The problem was especially acute for the Union. This of course was a direct result of the great advantage in material wealth enjoyed by the North. The Union army tried to purchase horses and got mules; when they purchased gunpowder they got sawdust, and so on. So I think that readers will find Shelby Foote’s treatment of this topic in his masterpiece The Civil War: A Narrative Vol. I quite interesting. In particular, Foote discusses problems related to General John C. Fremont and Secretary of War Simon Cameron. Take Fremont for example. Fremont served as the commanding Union General in the Western United States for a brief period during 1861. His command was brief primarily because of his megalomania and incompetence—a deadly combination if ever there was one—but there were other problems as well. Specifically Fremont had a graft problem. In fact more than $12 million disappeared from Fremont’s department during his brief three month stint in 1861. (That is more than $287 million in 2010 dollars.) Fremont was unable to account for this money – and Lincoln suspected that much of it had lined his own pockets and the pockets of his friends in the contracting business. In any event, then as now, a failure to be able to trace enormous amounts of money speaks for itself and Fremont was sacked as the war kicked off. Secretary of War Simon Cameron was another facet of the problem. In my estimation his problem is more typical of what we see in modern government. Foote writes: … for months [leading up to Cameron’s termination] there had been reports of waste and graft in the war department; of contracts strangely let; of shoddy cloth, tainted pork, spavined horses and guns that would not shoot; of the Vermont wholesaler who boasted, grinning, that “You can sell anything to the government at any price you’ve got the guts to ask.” 
Anyone who has ever googled the words “qui tam” or “federal False Claims Act” has certainly found the basic history of these concepts. In a nutshell, the history can be stated as follows: fraud on government coffers was rampant during the American Civil War (although Virginians do not find the name “Civil War” offensive, as a general rule we prefer the “War Between the States” which is more accurate.)
There is no new thing under the Sun … especially fraud, waste and abuse in government spending (and the need for the Virginia Fraud Against Taxpayers Act and federal False Claims Act)
Review of Significant 2011 Events for the Virginia Fraud Against Taxpayers Act
This was a significant year for the Virginia Fraud Against Taxpayers Act and for qui tam litigation in Virginia, so as the year winds down it only seems fitting to review some of the key developments.
But you don’t have to take my word for it. Back in July Gibson Dunn published its 2011 Mid-Year False Claims Act Update2011 Mid-Year False Claims Act Update which is well worth a read.
In addition to an exhaustive treatment of false claims act legislative activity from each state, the Gibson Dunn talks about the 2011 amendments to our Virginia state false claims act. Additional coverage is given the Attorney General Cuccinelli’s intervention in the Bank of New York Mellon case earlier this year.
On a side note, I read various update-style newsletters from firms big and small across the country. The information published by Gibson Dunn is always top-notch, which is *not* something I can say for all of the law firm publications I receive….
More to follow in this year end-review.
Fairfax County Circuit Court Clerk John Frey Jumps Into the Attorney General Race
Important news in the Virginia Attorney General race came in late this week — Fairfax County Circuit Court Clerk John Frey announced that he would seek the GOP nomination for Attorney General.
The announcement came as a surprise to most, even those active in Republican circles in Fairfax County. As to Frey’s chances, there is an interesting analysis by the Not Larry Sabato blog which raises some good points in his favor. Perhaps most importantly, Frey was re-elected county-wide in 2007 election, and was the only Republican to do so in that election cycle.
Moreover, Frey’s knowledge of and success in retail politics should not be underestimated. He enjoys wide bipartisan support not only because he runs a tight ship at the Fairfax County Courthouse (which is important to every lawyer practicing in that Court) but also because more or less everyone who meets John genuinely likes him.
And on the topic of primary interest to this blog, the Virginia Fraud Against Taxpayers Act and qui tam litigation in Virginia, I can say for certain that Mr. Frey has more experience with the statute than the other candidates who have announced so far. I say that because filing a VFATA case in a Virginia Circuit Court is much more complicated than filing a normal civil action and I have personally filed several Virginia Fraud Against Taxpayers Act cases in Mr. Frey’s Court. Each time, he took the time to read the statute and prepare for the filing.
Even more important, John also understands the statute, and anyone who wants to properly do the job of Virginia Attorney General will need to understand it. Attorney General Cuccinelli has broken new ground in the use of the Virginia Fraud Against Taxpayers Act, but there remains much to be done.
This is shaping up to be a very interesting primary indeed.
More Candidates for Virginia Attorney General Jump Into the Fray
The 2013 race for Virginia Attorney General (which started last week) is now in full swing.
The first Republican to announce his intent to seek the nomination was Mark Obenshain, and he was quickly followed by Rob Bell and Dave Foster.
