The Massachusetts’ False Claims Law: Qui Tam Provisions for Whistleblowers, Expanded Tools for Enforcement Officials, Pitfalls for Health Care Providers and Other Government Contractors
By Phyllis A. Flora
Send Email to: pflora@dwyercollora.com
This article first appeared in the Masachusetts Bar Institute, Section Review, Spring 2001. Reprinted with permission. All rights reserved.
Last year, Massachusetts joined the growing ranks of states that have adopted legislation permitting private citizens to avenge fraudulent or false claims submitted to state or local governments.[1] Although a private plaintiff brings such an action on behalf of and for the benefit of the state or local government, the qui tam[2] provisions of the Massachusetts False Claims Law afford powerful incentives to would-be whistleblowers in the form of a significant percentage of the proceeds recovered, and payment of their attorney fees and costs. Because the Massachusetts False Claims Law is predominantly patterned on the federal False Claims Act, 31 U.S.C. §§3729 to 3733, there is a substantial body of federal law which provides guidance on how the Massachusetts law may be interpreted and enforced. In addition to enlisting private citizens (who may include disgruntled former employees, competitors, and dissatisfied patients or customers) in the war again government fraud, the Massachusetts False Claims Law also creates significant new investigatory powers by virtue of the authority vested in the Attorney General to conduct discovery prior to filing a complaint.
The Federal Claims Act
The Massachusetts False Claim Act
The Federal False Claims Act
The federal False Claims Act was adopted in 1863 to stem widespread fraud in the sale of provisions to the Union Army during the Civil War. The original False Claims Act permitted private citizens to prosecute a civil action on behalf of the federal government against government contractors, who could be required to repay twice the amount fraudulently obtained, plus a hefty fine. A successful qui tam plaintiff could receive a bounty of 50 percent of the amount recovered in the action.[3]
During World War II, the False Claims Act was re-written, substantially curtailing private citizens’ incentive to bring such actions. The 1943 amendments provided the U. S. attorney general with an opportunity to intervene in qui tam actions, marginalizing private plaintiffs’ participation in the litigation. In cases where the government intervened, qui tam plaintiffs were entitled to no more than 10 percent of the amount recovered; in cases where the government did not intervene, private plaintiffs could prosecute the action at their own expense and their bounty was limited to 25 percent of the recovery.[4] More importantly, the 1943 amendments prohibited qui tam actions if the government had any knowledge of the alleged fraud when the suit was filed, even if that knowledge came from the qui tam plaintiff.[5] In the wake of these amendments, few qui tam actions were filed and even fewer survived dismissal.[6]
Prompted by concerns about rising fraud in defense contracting and health care, Congress enacted broad reforms to the False Claims Act in 1986.[7] Perhaps the most significant of these amendments was that Congress lowered the scienter requirement. Prior to 1986, the False Claims Act required the “knowing” submission of a false or fraudulent claim, which many courts had interpreted as requiring specific intent to defraud.[8] Congress, particularly concerned about corporate officers’ ability to insulate themselves, and wanting to make it easier to establish liability,[9] amended the False Claims Act in 1986 to define “knowingly” to encompass a person who:
· has actual knowledge of the information;
· acts in deliberate ignorance of the truth or falsity of the information; or
· acts in reckless disregard of the truth or falsity of the information.[10]
The 1986 amendments also enhanced the consequences of a False Claims Act violation, providing for damages of up to three times the loss sustained by the government, and a penalty of $5,000 to $10,000 per violation.[11] Congress also afforded qui tam plaintiffs with an opportunity to continue to participate in cases where the government intervenes.[12] The 1986 amendments also enhanced qui tam plaintiffs’ incentive to bring False Claims Act complaints, guaranteeing a successful plaintiff a bounty of 15 percent to 25 percent in cases where the government intervenes and 25 percent to 30 percent where it does not.[13] Congress also provided for the recovery of a private plaintiff’s attorney fees and costs, regardless of whether the government intervenes.[14] The 1986 amendments also provided certain protections for whistleblowers against retaliation by their employers.[15] Congress also cured the government knowledge conundrum which had plagued the post-1943 statute, permitting a qui tam action even if the government already had knowledge of the conduct or if the information had previously been publicly disclosed, provided the plaintiff was the “original source” of that information.[16]
The 1986 amendments have led to a dramatic increase in qui tam filings. In fiscal year 1988, 60 qui tam cases were filed; in fiscal year 1999, 483 cases were filed.[17] Qui tam recoveries in fiscal year 1988 totaled $355,000, compared to $458 million in fiscal year 1999.[18] Whereas the defense industry was once the primary target of qui tam plaintiffs, over half of the qui tam filings today involve health care.[19]
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[1] G.L. c.12, §§5A to 5O (hereinafter referred to as the Massachusetts “False Claims Law”).
[2] The term “qui tam” derives from the Latin phrase “qui tam pro domino rege quam pro si ipso in hac parte sequitur,” meaning “who sues on behalf of the King as well as himself.” Black’s Law Dictionary 1251 (6th ed. 1990).
[3] See generally James B. Helmer, Jr., “How Great is Thy Bounty: Relator’s Share Calculations Pursuant to The False Claims Act,” 68 U. Cin. L. Rev. 737, 738-739 (2000).
[4] Id. at 742.
[5] See United States ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1103-1104 (7th Cir. 1984); Satir v. Blackwell, 579 F.2d 742, 746 (2d Cir. 1978); cert. denied, 441 U.S. 943 (1979).
[6] Helmer, n.3, supra, at 742.
[7] Robert Fabrikant and Glenn E. Solomon, “Application of the Federal False Claims Act to Regulatory Compliance Issues in the Health Care Industry,” 51 Ala. L. Rev. 105, 107 (1999).
[8] United States v. Davis, 809 F.2d 1509, 1512 (11th Cir. 1987); see also United States v. Priola, 272 F.2d 589, 594 (5th Cir. 1959) (requiring “guilty knowledge of a purpose … to cheat the Government).
[9] Pamela H. Bucy, “Growing Pains: Using the False Claims Act to Combat Health Care Fraud,” 51 Ala. L. Rev. 57, 61 (1999).
[10] 31 U.S.C. § 2729(b).
[11] Id. § 2729(a).
[12] Id. § 3730(c).
[13] Id. § 3730(d).
[14] Id.
[15] Id. § 3730(h).
[16] Id. § 3730(e)(4).
[17] Taxpayers Against Fraud, Qui Tam Statistics (visited February 10, 2000) http://www.taf.org/statistics.html (citing statistics reported by the United States Department of Justice in November 1999).
[18] Id.
[19] Id. (reporting that the Department of Health and Human Services was the client agency in 61 percent of the qui tam filings in fiscal year 1998, compared to 15 percent in fiscal year 1988).