjunction with the United States Department of Justice (or, under our VFATA, the Office of the Virginia Attorney General).  

So, what the subheading means to say, I think, is that the unique qui tam structure of the Federal False Claims Act–which allows private citizens to prosecute cases on behalf of the government and calls for a percentage of the government’s recovery to be paid to the party who blew the whistle on the fraud–should be extended to the corporate governance sphere.

In other words, private citizens should be deputized in the corporate world.

And thus the article strikes upon one of the themes of this blog:  the utility and effectiveness of private law enforcement generally.  We do not need to go so far as qui tam to see that private law enforcement is effective.

At any rate, check out the study, it is worth a read.

Virginia False Claims Act Lawyers


A Brief History of Qui Tam Litigation Under the Virginia Fraud Against Taxpayers Act

One of my stated purposes in starting this blog was to create interest in the Virginia Fraud Against Taxpayers Act and in qui tam practice in general.  In order for statutes such as the Federal False Claims Act and the Virginia Fraud Against Taxpayers Act to achieve their goals, it is necessary to build a public-private partnership between qui tam attorneys in private practice and our counterparts in the Virginia Office of the Attorney General and the United States Department of Justice. 

Today’s blog will focus on the history of litigation under the VFATA since January 1, 2003 when it became law.  I have attached to this entry a Mixx Delicious Digg Facebook Twitter


Blog Review and Comments: Lean and Mean Litigation Blog

I recommend everyone interested in this blog check out Stewart Weltman’s Lean and Mean Litigation blog.  While it does not address qui tam or false claims practice in particular, its focus on efficient litigation practices is invaluable to those interested in qui tam practice.

Weltman’s blog ranges over a wide variety matters relevant to trial practice, from effective deposition techniques to the psychology of litigation, but in my mind one point is woven throughout his blog: in litigation, just like in any other competitive professional endeavor, lawyers who want to win cases focus on the fundamentals, because they know that the case is won or lost on those basic elements of this profession. 

By that I mean the following.

People who really know football will agree, I think, that every football team in the NFL has basically equal talent.  I know, not every quarterback is Dan Marino, and not every running back is Barry Sanders, but no one gets into the NFL without having a rare combination of skills and abilities, and on any given day, any team in the NFL has the ability to beat the daylights out of any other given team.

On the other hand, if you matched the very worst professional team against the very best Division I college team, I would put my money on the pros, and I think most people would agree with me.  The disparity in skill and ability would be too great for the college team to compete.  

But in a competition between two professional teams, the side that executes better on the fundamentals will and does win.  If an NFL team with 12 straight losses plays an undefeated team, and the undefeated team proceeds to throw three interceptions and fumble the ball twice, they are almost certainly not going to win.  

The legal profession, in my estimation, is more like the NFL.  There are certainly a wide variety of skill levels present in the legal community, but at the end of the day anyone with a law license and a little experience can successfully get a case resolved against the best there is if they focus on the fundamentals, avoid sloppy mistakes, and work hard. 

I have never met a lawyer that was not intelligent enough to handle a case well.  I have met many, many lawyers who were too lazy to handle a case well.  I have heard that the three most feared words in any lawyer’s vocabulary are “pro se litigant.”  I can see the logic behind that, but I submit that the words “lazy opposing counsel” are right behind pro se litigants. 

A lazy opposing counsel who fails to take the time to understand his or her case fails to be able to accurately assess the situation, fails to work with the other side in narrowing the issues for trial, and fails to be of any use whatsoever to his or her client.  In my view, they also fail to live up to their oath as officers of the Court.

At any rate, if more people litigated cases the way Stewart Weltman describes, disputes between parties would be resolved more efficiently, litigants would spent less money on litigation, our court dockets would be less crowded, and life as a litigator would be much easier.  Please check his blog out.

Zachary A. Kitts
Cook & Kitts, PLLC       




False Claims Corrections Act of 2007 sent to the full Senate

Senate Bill 2041, also known as the False Claims Act Corrections Act of 2007, has received overwhelming bipartisan support from the Senate Judiciary Committee, which has reported it out to the full Senate for consideration.

    “This is common sense legislation that we expect to sail through the House and Senate,” said Jeb White, President of Taxpayers Against Fraud.  “This bill has broad bi-partisan support. It’s hard to be opposed to building a better rat trap to catch corporate cheats, chiselers, and con artists.”