On the Democratic side, there have been murmuring that recently ousted Del. Ward Armstrong will seek the Democratic nomination, but nothing definite.
As a quick caveat, this blog is dedicated to the Virginia Fraud Against Taxpayers Act and to qui tam litigation in Virginia and elsewhere. As such, I have an obvious interest in who occupies the Attorney General’s office — but this blog is strictly non-partisan, and so a candidate from either party who will dedicate resources to fighting fraud on our state coffers will get my full support.
And how, you might ask, could a candidate do that? First and foremost, a candidate could do that by pledging to dedicate resources to the fight against fraud by establishing a special litigation unit in the office just to handle affirmative civil enforcement of the VFATA.
More to come….stay tuned
BREAKING NEWS: ATTORNEY GENERAL KEN CUCCINELLI TO RUN FOR GOVERNOR OF VIRGINIA IN 2013
It is that time again Virginia — the 2013 state-wide election cycle kicked off today with an “unofficial official” announcement that Virginia Attorney General Ken Cuccinelli is running for Governor of the Commonwealth in 2013.
Anita Kumar at the Washington Post (usually referred to in this blog as WaPo) has the scoop as does the Richmond Times Dispatch and others by now.
For the last year or so, Cuccinelli had said he intended to run for re-election as Attorney General. His intent in this regard was also consistent with other intelligence gleaned from the Virginia rumor mill. The theory ran that Mark Warner had decided to not run for re-election to the U.S. Senate in 2015 (with the ultimate intent of running for Governor of Virginia again).
So, Cuccinelli was rumored to be running for re-election to his current post in 2013, with an eye towards running for the open Senate seat in 2014. But not anymore.
This blog is of course non-political and is not affiliated with any political party. I support vigorous enforcement of *all* of the laws of the Commonwealth, and will support any candidate for office who makes affirmative civil enforcement of the Virginia Fraud Against Taxpayers Act a priority.
A handful of political operatives have dropped hints about a potential run for AG in 2013, and as new developments occur we will keep readers posted.
SO CLOSE AND YET SO FAR AWAY: THE ON-GOING SAGA OF MR. MCCANN AND HIS FAILED EFFORTS TO BRING STATE FALSE CLAIMS ACT CASES IN FLORIDA AND CALIFORNIA AGAINST BANK OF AMERICA FOR FAILURE TO ESCHEAT UNCLAIMED PROPERTY
Today’s post is about a series of unsuccessful qui tam cases brought by a former Bank of America employee. Both cases were brought pursuant to state false claims act statutes (first in Florida and then in California) for an alleged failure on the part of Bank of America to escheat uncashed checks to the state of the payee’s last known address. The complaints in both cases alleged that BOA failed to pay to the State amounts that should escheat as abandoned or unclaimed property. Let me say at the outset that this post is not intended to embarrass or to criticize anyone, but rather to show how someone can be so close—and yet so far away—to bringing a valid cause of action under a state false claims act statute. Mr. McCann brought his first qui tam case in the State of Florida under the Florida False Claims Act on or about 2006. In that case, he alleged that Bank of America had failed to escheat unclaimed property belonging to Florida residents. Such amounts should have escheated to the State of Florida, according to McCann. STATE ESCHEAT STATUTES AND STATE FALSE CLAIMS ACTS When someone mails a person a check that is never cashed, after a certain set amount of time the check becomes “unclaimed property.” The Uniform Disposition of Unclaimed Property Act, which has in some form been enacted in all 50 states, requires unclaimed personal property to be delivered to the state of the owner’s last known residence if the “property holder” (i.e., the person who finds themselves in possession of property belonging to someone else) has a last known address for the “property owner” (i.e., the person owning the property.) Just about anyone could become a holder of unclaimed property. For example, if a person has a party at his or her house and afterwards finds an expensive piece of jewelry left behind by a party-goer, the home owner has just become a holder unclaimed personal property. That scenario however is uncommon. What is more far more common is for a bank, a credit union, a retail store, etc. to find itself in possession of property belonging to someone else—someone who, for whatever reason, has not shown any interest in the property. When that happens, the “property holder” must deliver that money to the state of the last known residence of the property owner. But some companies choose not to do this, and instead treat unclaimed property as a revenue source. And that is where state false claims act violations occur. Every holder of property is required to file an annual report with the various states where they do business, and that report must list all of the unclaimed property. UNCLAIMED PROPERTY v. ESCHEAT One very technical but very important point needs to be made. Many sources call this “escheat” of unclaimed property, but the truth is that unclaimed personal property—unlike unclaimed real property—never truly escheats. That is because the states never take title to unclaimed personal the property. Rather, all 50 states simply become “holders” of the unclaimed personal property and it is held in perpetuity for the rightful owners. The state must make regular efforts to locate the rightful owners of the property and deliver the property to them. For that reason, most states have some kind of unclaimed property office that runs advertisements in newspapers, and maintain websites where people can search for their property. MR. MCCAN’S ALLEGATIONS Mr. McCann brought his case in The relator couldn’t point to any specific check however and couldn’t show for certain that the “clearing errors” (as he called them) resulted in any specific liability for unclaimed property to any specific state including but not limited to Florida. At best, his case alleged some errors that might have resulted in some unclaimed property that was owed to someone, somewhere. But he couldn’t point to any specific check to any specific person for any specific sum. 
