As of yesterday, March 3, 2011, SB1262 was “enrolled” by the Virginia General Assembly!
An enrolled bill is the final printed version of the bill as passed by the House of Delegates and the Senate, signed by the Speaker of the House and the President of the Senate (the Lieutenant Governor) and transmitted to the Governor for his signature.
I also have a correction to make. Earlier, I had reported that Illinois was the first state to update its state false claims act to match the new federal False Claims Act. However, that was not correct.
It turns out, Illinois did not capture all of the federal amendments–so, as soon as Governor McDonnell signs Mixx Delicious Digg Facebook Twitter
The New and Improved Virginia Fraud Against Taxpayers Act is “Enrolled” And Sent to the Governor!
Stephen Kohn blogs about the ACLU lawsuit attacking the seal provisions of the federal False Claims Act
Last month the Whistleblowers Protection Blog did an excellent post following up on the ACLU’s attack on the federal False Claims Act. After the District Court’s dismissal of the ACLU’s lawsuit, the ACLU appealed the matter to the Fourth Circuit Court of Appeals. The matter has been fully briefed, and it was argued on
Sept. 20, 2010.
The folks at the National Whistleblower Center have been looking into the roots of the ACLU’s interest in qui tam litigation. The following is a quote from the Jan. 27, 2011 post on WPB:
The lead attorney who authored the principal appellate brief attacking the False Claims Act was Benjamin Sahl, an attorney who now works for Cowan, Liebowitz, and Altman. The Cowan firm represents numerous corporations which oppose the FCA, including pharmaceutical companies like Eli Lilly, Merck, and SANOFI–Aventis as well as financial groups like Morgan Stanley and Citigroup. These corporate interests certainly feel the dent in their pockets because of the False Claims Act, the safeguard for all whistleblowers. Corporations would like to see the FCA weakened.
However, these corporate interests did not directly sponsor the litigation. Instead, the case was filed in the name of three “public interest” groups, the American Civil Liberties Union, OMB-Watch and the Government Accountability Project. The financial donors who provided the tax-exempt donations that paid for the litigation were not revealed in court filings.
The urge to insert a little light-hearted fun into this serious situation–by saying something like “It has always seemed to me that most of the folks working for the ACLU were not capable of maintaining real jobs, much less jobs like that”–is overwhelming, but the fact remains that this is a very serious issue and there would be extremely detrimental results from all of this if the Fourth Circuit were to agree with the ACLU.
I believe the real roots of the ACLU’s interest in this lie somewhere else entirely–to lawyers practicing in this field, all (or almost all) of the cases cited by the ACLU in its complaint have one thing in common….
Many thanks to Stephen Kohn and Richard Renner at the Whistleblower Protection Blog for this post!
At any rate, stay tuned.
The Virginia Fraud Against Taxpayers Act is Amended to Match the Federal False Claims Act!
Last night, the both Houses of the Virginia General Assembly passed the most important piece of legislation in the 2011 legislative session–that is, the Virginia Fraud Against Taxpayers Act was updated and amended to match the Federal False Claims Act! The bill is SB1262, which was sponsored in the House by Del. Greg Habeeb and in the Senate by Sen. Jill Vogel.
I have been reluctant to blog about these amendments as they wound their way through both houses because we faced, for a short time, a potential disaster. I didn’t want any of the usual suspects who lobby against false claims act legislation to smell blood in the water…
In a nutshell, here is what happened: the amendments to the Virginia Fraud Against Taxpayers contained in SB1262 were accidentally amended in the Senate with potentially disastrous results, and became known as “SB1262E.”
I don’t blame anyone in the Senate, of course, because the error occurred through the sort of legislative oversights that happen in these rushed “short-sessions” of the legislature. Still, the Senate amendments created several problems with the statute. In a worst case scenario, SB1262E could have been read as turning the VFATA into a general fraud statute. In a best case scenario, SB1262E made the statute inconsistent on its face.
In the House of Delegates, however, Del. Greg Habeeb did a masterful job of re-amending SB1262 back into its original form and then steering the bill through the House of Delegates with only minor problems. The minor problem was this: exactly 14 Delegates voted against Del. Habeeb’s amendments to SB1262.
So each house of the GA passed different versions of the legislation, and if an agreement had not been reached last night reconciling the two versions, SB1262 and SB1262E would have wound up “in conference.”
But last night the Senate–in an inspiring act of bipartisan cooperation–agreed to re-amend the bill to its original form.
My hat is off to all those in the GA who worked so hard on this legislation, but thanks are especially owed to Del. Greg Habeeb, who took this bull by the horns–and in his first legislative session no less. That young man (I can call him a “young man” because he is almost three years younger than I am) is really going places folks, mark my words!
