Virginia Qui Tam Law

The Maryland House of Delegates hears testimony on the Maryland False Health Claims Act of 2010

zkitts@cookkitts.com (Zachary Kitts) — Wed, 10 Mar 2010 14:07:00 GMT

Today the Maryland House of Delegates heard testimony on the Maryland False Health Claims Act of 2010. WBAL's Channel 11 News covered the story, including a quote from yours truly.

The House Committee heard the testimony of three panels who supported the legislation. The first panel was led by Lieutenant Governor Anthony Brown, and the heads of several Maryland agencies. All testified enthusiastically in support of the bill, which is one of Governor O'Malley's primary legislative goals this year.

The second and third panels consisted of qui tam lawyers in private practice and several healthcare providers. The second panel consisted of Pat O'Connell (who is a former Assistant Attorney General in Texas), Dan Miller (who formerly led the Delaware Medicaid Fraud Control Unit), and Jeb White (CEO and President of Taxpayers Against Fraud). Finally, Peter Chatfield (from Phillips & Cohen) and I closed out the favorable testimony.

Importantly, the second and third panels each contained an actual, bona-fide healthcare provider who spoke in favor this legislation. I have always been of the opinion that most healthcare providers are honest, and that the dishonest few enjoy an unfair competitive advantage over everyone else. Personally, I would have a big problem with that if I were a healthcare provider, and I would think other healthcare professionals would agree.

The simple fact is that false claims act legislation levels the competitive playing field between the dishonest few and the vast majority of providers who are law-abiding. I only wish more healtcare providers understood that.

Overall, while the Senate seemed more favorably inclined towards our testimony a couple of weeks ago, I think the House Committee was receptive.

Several Delegates brought up the topic of a full Maryland False Claims Act, instead of a healthcare-only bill. Needless to say, I found their logic compelling.

I do find it troubling that the House appeared so open to the idea of amending HB-525. Given that one of the major goals of this whole thing is to get the statute approved under the Deficit Reduction Act of 2005 (and thus qualify Maryland for an extra 10% of Medicaid fraud recoveries), it makes no sense at all (at least to me) to start cutting stuff out of the statute, adding "improved" provisions, and so forth.

In the first place, a legislature should never try to reinvent the wheel, especially in an area of law in which they have absolutely zero experience. Such efforts are almost certain to result in a disaster, and of course the healthcare proponents know that. Their goal, of course, is to change the statute such that it fails to get approval under the DRA of 2005.

If the law fails to get DRA approval, it quite simply will not have the same dramatic effect on Maryland's healthcare budget. Then, in a couple of years, the healthcare people can come back to the legislature and say "You see, we told you this wouldn't work. Let's just get rid of this nuisance law."

To me, Virginia's approach makes the most sense--we copied the federal False Claims Act word for word, with the only difference being that in Virginia complaints must remain under seal for a period of 120 days instead of 60 days. (The only reason we made that one change was because most Virginia courts are reluctant to grant continuances as a general rule.)

If you copy the federal False Claims Act word for word, there is no doubt about your law passing muster under the DRA. But there is another very important reason to do this, in my opinion. Namely, when you copy a federal statute word for word, you send an important message to your state judiciary about your intentions with this piece of legislation, because you incorporate the 147 year history of the federal False Claims Act.
Without the clear guidance that comes from 147 years of case law, you run a greater risk of having a state court make bad law, especially in the early stages.

I would like to thank Lt. Gov. Brown and his staff, as well as Inspector General Tom Russell and his staff for all of the hard work they have put into this--and make no mistake about it, they have worked very hard. If we get the law passed in Maryland this year, it will be because of them.

Notice I say "if it passes this year" because I now have no doubt that eventually every one of the 50 states will have a state false claims act, including Maryland. If the law does not pass this year, the question is not whether Maryland will ever have a false claims act, but rather how much money will be lost before she does.

Connecticut becomes the 26th state to pass a state False Claims Act

zkitts@cookkitts.com (Zachary Kitts) — Tue, 09 Mar 2010 00:09:00 GMT

Connecticut becomes the 26th state to pass a state False Claims Act.

My apologies for missing this, but in December of 2009 Connecticut became the twenty-sixth state to pass a state false claims act.

