Eric Schneiderman
The New York False Claims Act: A Victory for Civil Justice
One of the most important and least reported accomplishments in this year’s state budget was the enactment of a New York State false claims act. This law is a major step forward for health care reform and protection of taxpayers, but it was far too long in coming, and it was achieved only after overcoming opposition that can only be described as bizarre on the part of “tort reform” devotees in the Republican Majority.
When the New York Times published a series on Medicaid fraud in New York State in July of 2005 detailing outrageous abuses and asserting that the state could be losing as much as $18 billion per year to waste fraud and abuse, the hue and cry response in Albany was virtually instantaneous. Predictable finger pointing ensued, with some trying to scapegoat undocumented immigrants, despite clear evidence from the Times investigation that fraud on any significant scale is almost always committed by providers and large institutions—not individuals patients.
To solve the problem of Medicaid fraud some called for bureaucratic reorganization and more funding for investigations. I was among those who wanted to go farther, and harness the quasi-regulatory effect of the civil justice system by passing a false claims act (FCA). Originally enacted at the federal level under President Lincoln to help fight war profiteering during the Civil War, false claims acts enjoyed bipartisan support nationally because of their stunning effectiveness at curbing fraud and government waste, not just in healthcare programs like Medicaid, but across the board.
Here’s how the False Claims Act works. Under the qui tam provision of the law, if someone knows that the government is being ripped off—whether by a doctor over-billing Medicaid, or a contractor padding their payroll on a government job—they can sue the perpetrator on behalf of the government. If they win then the defrauder must pay back three times the amount they stole plus civil penalties, the whistleblower is rewarded with a portion of the money for making the recovery possible, and he or she is legally protected from retaliation. The rest of the recovered money—a minimum of seventy five percent under the New York State FCA—goes back to the government.
Since the federal FCA was revamped and strengthened in 1986 it has saved U.S. taxpayers more than $18 billion. In the health care arena Uncle Sam recovers $15 for every $1 invested in False Claims Act health care investigations and prosecutions. Fifteen other states and the District of Columbia have FCAs that are equally successful.
False Claims Acts are so effective in fact, that the 2005 Deficit Reduction Act, passed by the Republican Congress and signed by President Bush, included incentives for states to enact such laws. Previously states and the federal government split any recovered funds 50/50, but under the new law, states will qualifying false claims acts will get a 60/40 split of any recovered funds in there favor. This will amount to 20% more revenue from any Medicaid fraud uncovered, not only by qui tam actions, but also by public agencies including the Attorney General’s office and local District Attorneys.
But a funny thing happened when the false claims act landed on the agenda in Albany. Republican senators, who styled themselves as jealous protectors of tax dollars, railing against Medicaid fraud and abuse, emerged as staunch opponents of their own party’s solution to the problem. They insisted that government agencies, rather than individual New Yorkers, could solve the problem. As the debate unfolded, Senate Republicans revealed a truly astonishing justification for their unwillingness to support a false claims act, despite its proven effectiveness and strong GOP support in Washington DC: it would allow trial lawyers to make too much money.
Readers of this blog surely know that trial lawyers are frequent scapegoats in the tort “reform” debate, but I don’t know of another case in which this rhetorical smokescreen of attacking “greedy trial lawyers” has become so much of an end in itself as to overwhelm supposedly fundamental conservative beliefs. Senators who were so incensed by the Times report of massive fraud and abuse were nevertheless adopting the position that it would be preferable to allow stolen government funds to go un-recovered than to recover the money with the help of whistleblowers, and compensate the whistleblowers and their attorneys with a small portions of the funds. Some argued that the state could not afford to share recovered funds, but that is of course ludicrous. Qui tam actions bring to light cases of fraud that would otherwise go undiscovered, so any amount of money that the state recovers will be a net gain—75 percent of something is a lot more than 100 percent of nothing.
Republican senators asserted that a false claims act would encourage frivolous lawsuits against innocent healthcare provider by lawyers seeking to make an easy buck, but nothing of the kind has occurred with the federal false claims act. On the contrary, because false claims attorneys assume the upfront cost of assembling cases, and only receive compensation if they win, only the most airtight cases, exposing abuses on a large enough scale to pay for the costs of litigating them, are brought to trial.