Of course, thanks is owed to state Sen. Jill Vogel and the other 35 state Senators who voted for fiscal responsibility, but I would like to especially thank Sen. Chap Petersen, who took the time to meet with Del. Habeeb and I a few weeks ago about the discrepancy between SB1262 and SB1262E.
So, Virginia becomes one of only two states to my knowledge who have updated and amended their state False Claims Act to match the new federal statute! (Illinois is the other state, I believe).
I blogged previously about the importance of these amendments, which will become law on July 1, 2011, but there will be more to come. Now, I am happy to say, it will be necessary for me to update and put together a second edition of my ebook on the Virginia Fraud Against Taxpayers Act…
On the topic of civil investigative demands issued by the Attorney General
As Virginia’s 2011 legislative session winds to a close, I am pleased to announce that two bills which sought to strip the Virginia Attorney General of his powers to issue civil investigative demands have failed to pass the House of Delegates.
Thus all eyes interested in the CID portions of the Virginia Fraud Against Taxpayers Act now turn to the Supreme Court of Virginia, which should be hearing oral argument soon on the AG’s appeal of a Circuit Court order quashing his civil investigative demand to the University of Virginia. The opening brief was filed (by the AG) on Dec. 14, 2010, and UVa’s response was filed in January.
In Virginia, as an aside, there is no appeal as of right–thus, the AG’s first battle will be in getting SCOVA to accept this case for appeal. It has been a number of years since SCOVA dealt with any CID issues, and even then, those CIDs were issued under a different law, so it is possible they will accept this one.
If they do, as I said a few weeks ago in an interview with a Charlottesville-area newspaper, the decision should be clear. (And by the way, I have every confidence in the world that SCOVA will get it right).
Although there isn’t much SCOVA precedent on the topic of CIDs generally and there is zero SCOVA authority regarding CIDs under the Virginia Fraud Against Taxpayers Act, we need only look to the case law from other states and from the United States Supreme Court to see how this one should turn out.
In fact, in an interesting aside, the state of Florida has perhaps the best-developed body of case law concerning the scope of CIDs. Florida courts have repeatedly held that the state attorney acts as a one-person grand jury in carrying out investigations into noncapital criminal conduct, and the state attorney must be granted reasonable latitude in that role. Doe v. State, 634 So.2d 613, 615 (Fla.1994).
In an earlier post, I made the analogy between a CID and a grand jury proceeding. Other Courts, including the United States Supreme Court, agree:
See, U.S. v. Morton Salt Co., 338 U.S. 632, 70 S.Ct. 357 (1950).
I could go on and on, but readers will get the point.
[The AG] has a power … which is not derived from the judicial function. It is more analogous to the Grand Jury, which does not depend on a case or controversy for power to get evidence but can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not. When investigative and accusatory duties are delegated by statute to an administrative body, it, too, may take steps to inform itself as to whether there is probable violation of the law.
See, U.S. v. Morton Salt Co., 338 U.S. 632, 70 S.Ct. 357 (1950).
I could go on and on, but readers will get the point.
Every state wants a False Claims Act, but not every state has the political will to pass one…
With all of the legislative activity this year on the Virginia Fraud Against Taxpayers Act, I haven’t had much of a chance to look at other state legislative activity. I ran across this article the other day, however, and I wanted to pass it along.
Apparently Ohio Attorney General Mike DeWine is pushing for an Ohio False Claims Act. That is good news in and of itself, but it appears he has a long way to go. In the legislative session that began in January, a False Claims Act bill was not introduced.
I have commented previously on this blog about states without false claims acts and the mysterious reasons why they fail to enact them. The federal government and 26 states have false claims act legislation–and no state that has even enacted one has gone back and done away with it. Much to the contrary–and I always say this in my testimony before various state legislatures–when you look at Virginia’s amazing recoveries and the success stories of other states, I can’t imagine what further evidence a legislature wants to see.
It looks like Arizona is at least one step closer to passing a FCA statute. There, a battle is currently raging in over passage of The Arizona False Claims Act. I don’t know how much it will help, but I was asked to send an email to one Rep. Farnsworth, so I did. Here is the text of the email I sent to Rep. Farnsworth this past week:
________________________________________________
Dear Rep. Farnsworth:
My name is Zach Kitts and I am writing about HB 2674 and HB 2629, which I understand constitute
the Arizona False Claims Act. I am lawyer in private practice here in Virginia, and I focus my
practice on state and federal qui tam litigation. I would be happy to speak with you about
this, or to submit further written support for the Arizona False Claims Act.
Simply put, passage of an FCA statute should be the first thing the legislature focuses on. I
have several reasons for saying that.
I wanted to tell you about our experience in the Commonwealth with false claims legislation.