The Connecticut statute--which contains a qui tam provisions and the other requirements to meet the requirements of the Deficit Reduction Act of 2005--is available here.

We are now, therefore, officially over the half-way mark towards the ultimate goal of having a state FCA in every one of the fifty states. Every new state to add a false claims act gives lie to the frivolous arguments we are hearing in Maryland and elsewhere about these statutes.

What is interesting is that while some states see massive legislative battles--complete with high-paid lobbyists and the coordinated campaigns of disinformation those folks bring with them--other states are able to enact this legislation with very little difficulty.

26 states down, and 24 to go....

Important New Opinion from the U.S. District Court for the Eastern District of Virginia

zkitts@cookkitts.com (Zachary Kitts) — Wed, 03 Mar 2010 17:50:00 GMT

An important opinion was issued today by Judge Cacheris in the U.S. District Court for the Eastern District of Virginia concerning qui tam litigation.

By way of background, the first step in a qui tam case under the federal False Claims Act is to disclose the claim by serving a written disclosure memorandum on the Attorney General of the United States and also on the U.S. Attorney for the district in which the relator intends to file. The FCA requires this written disclosure together with "substantially all material evidence and information the person possess..." in 31 U.S.C. 3730(b)(2).

An issue that comes up from time to time is the discoverability of these disclosure statements once the case is unsealed and litigation begins. It is the general opinion of plaintiff-side qui tam lawyers that such disclosures are protected, and as such lawyers most include a paragraph on the first page along the lines of the following:

This disclosure memorandum is subject to the attorney-client privilege and the privilege afforded to attorney work product. This memorandum was prepared by attorneys for the relator for submission to the United States Department of Justice in anticipation of litigation, and is therefore also subject to the privilege afforded to communications between parties with a commonality of interest and/or the joint-prosecution privilege. Submission of this document to the United States Government is not and shall not be construed to be a waiver of any privilege or a waiver of any exemption from discovery of this document that otherwise applies.

Judge Cacheris' opinion holds that disclosure statements to the government are protected. Here, defendants did not satisfy their burden of demonstrating a substantial need for the factual information contained within the disclosure statement, nor did they demonstrate that they were unable to obtain the information contained in the disclosure by any other means.

As an aside, I have often wondered why some defense counsel are so very interested in the disclosure statement served on the government. Given the strict requirements federal courts have placed on FCA Complaints under Fed. R. Civ. P. 9(b) (namely, the allegations of the Complaint must be pled with particularity) there is normally not much difference between the disclosure statement and the Complaint filed under seal with the Court. Certainly, if a relator's counsel chooses to leave out of the Complaint any facts included in the disclosure, he or she does so at his or her own peril.

At any rate, congratulations to TAF member David Stone for his fine work. There is a split amongst the federal courts to consider this issue, and David's fine work helped to contribute one more decision in our favor.

March 2, 1863: On This Day in History...

zkitts@cookkitts.com (Zachary Kitts) — Tue, 02 Mar 2010 21:21:00 GMT

On March 2, 1863 the 37th Congress passed the federal False Claims Act, making today the 147th birthday of the statute.

And just think--after all that history, the best is yet to come!

The Virginia Supreme Court ends a series of misguided attempts to abuse the Virginia Fraud Against Taxpayers Act

zkitts@cookkitts.com (Zachary Kitts) — Mon, 01 Mar 2010 16:29:00 GMT

Last Thursday, the Virginia Supreme Court announced its opinion in Ligon v. County of Goochland, et al., in the process putting a stop to a troubling trend. In the last couple of years, a small number of plaintiff's lawyers have been attempting to convert the Virginia Fraud Against Taxpayers Act into a generalized whistleblower cause of action for wrongful termination on behalf of government employees.

The usual fact pattern for these ill-advised attempts is a government employee alleging that he or she was terminated for blowing the whistle on untoward activity at the state or county government level. In every case I am aware of--including Ligon's case--the allegations have been lodged against the employee's supervisor, who by definition has always been a state or county employee. I am aware of several such cases in various Circuit Courts of the Commonwealth.

The Virginia Supreme Court upheld the trial court, which had granted the defendant's demurrer on the grounds of sovereign immunity. Stated another way, the Commonwealth can only be sued when it has specifically waived its immunity. The VFATA most assuredly does not waive immunity to suit by an employee of the Commonwealth or one of its political subdivisions.

