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A need for more (effective) False Claims Act ordinances?

by Dave Scher | Mar 19, 2015 | Whistleblowers

Stack Of CashDuring the fiscal year 2014, the Federal government recovered nearly $6 billion from False Claims Act cases as more than 700 whistleblower lawsuits were filed for the second consecutive year.  These statistics plainly show the effectiveness of incentivizing whistleblowers to risk coming forward to report wrongdoing.

Presently 30 states have adopted False Claims Act statutes that share similarities with the Federal model, but have nuances as to the types of fraud each state allows whistleblowers to report and how much of a percentage they can receive from the government’s recovery.  Given the whistleblowing success at the Federal level, we expect these state statutes to continue to proliferate.

The question becomes, why don’t municipalities and counties protect their money with similar False Claims Act ordinances?

According to the Taxpayers Against Fraud, New York City, Chicago, Philadelphia, and Allegheny County have created their own versions of the False Claims Act with qui tam provisions.  In Florida, Miami-Dade and Broward counties as well as the city of Hallandale Beach and town of Bay Harbor Islands have False Claims Act ordinances as well.  However, these few counties and municipalities represent only a handful of the more than 3,000 counties or county-equivalents in the United States.

Moreover, the county ordinances do not appear to be as effective as the Federal or state counterparts in terms of enticing whistleblowers to come forward.

For example, the Miami-Dade ordinance limits a relator to a 10% recovery for an intervened case as opposed to the 15-25% range used in the Federal version.  Also, the potential recovery is further limited by the fact that the attorney’s fees and costs are deducted from the recovery prior to calculation of the reward.  On the Federal level, attorney’s fees and costs are a wholly separate item that does not reduce the relator’s share.

Further, Hallandale Beach limits a relator’s recovery in a non-intervened case to 20% when a Federal relator would expect 25-30% in the same instance.

Also, the Miami-Dade, Broward, and Bay Harbor Islands ordinances contain mandatory fee shifting provisions meaning that if the county does not intervene and the defendant wins, then the relator is personally on the hook for the defendant’s attorney’s fees and costs, which can be a very substantial figure.  On the Federal level, the judge has discretion to refuse an award of fees and costs to a defendant if the case was “substantially justified or that special circumstances make an award unjust.” 28 U.S.C. 2412(d). 

All too often, potential relators come to us with allegations, which if proven, could return hundreds of thousands if not millions of dollars to a county or municipality.  Unfortunately, we have to tell these individuals that there is no mechanism by which they can bring a lawsuit on behalf of most counties and municipalities.  Hopefully the continued success of the Federal and state qui tam statutes will encourage counties and municipalities to start encouraging whistleblowers to come forward and report those who are defrauding local government entities.

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