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Govenor O’Malley Signs The Maryland False Claims Act Into Law!

By Zachary Kitts on April 13, 2010 in ,



Today Maryland Governor Martin O’Malley signed the Maryland False Health Claims Act into law, bringing to a close one of the most heated legislative battles over a state false claims act in recent memory.  

Of the nearly two-hundred bills signed into law today, Governor O’Malley signed the Maryland False Health Claims Act first–a symbolic gesture which showed the importance of this law for Maryland’s future fiscal health in these financial hard times.

And now, the battle shifts elsewhere.  As readers of this blog are aware, a number of changes were made to the Maryland False Health Claims Act during the legislative process.  These changes do things like create new affirmative defenses, make the assessment of double or treble damages discretionary, and so forth. 

In short, each of these changes takes the Maryland statute a step further away from the federal False Claims Act.  I have previously discussed my suspicions behind the current trend of lobbyist-suggested changes on this blog, but time will tell how this pans out. 

In terms of whether the Maryland statute will be successful, the state does have a number of factors in its favor.  First, they have a real lawyer at the helm in the form of Attorney General Doug Gansler.  General Gansler has federal and state prosecution experience, including prosecution of consumer fraud cases and complex financial criminal matters–and these two areas of practice are excellent training for False Claims Act prosecutions.  

Second, but not less important, is that General Gansler will have the support of Department of Health and Mental Hygiene Secretary John Colmers.  Secretary Colmers (and his Inspector General Tom Russell) were both on the front lines of the Maryland FCA fight, and he will no doubt make sure his agency cooperates with General Gansler fully.  

Although it may seem strange at first, in some states the state agency responsible for Medicaid administration actually pushes back on efforts to enforce the law by state Attorney General.  Inter-agency rivalries and jealousy are a fact of life in government work–moreover, in some situations, government agencies will be slow to cooperate in situations where the prosecution could show part of the agency in a negative light.  This problem can be minimized when the top leadership of an agency is in favor of vigorous enforcement.  Secretary Colmers is definitely in favor of vigorous prosecution, so General Gansler will not have this problem to deal with. 

The law becomes effective on October 1, 2010.  

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The travails of Colorado, and perhaps an interesting new change in strategy from the enemies of fiscal responsibility…..

By Zachary Kitts on March 30, 2010 in , , ,

Breaking news from the front lines in Colorado has that state’s proposed false claims act  (I believe it is SB 187) being amended to include the following language: 

 

WHEN A RELATOR BRINGS AN ACTION UNDER THIS SUBSECTION  (2), THE FEDERAL FALSE CLAIMS ACT, OR ANY SIMILAR PROVISION OF THE LAWS OF ANY OTHER STATE, NO PERSON OTHER THAN THE STATE MAY INTERVENE OR BRING A RELATED ACTION BASED ON THE FACTS UNDERLYING THE PENDING ACTION.

This follows on the heels of my earlier posts about Maryland’s struggles to keep frivolous detritus out of their FCA.  The proposed language above seems, at first glance, similar to the language of the federal False Claims Act, except it is not.  By adding the language 
“or any similar provision of the laws of any state”  Colorado prohibits a relator from filing a pendent state claim on behalf of Colorado as part of a nation-wide FCA case.  

Needless to say, this will prevent Colorado from getting invited to many cases.  

By way of background, the importance of having a state FCA goes beyond the treble damages, civil penalties, and attorney’s fees.  By adding a state FCA with a qui tam provision, the state is allowed to participate in nation-wide cases alleging healthcare fraud from the early stages of the case. 

It is no secret that the most lucrative healthcare fraud cases in recent years have all been brought by a qui tam relator.  Such cases are normally filed in federal court, because one or more claims are brought under the federal False Claims Act.  The initial sealed complaint also includes pendent state claims for each state to suffer a loss under the statute.

Once the case is sealed, an investigation begins on behalf of the federal governments, and at some point those states with qui tam statutes are brought into the mix.  Only the states with qui tam statutes can be brought into the mix, however, because any disclosure to a non-qui tam state would constitute a breach of the seal.  