Of course, as readers of this blog are aware, when private-practice lawyers use the VFATA for the purposes for which it was intended, the successes are hard to refute. In very broad terms, the VFATA contains two categories of causes of action.

First, it provides a private right of action for any person with personal, first-hand knowledge of another person submitting false claims for money to the Commonwealth in any one of a number of ways. Because there is no requirement of personal damages, this part of the statute makes the private party and his or her lawyer a partial assignee of the Commonwealth's claim against the defendants (in other words, a qui tam provision).

As with the federal statute, government employees are only allowed to bring claims under this portion of the VFATA in very specific, very limited circumstances. Ligon did not try to assert a claim under these provisions in any event--that is, he did not try to assert a qui tam claim for a part of the Commonwealth's damages.

Rather, Ligon tried to make a claim under the second major part of the statute, which protects individuals who take steps toward bringing a claim under the qui tam provisions outlined above. These provisions are commonly called the anti-retaliation provisions, and they are present to one degree or another in most remedial statutes. Under federal False Claims Act case law, it is not necessary for such a person to actually file a qui tam action, nor is it necessary for such a person to use the words "qui tam" or "fraud" in order to fall under the statute's protective reach.

The VFATA was not, however, meant to protect Mr. Ligon, and I am very glad that the Supreme Court saw it that way.  I have several reasons for saying this. First, this was the first Virginia Supreme Court decision interpreting the VFATA, so there was always a risk that the Court would do some damage to the statute from the point of view of a qui tam lawyer.

Second, I hope that from this point forward lawyers in private practice will take the time to actually learn how to bring a real qui tam case, and not become distracted by misuses of the statute. As always, comments and/or questions are invited and appreciated.

Report from Annapolis on the Maryland False Claims Act

zkitts@cookkitts.com (Zachary Kitts) — Wed, 24 Feb 2010 01:44:00 GMT

I am just back from a full day in Annapolis where, I am pleased to report, resistance to the idea of a Maryland False Claims Act seems to be crumbling.

This year, two different versions of a state FCA were introduced in the Maryland Senate--one version, SB 279 was a health care only bill, and was introduced by Lt. Gov. Brown and Gov. O'Malley. Meanwhile, SB 187, which was introduced by Sen. Lenett and Sen. Raskin, is a full fledged Maryland False Claims Act.

You can read Lt. Gov. Brown's press release on today's Senate hearings here. I was invited up by Lt. Gov. Brown (along with TAF President Jeb White, Peter Chatfield of Phillips & Cohen, Pat O'Connell of Baron & Budd, and Daniel Miller of Berger & Montague), to testify in support of the Md FCA. In particular, I was asked to speak from the view of a private sector qui tam lawyer about Virginia's experience with the implementation of our own Virginia Fraud Against Taxpayers Act, and the public-private partnership that has thrived in Virginia.

Tom Russell, Maryland's Inspector General, and Ilene Nathan, the Director of Maryland's MFCU helped to guide us through the legislative session and prepared us for what we might expect.

We were honored with a private meeting with Lt. Gov. Brown himself. It was the first time I had ever met him, and I must say I was impressed both with the Lt. Gov. himself and with the work his office put into preparing for the hearings. Lt. Gov. Brown is a former Army aviator and the recipient of a Bronze Star. He continues his service in the Army Reserve to this day, and is the highest raking politician to have served an active tour of duty in Iraq. I definitely think Gov. O'Malley picked the right guy to handle this job.

By and large, the Senators all seemed pretty open to our testimony, and it definitely seemed like the health care lobbyists got the more hostile questions. It also seems like none of the Senators appreciated some of the exaggerations made by those folks.

The testimony of the healthcare lobbyists was also interesting because it drove home the power of qui tam whistleblowers. It seems the battle in Maryland has shifted for the healthcare lobbyists. The last two years, they focused on trying to prevent a Md FCA in any form; now, they seem to have shifted to trying to contain the "damage" from their point of view.

I say this because a number of the lobbyists now admit that a Maryland False Claims Act is needed--but they are focusing on trying force a compromise on to the qui tam provisions of any such law. Perhaps "compromise" is not the right word--they want Maryland to have a FCA without a qui tam provision, which would mean that an insider with first hand knowledge of fraud on the state government would not be able to come forward and prosecute the claim on behalf of the state.

