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The Question the American Legislative Exchange Counsel Cannot Answer: Why Do All of the Business-Friendly States Have State False Claims Acts?

The Question the American Legislative Exchange Counsel Cannot Answer:  Why Do All of the Business-Friendly States Have State False Claims Acts?

As my regular readers know, this blog is about qui tam litigation under the federal False Claims Act as well as under the Virginia Fraud Against Taxpayers Act and other state false claims acts.  A regular theme throughout the last four years has been the battle from state to state to pass state false claims legislation. 

In Virginia, of course, we didn’t have much trouble getting our Virginia Fraud Against Taxpayers Act passed in 2002 — and we experienced only one minor bump on the road to passing one set of
major revisions and one set of technical revisions.  

The Virginia legislators I have spoken during our legislative attempts have almost universally said the same thing:  how could anyone who wants to get re-elected be against a law that increases prosecution of fraud and false claims against the government? 

Unfortunately some legislators in other states do not feel the same way — and nor do the lobbyists that seem to hold so much sway in those states.  Interestingly, the more power lobbyists hold in a given state, the less likely that state is to have a state false claims act….   

One such state is Ohio, ranked by many commentators as possibly the most corrupt state in the Union according to a recent report assembled by the Center for Public Integrity. 

The report breaks down the score using 15 different criteria, with Ohio failing in the categories of — and this is a shock — Lobbying Disclosures and Legislative Accountability among many others.  

During the recent battle in Ohio, one such non-accountable legislator, Bill Seitz, a prominent Ohio Republican state senator, wrote to a fellow senior lawmaker to relay concerns about “the recent upsurge” in false-claims legislation nationwide. 

And his concerns, believe it or not, were not that Ohio did NOT have a false claims act.   
Rather, his concerns were that “our friend at ALEC” did not like the Ohio False Claims Act. 

So who is ALEC and why does it have such power in Ohio?  ALEC is short for “American Legislative Exchange Counsel — a business-backed group that views false claims laws as encouraging “frivolous” lawsuits.  (That old pet monstrosity).  

ALEC’s membership includes not only corporations, but nearly 2,000 state legislators across the country — including dozens who would vote on the Ohio bill.

“The considered advice from our friends at ALEC was that such legislation is not well taken and should not be approved,” he said in a private memorandum.

As part of the same memo, he discounted the recent upsurge in False Claims Act legislation as “understandable, considering most states are broke.” 

ALEC also used the old ruse that state false claims act legislation is “liberal” and a “bonanza for trial lawyers.” 


Lets get a few things straight — Virginia, which is one of the most vigorous prosecutors of wrongdoing using our false claims act, isn’t broke.  In fact, we have a surplus in our budget.  

Moreover, Virginia isn’t liberal, thank you very much…(not that there is anything wrong with that, as Jerry Seinfeld would say).

I will leave it ALEC to explain why states like Virginia, which are both conservative and business friendly by any measure, are such die-hard proponents of state false claims acts.  In fact, as I have blogged before, the more “business-friendly” and conservative a state is, the more likely that state is to have a false claims act.    

I also think that a correlation exists between vigorous criminal prosecutions and vigorous false claims act prosecutions — with Texas being Exhibit A and Virginia being Exhibit B.

I also think there is a correlation between corruption in state government and the power of lobbyists in the state legislative process.

I am waiting for someone — anyone — from ALEC to explain how liberal trial lawyers hijacked the legislative process to create a “bonanza” for themselves in Virginia and Texas (among many others) and passed state false claims acts……and then went back to being ignored.