   Proponents of S. 2041, note that the new bill clarifies the existing scope of False Claims Act liability, while closing a small number of loopholes that have allowed companies to steal taxpayer dollars with impunity. Specifically, S.2041 would:


  •     Clarify that False Claims Act liability protects all federal funds;

  • Solely vest the Government with the power to dismiss whistleblower-filed False Claims Act lawsuits that are based on public allegations;

  • Remove the confusion over the statute of limitations period by adopting a straightforward 10-year period;

  • Explicitly clarifies that the False Claims Act applies to those who discover an overpayment and decide to pocket the funds; and provide strengthened employment protection for whistleblowers.

     S. 2041, and its analog in the U.S. House of Representatives, is supported by leadership in both parties, including Sen. Charles Grassley (R-IA), Senator Richard Durbin D-IL), Senator Patrick Leahy (D-VT), and Senator Arlen Specter (R-PA).

    More Good news to follow!    


An Open Letter to Bob McDonnell and Ken Cuccinelli (as well as all other Potential 2009 Candidates for Attorney General of Virginia)

Now that Senator Cuccinelli (R-Fairfax) has announced his intentions to run for Attorney General of the Commonwealth next year, I figured the time was right for this open letter.   

Sen. Cuccinelli has a sterling opportunity before him to embrace the Virginia Fraud Against Taxpayers Act and make it part of his campaign.  While Bob McDonnell has silently taken steps to support and strengthen the VFATA and the world-class attorneys in his office that prosecute these matters, he has failed to accept the credit for it publicly for reasons that escape me. 

Since taking office as Attorney General, Bob McDonnell has improved upon a Medicaid Fraud Control Unit that was already first-class.  The OAG obtained approval for the Virginia Fraud Against Taxpayers Act from the United States Department of Health and Human Services Office of the Inspector General, thus qualifying Virginia to relieve an additional 10% of the recoveries from all Medicaid fraud prosecutions.  See my previous post: The Deficit Reduction Act of 2005 and the Virginia Fraud Against Taxpayers Act: One Year Anniversary.     

On Bob McDonnell’s watch, Virginia has recovered literally hundreds of millions of dollars using the VFATA, and before his term is out the number will probably have a “b” after it (i.e., a billion dollars).   

So why, with his campaign for Governor in full swing and with the Commonwealth pressed for money in this economic downturn, has McDonnell not been talking about the VFATA?  I can’t ever remember a politician before Bob McDonnell who failed to take credit for his work, especially when he or she was seeking election to a higher office.   

There have been mentions, of course.  An excellent /files/116785-109034/CVS_Settlement_Agreement.pdf”>settlement with CVS Pharmacy on the order of $37 million dollars, of which more than $15 million went to several states.  One of these states was Virginia.

Press releases by the various state Attorney Generals indicated that Kentucky relieved $1.36 million; California received $3.4 million; and Massachusetts received $3.7 million. States without a False Claims statute certified by the HHS Office of the Inspector General received the following: North Carolina, $900,000; Missouri, $929,987, and Maryland, $830,490.

Noticeably missing from the list is Virginia.  On the day the CVS settlement was announced, most state AGs–being the elected officials that they are–did press releases to announce the good job they had done for their respective states.  Virginia’s Attorney General, however, did a press release to announce the continuation of an anti-gang initiative in the Shenandoah Valley.

I could not find a press release from the OAG indicating that this settlement even took place.  With our OIG-approved Fraud Against Taxpayers Act, Virginia’s share will of course be more than Maryland’s share–which would put the recovery in the seven figures–but my point is something else entirely.

I’m not trying to knock anti-gang initiatives, and I am certainly not trying to knock the Shenandoah Valley.  What I am pointing out is that the OAG could and should do a better job of promoting its successes using the VFATA.  Such efforts could lead to more interest on the part of the Virginia Bar in the VFATA, and in turn to more information flowing into the OAG.

The OAG did press releases for a Pennington Gap dentist who pled guilty to Medicaid fraud, and also for a Giles County physician who pled guilty to similar charges.  Meanwhile, the Commonwealth has recovered tens of millions of dollars from big pharmaceutical companies as part of nationwide settlements, without so much as a whisper.  