Needless to say, a Maryland False Claims Act without a qui tam provision would be no good at all. It would not qualify Maryland for an enhanced percentage under the DRA of 2005, and it would not give Maryland law enforcement the tool it really needs--motivated insiders with first-hand knowledge of fraud on the government.

No one is quite sure when the actual Senate vote will be held. Meanwhile, the House of Delegates will hold hearings on March 10 on its own bill. Lets keep our fingers crossed.

Attorney General Ken Cuccinelli Breaks New Ground, and Comes Out of his Corner Swinging.....

zkitts@cookkitts.com (Zachary Kitts) — Sat, 13 Feb 2010 03:20:00 GMT

I am very pleased to announce that Virginia Attorney General Ken Cuccinelli has broken new legal ground in Virginia's fight against fraudulent claims on our tax dollars. To some of you, today's events may not that seem important, but to those of us in the qui tam legal community they are nothing less than a total shift in the way the Virginia Attorney General's office handles fraud.

Today, General Cuccinelli announced his intervention in a California qui tam case against JM Eagle manufacturing. For those of you new to this blog and to qui tam litigation, a false claims case is initiated by a relator who files a complaint under seal, and then serves it on the government, but not on the defendant.

This case for example was filed under seal in the U.S. District Court for the Central District of California, as there is a federal claim that gives the federal court jurisdiction. Because defendants also do business with most states, the complaint contains pendent state claims for each state with a state false claims act, including Virginia.

After service on the U.S. Attorney General and on the U.S. Attorney for the Central District of California, the government investigates, and then determines whether it will intervene or not intervene in the case. (The government has a third option, and that is asking the relator, or the court, to dismiss the case.)

Where the government intervenes, it assumes control of and responsibility for the litigation. When it does not, the relator assumes control of the litigation, subject to the government's supervision. The relator cannot settle the case without the government's approval, and the relator cannot dismiss the case without the government's approval.

This JM Eagle case is important because it represents the first time a Virginia Attorney General has intervened in a non-healthcare case in another state. Previously, the office had declined intervention and waited for the check to come in the mail. Even when a state does not intervene, it still receives a minimum of 70% of the money recovered, so that is not that bad of an option for the Commonwealth.

Still, the fact that Cuccinelli has decided to intervene signals a more assertive approach to this case specifically and to qui tam cases filed under the Virginia Fraud Against Taxpayers Act generally. As readers of this blog are aware, I have not been shy in the past about expressing my desire for an Attorney General that takes a more involved approach to these cases; thus, so far General Cuccinelli is getting a "A+" grade in my book, plus a gold star.

This comes on the heels of General Cuccinelli announcing the leadership of his administration. As I opined previously, his picks of Chuck James, Steve Buck, Duncan Getchell, and others to the top positions of his administration represents in my opinion the single most qualified legal team to ever head the Virginia OAG.

Finally, his office did a press release on the intervention decision. This may seem like an unimportant thing to some, but it is actually crucial. For law enforcement of any kind to be effective, people must have a healthy respect for it. Instilling healthy respect for law enforcement starts by making everyone aware that authorities do and will take action to enforce the law.

Hopefully, this will not be a flash in the pan, but rather will be the first steps toward a number of long needed overhauls in the way the OAG handles non-healthcare qui tam cases.

So far, so good.

Taxpayers Against Fraud Education Fund files amicus brief in ACLU et al. v. Eric Holder, et al. in the Fourth Circuit Court of Appeals

zkitts@cookkitts.com (Zachary Kitts) — Wed, 03 Feb 2010 17:11:00 GMT

Today, TAFEF filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit in the case captioned ACLU et al. v. Eric Holder, et al., 09-2086. A copy of the amicus is available here.

My name is on the brief, but the credit for it belongs to Marc Vezina of Vezina & Gattuso, LLC, and to Cleveland Lawrence and Jeb White from TAFEF.