In assessing how an Arizona FCA might work, there is no need for speculation. We have the
example of Virginia and other states.
In Virginia, our state FCA passed unanimously in 2002 and became law on Jan. 1, 2003. I can
say with certainty that the law is an unparalleled success. No one can argue with Virginia’s
results. In the three‐year period from FY 2007‐FY 2009, Virginia recovered on average more
than $228 million per year from our award winning Medicaid Fraud Control Unit. Virginia
recovers more than $5 million per employee of our state MFCU.
In this email, I will not spend too much time refuting arguments often made against this legislation. Instead, I would like to invite you to ask me if you have any further questions. I do want to assure you, however, that there is not a state in the Union that is more business-friendly than Virginia.
Virginia has no additional employment-related statutes of any kind. There is no class-action mechanism. We have a medical malpractice cap. We have a cap on punitive damages. In short, we have every sort of traditional “business-friendly” legislation there is.
My reason for saying all of this is that I can promise you that if false claims legislation created frivolous litigation, it would not have lasted eight years in Virginia.
I also want to emphasize for you the importance of matching the federal statute word for word. There is no reason to change anything from the current version of the federal FCA, and those states that have tried have
had disastrous results. For example, I was invited to Maryland last year by the Lt. Governor to help try and get the Maryland FCA passed. The Maryland legislature tried to tinker with the statute and make it “Maryland style.” (Their words, not mine).
Now, roughly a year later, it is most likely that no Maryland FCA cases have been filed under seal. That is because they tinkered with the statute and made it unattractive to qui tam lawyers in private practice. The importance of the qui tam provisions of state FCAs cannot be overstated.
Why are the qui tam provisions of the statute so important?
Compliance with the requirements of any law or rule are governed by the same general requirements. In no particular order they are as
follows:
(1) the likelihood that transgressions of the law or command will be detected;
(2) the likelihood that observed transgressions will be prosecuted;
(3) the substance of the behavior the law forbids;
(4) the nature and quality of the evidence required to
prove a violation; and
(5) the severity of the potential sanctions.
Government is quite capable of addressing factors three through five, but it needs assistance with the first two. That is the real power of the qui tam provisions of the statute. The qui tam provisions of state FCA legislation enables law enforcement to work hand in hand with the outside lawyers to further the interests of the Commonwealth. That is just one reason that the qui tam provisions are so vital.
I also wanted to mention that I think the best bet is to match the federal False Claims Act word for word. That is smart for many reasons, not the least of which is that the federal FCA has a matured, well-developed body of jurisprudence behind it. You incorporate that 148 plus years of judicial interpretation by matching the federal statute.
I will be happy to answer any questions you might have. Please feel free to ask.
Thanks,
Zach
Legislative Update–SB 1262 is re-amended back into its original form in the House of Delegates
In breaking news from Richmond, we appear well on our way to amending the Virginia Fraud Against Taxpayers Act (Va. Code 8.01-216.1 et seq.) to incorporate the changes made by Congress.
Today, Del. Greg Habeeb re-amended SB 1262 to fix the slight problem that arose in the Senate; the Senate amendments arose through a misunderstanding.
Here is what happened: SB 1262 was amended in the Senate Courts of Justice Committee to add five words to line 63; at the same time, it removed those same words from another location in the statute. The amendments would have a very negative outcome for the Commonwealth and would more or less defeat the purpose of the VFATA.
Specifically, in the Senate committee Va. Code § 8.01-216.3(A)(1) was changed from “Any person who [engages in one of the seven prohibited acts]” to “Any person who, intending to defraud the Commonwealth [engages in one of the seven prohibited acts].”
So, after the cross-over day (which occurred last week) the House got SB 1262 in the amended form. Del. Habeeb’s change of the bill back to the original amendment was voted out of the Courts of Justice Committee by a 14-0 vote, and will now be headed to the full House.
So, we are headed in the right direction folks! Stay tuned…
The GMU Journal of Law, Economics & Policy Issue 7.1
Last week, GMU law school released issue 7.1 of The Journal of Law, Economics & Policy which includes an article by yours truly. The article is entitled “Public Trust and the Role of Qui Tam Relators in the Regulatory Framework.” Here is my off-the-cuff attempt at a synopsis:
Compliance with regulatory demands can be predicted using a set of general factors. In no specific order, they are: (1) the likelihood that transgressions of the law or command will be detected; (2) the likelihood that transgressions will be prosecuted when observed; (3) the substance of the behavior the law forbids; (4) the nature and quality of the evidence required to prove a violation; and (5) the severity of the potential sanctions. While government has proven very capable of addressing factors three through five, it is understandably less capable with factors one and two.