I find it interesting that McDonnell would want to trumpet small cases against individuals for stealing money from Medicare and Medicaid, and ignore the tens of millions recovered from large pharmaceutical companies who stole money from the Commonwealth. 

To do so ignores the hard work and dedication of Virginia’s world-class Medicaid Fraud Control Unit and the entire Office of the Attorney General.  But it also ignores the possibilities for the Commonwealth if civil case filings under the VFATA were increased. 

It is true, of course, that McDonnell is hostile to trial lawyers, and that he can be said to be in favor of tort reform.  I must say, however, that if his hostility to trial lawyers plays any role in his failure to promote the VFATA, he should make it clear now. 

Meanwhile, Sen. Cuccinelli, if you are serious about not only winning the Office of Attorney General, but also about fulfilling your duties, you should make the Virginia Fraud Against Taxpayers Act one of your chief campaign planks. 

If you don’t, someone else surely will.
Zachary A. Kitts


Qui Tam Practice in Virginia: Filing Under Seal in Virginia Circuit Courts

    One issue specific to qui tam practice in Virginia state courts is the structure of the Circuit Courts and the implications of that structure for filing the complaint under seal.  Unlike in states such as Maryland, Virginia has no uniform case management system in use in every Circuit Court.  

    The Clerk of the Court in Virginia is a Constitutional Office.  The Clerk is elected every eight years in a county-wide election, and is free to implement whatever case management system he or she feels appropriate, with virtually no oversight from the Virginia Supreme Court.  Given the disparities in size and wealth between the various counties in the Commonwealth, it is no surprise that the system that works quite well in Craig County might not work as well in Fairfax County, and vice versa.  Given the sparsity of the statute’s use, those preparing to file a case under the Virginia Fraud Against Taxpayers Act should be aware that there almost certainly will not be a mechanism in place for filing a qui tam case under seal. 

    This is not a problem that should be taken lightly.  The case absolutely must be filed under seal in order to comply with the statute, and that automatically makes things like generating a case number (while not publicly disclosing the name of the parties) and generating a receipt for the filing fee (again, without publicly disclosing the names of the parties) fairly complicated.  Again, the answer to these problems will be different in each Circuit Court, further complicating the issue.  
    On the other hand, because the Clerk is an elected officer, they do tend to be more responsive and helpful than a non-elected official might be.  When I filed the first Virginia Fraud Against Taxpayers Act case in Fairfax County, I found John Frey and his staff to be extremely professional and helpful.  My advice is the following: 

    (1) Be sure you call the Clerk personally and give him or her a heads up about a week in advance.  This gives them time to read the statute and think it over, and consult with Judges, members of their staff, and so forth.  

    (2) You must file the case with the Clerk in person, and make an appointment in advance to do so.  Walk the Clerk’s Office through the whole procedure, and make certain that they understand that the normal procedures for sealing cases are not relevant to this case, because even the names of the parties cannot be made public.  

    (3)    Politely request that the Clerk of Court either become the point of contact, or designate one specific person to be the point of contact.  This is crucial, because after the complaint leaves your hands, if one specific contact person is not assigned you may find yourself unable to get any information about the case.  Remember that whatever case management system the Clerk’s Office has in place works very well for them, but it is not designed to handle complaints filed under seal.     
    (4)  When the Court order unsealing the case is issued, go back and read direction number (3) above.  The standard processes the Clerk’s Office has in place to enter orders signed by Judges will not catch the order unsealing the case, and again, extra follow-up is important.  You need to double check that the case is actually unsealed, and I again recommend going there in person and asking to see the file (or searching the information on-line if your Circuit Court is one that is available on-line). I have heard antidotal evidence of a case or two in Circuit Courts being served on the defendants and actively litigated without having been formally unsealed.  Don’t let this happen to you.    

    (5)  Once the case is unsealed, make sure the summons are issued.  The rules of the Virginia Supreme Court call for summonses to be issued upon request by the plaintiff; the VFATA, on the other hand, calls for summonses to be issued upon a court order.  Thus, without follow-up, the summonses may not issue automatically.

    Once you have cleared these hurdles, litigation should, in theory, proceed just like any other case in Circuit Court. 

Zachary A. Kitts
Cook & Kitts, PLLC