It is these “sealed meetings” so to speak, to which states want to get an invitation.  It is one of the main reasons for passing an FCA to begin with–the state then gets to participate in the process of forming the case almost from square one.      

All states except Colorado, that is.  The state of Colorado has seen fit to exclude itself from this process, however, because no qui tam relator in her right mind would include a pendent claim for the state of Colorado in her sealed federal complaint.  Why?  Because she would be providing the state with all of the information at her disposal, which is required by the statute, and she would be excluding herself from any recovery if Colorado declines to intervene.  

Actually, as I now understand it, this is part of the healthcare industry’s new strategy against state false claims legislation–and it may very well signal an important shift in the battle over state FCAs. 

In the past, the battle was to prevent a state from passing an FCA at all.  This is a strategy that has failed of late–as more states pass state false claims acts and do not suffer any untoward effects, it becomes more difficult for the lobbyists to argue that it will be the end of the world if the legislature passes an FCA.   

So, it appears that the paid guns for hire who lobby on behalf of their industry clients have adopted the strategy and tactics.  Because they can no longer argue that a state FCA will be the end of the state’s economy, that it will bankrupt every hospital in the state, and so forth, they have amended their strategy. 

Now, it seems, the focus of industry lobbyists is on making a number of “helpful suggestions” to the state about how they can tweak their state false claims legislation.  But I am certain that this is not the end of the story.  

Rather, I suspect the usual gang of industry lobbyists are making these suggestions because they know that everything they suggest will make the state’s false claims act less “user-friendly.”  That is, less attractive to the lawyers who represent relators, and less attractive to the individual whistleblower who uncovers fraud.  Perhaps most important, all of the changes suggested by the industry lobbyists will, without exception, preclude DRA approval.  Without DRA approval of the state’s false claims act, the state is going to lose tens of millions of dollars of free money.  

So here is what I am predicting–in two or three years, every single state that changes its false claims act away from the model of the federal false claims act will be visited by these same lobbyists.  The pitch this time will be something like this:  “We told you this false claims act statute was a bad idea.  Now you tried it, and your statute hasn’t returned any money to your state treasury AND you have this annoying cumbersome law on your books.  So, lets just get rid of this statute, shall we?”  

We shall see.                 

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The Maryland False Health Claims Act of 2010 is Amended and Sent to the House of Delegates

By Zachary Kitts on March 29, 2010 in ,



Today the Baltimore Business Journal carried an article on the amended Maryland False Health Claims Act of 2010.  

While the amended bill will not pass muster under the Deficit Reduction Act of 2005 (and in the process earn Maryland an additional 10% on its Medicaid share) the bill is better than nothing.    

A lot of good people worked very hard on getting a Maryland FCA passed this year, and ultimately the fact that DRA Compliance was compromised by amendments made to the bill in the House of Delegates is in no way the fault of Lt. Gov. Brown, or Secretary Colmers, or Inspector General Tom Russell.  

There is no doubt that all of those folks, and their hard-working staffs, did everything that could be done.    

Ultimately, the  Mixx Delicious Digg Facebook Twitter

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

By Zachary Kitts on March 10, 2010 in ,



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.      
 

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

By Zachary Kitts on March 9, 2010 in ,





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 Mixx Delicious Digg Facebook Twitter

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

By Zachary Kitts on March 3, 2010 in , ,



An important 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.

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March 2, 1863: On This Day in History…

By Zachary Kitts on March 2, 2010 in , ,



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! 

      

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

By Zachary Kitts on March 1, 2010 in , ,

Last Thursday, the Virginia Supreme Court announced its opinion in Mixx Delicious Digg Facebook Twitter

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Report from Annapolis on the Maryland False Claims Act

By Zachary Kitts on February 23, 2010 in ,





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, Lt. Gov. Brown and Gov. O’Malley.  Meanwhile, 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 Mixx Delicious Digg Facebook Twitter

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

By Zachary Kitts on February 13, 2010 in , ,



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.     

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