Both cases failed. In my legal opinion—as someone who has successfully prosecuted such cases—McCann did in fact fail to state a claim, and the result in both cases was correct.
A little background on the escheatment of unclaimed property and state false claims acts will be helpful.
Therein lies the problem with that type of allegation. In order to be unclaimed property, the check draft or other instrument must meet certain requirements–for example, the check or draft be for a specific amount of money and must be payable on demand.
After the Florida case was dismissed, Mr. McCann tried again in California. Proceeding in the name of the State under the California False Claims Act (California Govt.Code, § 12650 et seq.). Again his case was dismissed for failure to state a claim.
CASES STATING A CLAIM FOR FAILURE TO ESCHEAT PROPERTY
Numerous other relators have however succeeded where the relator in this case failed, including here in State of California ex rel. Stull v. Bank of America
So yes, it is quite possible to bring a false claims act cases based on a failure to escheat unclaimed property, but as with every qui tam or False Claims Act case, the devil is in the details.
Analysis from Thomson Reuters News & Insight — State False Claims Acts Stand Tall Around the Country
Thomson Reuters reporter Andrew Longstreth did an article today on the failure of states like Kentucky and Pennsylvania to pass state false claims statutes — as with most reports in this arcane area of law, Mr. Longstreth makes a few errors but on the whole this is a solid piece and worth a read.
The U.S. Small Business Administration Gets Serious about Fraud and False Claims in SBA Small Business Programs
Late last week the U.S. Small Business Administration issued a new /files/116785-109034/SBA_frau_10_27_Memo.pdf”>Congressional Hearing Memo from this week points out, the government actively seeks — and indeed relies on — private citizens to come forward with evidence of fraud on the government. Such private citizens can be handsomely rewarded under the federal False Claims Act.
Remember the civil investigative demand served on UVa ?
This week Julian Walker over at The Virginian-Pilot brought us all up to date on an old story–namely the civil investigative demand served by Attorney General Ken Cuccinelli on the University of Virginia.
As readers may recall, Attorney General Cuccinelli, in a routine grant fraud investigation, served a CID University of Virginia seeking records related to Michael Mann’s climate research. (That is, Michael Mann the academic climatologist, not Michael Mann the highly-acclaimed Hollywood director and TV producer.)
UVa pushed back, and tried to turn this case into something other than what it is — that is, they made it into something other than a routine grant fraud investigation under the Virginia Fraud Against Taxpayers Act…which is something defendants often try. Long story short, the case is now with SCOVA, and the news is that it will not he heard this year.
But here is the real news — General Cuccinelli has broken so much new ground since then that the CID is no longer the talk of the town….
TANSTAAFL: There Ain’t No Such Thing As A Free Lunch, Kentucky. No Kentucky False Claims Act Means No Intervention…
This week the State of Kentucky learned the oldest wisdom in the world — There Ain’t No Such Thing As A Free Lunch….
Kentucky has no state false claims act, and so they don’t get to reap the benefits that come to those states that pass a state false claims act. That includes, of course, all of the health care savings that come to a state via the Deficit Reduction Act of 2005, but it also includes non-health care fraud benefits.
For example, Kentucky can’t join a U.S. lawsuit claiming Education Management Corp., the nation’s second-largest for-profit college chain, used improper recruitment practices to secure more than $11 billion in student aid.
The United States Department of Justice and four states (each of which has a state false claims act of course!) filed a 16-count complaint alleging EMC violated rules for colleges that get U.S. student grants and loans. The case was originally filed by a qui tam whistleblower in U.S. District Court in Pittsburgh.
The Attorney General of Kentucky tried to get in on the action in August of this year, and an opinion issued this week by U.S. District Court Judge McVerry denied their attempt. He stated point blank that “Kentucky has no state false claims act” as one of his chief reasons for not allowing the intervention.
Apparently more than $6 million in Kentucky state money was thus lost…. but the good news is that the legislative session is just right around the corner Kentucky–now do what you have to do.