The qui tam provisions of the federal False Claims Act have, for the last 148 years, served to bridge this gap. Most important however is the fact that by changing the world of regulation from a two-party dynamic (between the government and a target) to a three-party dynamic (between the government, a target, and any private citizen with first-hand information) and by creating a safety-valve for motivated individuals, public trust in the integrity of government is increased.
Interested readers can purchase a copy via the JLEP webpage or from Westlaw or Lexis.
Action Alert–HB 1399 Must Be Defeated in the Senate
Today is the “cross-over” day in the Virginia General Assembly, which means that bills passed by either the House of Delegates or the Senate are transferred to the other House for action.
While there is much going on with the Virginia Fraud Against Taxpayers Act this legislative session, I want to dedicate today’s post to a particularly annoying bill that somehow slipped onto the uncontested docket in the House of Delegates and meandered its way into the Senate. I am talking about HB 1399.
HB 1399 is quite simply an attempt to abuse the VFATA and stick the taxpayer with an even higher bill. In a nutshell, HB 1399 would extend the protections of the anti-retaliation provisions of the VFATA to state government employees.
So HB1399 attempts to protect government employees just like private sector employees. However, there is a huge difference. Unlike private sector employees—who enjoy no protections other than VFATA—government employees are already protected by the First Amendment, which is made applicable to the states by way of the Fourteenth Amendment, which prohibits state actors from retaliating against employees for speech on matters of “public concern.”
So, without question, public employees are already protected for speaking out on matters of public concern, and these provisions would cover the same sorts of speech that HB 1399 would protect.
What HB 1399 really does is create unprecedented remedies for wrongful termination of a government employee—counties, cities, and the Commonwealth would all be liable for double damages, attorney’s fees, and any other relief necessary to make the person whole.
There is no other wrongful termination statute in Virginia even remotely approaching the powerful remedies available to private sector employees under VFATA, and we do not need one now. Ironically, it is the taxpayers themselves who will ultimately foot this bill—the very taxpayers that the VFATA is intended to protect.
Again, the anti-retaliation provisions of the VFATA are necessary and important to the statute as they pertain to private sector employees who wish to stop their employer from defrauding the Commonwealth. There is absolutely no reason to extend these same incredible remedies to government employees who already have a cause of action for the same exact activities covered by HB 1399.
Word from the HOD is that a misguided group of employment lawyers–actually, just one guy–are representing to the General Assembly that Congress really intended to extend wrongful termination protections in the Federal FCA to public-sector employees, but that is absolutely not the case.
Contrary to the views espoused to the General Assembly by those testifying in support of this bill, there is absolutely no evidence for this argument in the legislative history of the 1986 amendments to the FCA.
Moreover, the federal False Claims Act has been amended three times in the last two years, and again, there is no evidence in any of the legislative history that Congress ever contemplated adding a provision like HB 1399.
If Congress wanted to do that, they could have easily done it over the last two years when the federal False Claims Act was completely overhauled. So I wish they would stop using this silly argument.
I urge all my readers to contact their state Senators and urge them to vote HB 1399 down.
By they way, HB1399 looks certain to fail in the Senate, but you just never know. I will be there next week to testify against it, the hearings are set for Feb. 14, 2011.
Zachary Kitts
Washington Post Announces Attorney General Ken Cuccinelli’s Intervention in Virginia Fraud Against Taxpayers Act Case
On Friday, the Washington Post did a story about one of my cases that was unsealed during the week–the case is captioned Commonwealth of Virginia ex rel FX Analytics v. Bank of New York Mellon Corporation.
Perhaps most important, the Washington Post story demonstrated the importance of the legislation currently pending before the Virginia state Senate. Specifically, SB 1314 and SB 831 should be defeated in the Senate Courts of Justice subcommittee.
On the other hand, SB 1262, introduced by Sen. Vogel should and sponsored in the House of Delegates by Greg Habeeb, should be reported out of Committee and passed by the Senate.
As the AG himself says in the Post, he used the powers granted to him under the civil investigative demand provisions of the VFATA to investigate the case against Bank of New York Mellon Corporation. Based on his investigation, and on the information provided by the relator, the Attorney General was able to determine that he should intervene in the case.
Consider this: SB 1314, which was introduced by Sen. McEachin, does just one thing–it strips the Attorney General of his ability to issue civil investigative demands under the Virginia Fraud Against Taxpayers Act. If Sen. McEachin had his way, it would have been impossible for the AG to conduct an investigation of the case.
SB 831 is a little less offensive, as it just strips the AG of his ability to issue a CID to an institution of higher learning, or something like that. This would still be a bad idea, as discussed earlier .
It appears that the hearings on these three Senate bills, which was scheduled for last Friday, has been rescheduled for this Monday at 9:00 AM. I have already submitted my testimony, and I encourage other readers to attend in person and testify in support of the bill.
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