Missouri's Medicaid Fraud Control Unit Ranked Number One in FY 2008, Despite Not Having a State False Claims Act

zkitts@cookkitts.com (Zachary Kitts) — Wed, 27 Jan 2010 17:51:00 GMT

Missouri Attorney General Chris Koster said today that Missouri has earned the distinction of returning more money to the public fisc through Medicaid fraud prosecutions than any other state in the nation. This is, however, only when the federal Medicaid grant to Missouri is considered: according to national data from the federal Department of Health and Human Services (HHS), the Attorney General's Medicaid Fraud Control Unit obtained $18.81 for every federal dollar received in federal fiscal year 2008.

The Missouri Attorney General's Medicaid Fraud Control Unit received a grant of $1,582,000 from HHS in federal fiscal year 2008, and used that funding to recover $29,753,505, for the return rate of $18.81 per grant dollar and the number one ranking nationally.

As a lawyer practicing in the area of qui tam litigation under the federal False Claims Act and the various state false claims acts, I would not be doing my duty if I didn't point out some of the puffery in General Koster's statement.

First, although Missouri does not have a state false claims act, it still benefits from the national cases filed by qui tam whistleblowers. Missouri particularly benefited from the national drug settlements in 2008, several of which were in the billions of dollars, and all of which were initiated by qui tam whistleblowers with personal, first-hand knowledge of the fraud.

Second, Missouri's achievement must be put in perspective. The total amount recovered by Missouri in 2008 was $29.7 million--when compared to Virginia's $650 million in 2007 using the Virginia Fraud Against Taxpayers Act, we see that Missouri's achievements become a little more humble.

General Koster said: "Efficiency of government is critical, particularly during these challenging economic times," Koster said. "Missouri's Medicaid Fraud Unit has used all tools available to aggressively investigate and prosecute Medicaid fraud, and return those stolen health care dollars to Missouri."

They may well have used all of the tools available to them, but they did not push for the most important weapon--a state false claims act with qui tam whistleblower provisions.

I must say that I find it strange that Koster did not mention qui tam whistleblowers as part of his equation--and he also didn't use this press opportunity to push for passage of a state false claims act.

General Koster is no doubt a very capable AG, and he no doubt has a very fine staff, but they need the proper tools to really be able to make a difference.

Below is the ranking of recovery rates per federal grant dollar spent:

RANK, STATE, PER GRANT DOLLAR

1.        Missouri $18.81
2.        North Carolina $18.38
3.        Tennessee $17.13
4.        West Virginia $15.69
5.        Ohio $15.38
6.        Maine $14.73
7.        South Carolina $14.25
8.        Minnesota $13.67
9.        Nebraska $11.36
10.       Georgia $10.79
11.       Texas $10.77
12.       Kentucky $10.13
13.       Kansas $ 9.21
14.       Massachusetts $ 9.18
15.       Indiana $ 8.92
16.       Oklahoma $ 8.83
17.       Washington $ 8.61
18.       New Jersey $ 8.07
19.       Vermont $ 8.02
20.       New Hampshire $ 7.52
21.       Oregon $ 7.34
22.       Maryland $ 7.27
23.       Pennsylvania $ 7.12
24.       Louisiana $ 6.83
25.       Florida $ 6.76
26.       New York $ 6.65
27.       Alabama $ 6.54
28.       Virginia $ 6.04
29.       Michigan $ 5.75
30.       California $ 5.70
31.       Illinois $ 5.55
32.       South Dakota $ 5.51
33.       Mississippi $ 5.17
34.       Connecticut $ 4.80
35.       Utah $ 4.56
36.       Iowa $ 3.99
37.       Wisconsin $ 3.91
38.       District of Columbia $ 3.69
39.       Colorado $ 3.66
40.       Rhode Island $ 3.40
41.       Arkansas $ 2.65
42.       Nevada $ 2.15
43.       Arizona $ 2.07
44.       Wyoming $ 1.96
45.       Hawaii $ 1.15
46.       Alaska $ 1.02
47.       New Mexico $ 1.00
48.       Montana $ .92
49.       Delaware $ .78
50.       Idaho $ .06

State Legislative Update for 2010

zkitts@cookkitts.com (Zachary Kitts) — Tue, 12 Jan 2010 17:24:00 GMT

Over the next several weeks, state legislatures across the country will convene and begin the 2010 legislative session. We will follow those states considering passing false claims-style legislation and provide updates where available.

In particular, on the watch list for this year are Maryland and Arizona, where there have been specific efforts to organize our folks this year.

Stay tuned.