And, while I am generally a defender of the public sector, I would have expected to find agreement with my Republican colleagues on a false claims act because it is clearly more effective than simply hiring more government investigators. A system as vast as Medicaid is virtually impossible for government agencies alone to effectively monitor, and catch every would-be scammer. A false claims act gives employees of service providers, doctors, nurses, and patients, an incentive to contribute their eyes and ears to the fight against fraud. These people, who are involved in the system every day, often know when something shady is going on, but are either afraid to come forward, or simply decide that it’s not their problem. A false claims act not only taps into invaluable first-hand information about what’s going on below our government radar, but it effectively contracts out the litigation of claims that the government lacks the resources to pursue. All the government does is pay a reasonable fee for the service—only when the case is actually successful—and collect the money.
The expansive reach of a false claims act, and the three-fold penalty for any amount of fraud that is uncovered, also makes it a highly effective deterrent. As U.S. Senator Charles Grassley (R-IA) and Rep. Howard Berman (D-CA) have noted:
“Studies estimate the fraud deterred thus far by the qui tam provisions runs into the hundreds of billions of dollars. Instead of encouraging or rewarding a culture of deceit, corporations now spend substantial sums on sophisticated and meaningful compliance programs. That change in the corporate culture — and in the values-based decisions that ordinary Americans make daily in the workplace — may be the law’s most durable legacy.”
When the Senate Republicans quietly caved in their opposition to the false claims act, allowing it to become part of a package of Medicaid fraud reduction measures included in the final budget, it was one of the most significant victories of this year’s budget battle. I have no illusions that the Republican Majority in the Senate has come around to a more enlightened view of the civil justice system, but at least in this instance their irrational trial-lawyer-bashing will no longer deny the public the benefits of hundreds of millions of stolen tax dollars recovered and untold fraud deterred that accrue from opening the court house doors to citizen whistleblowers through a false claims act.
Posted at 10:04 AM, Apr 16, 2007 in Permalink | Comments (16) | TrackBack (0)
Comments
Wish there would be a similar measure for false tort claims and attorney fraud . never gonna happen.
Posted by: Anirban | April 16, 2007 11:23 AM
Of course, a system of sanctions for frivolous lawsuits, including tort based actions, already exists.
However, you seem to wish for them to be stronger, by creating incentives along the lines of the False Claims Act (one major impediment to such a scheme is the more limited access to information by way of the attorney client privilege and confidentiality that are fundamental to our justice system).
Interestingly, while you emphasize strengthening this system against plaintiffs, you omit any reference to doing so against defendants (i.e. only against those making the "claim").
And yet, defendants are often guilty of frivolous defenses and the practice of defensive litigation.
Why not equally focus your interest on increasing sanctions throughout the civil justice system on both sides of litigation, instead of focusing only on the injured plaintiffs?
Posted by: Cyrus Dugger | April 16, 2007 01:38 PM
frivolous defense is an oxymoron. Nothing like that exists.Defendant is dragged to the court , not the other way around and everyone is entitled to the best defense to vindicate oneself.
Posted by: Anirban | April 16, 2007 04:25 PM
Hi Anirban,
That's where you are wrong. See Note to Rule 11 Federal Rules of Civil Procedure, Legal Information Institute (discussing sanctions for both frivolous claims or defenses); Frivolous Litigation: On Frivolous Litigation: A Study of Tort Liability & Procedural Sanctions, 14 Hofstra L. Rev. 433 n11 (1986).
Why is it so hard to acknowledge that frivolousness is a two way street? If you believe that there is defensive medicine, why do you contest the existence of defensive litigation?
You need only open up the recent reports of defensive litigation and bad faith claim denials by the auto insurance industry to see an example. Auto insurers play hardball in minor-crash claims
What there is not, is a remedy in tort for malicious defenses.
Ironically, there is such a remedy available to plaintiffs for malicious prosecution. See Van Patten & Willard, The Limits of Advocacy: A Proposal for the Tort of Malicious Defense in Civil Litigation, 35 HASTINGS L.J. 891 (1984).
The aforementioned article makes the case for the availability of a remedy in tort for malicious defenses.
Posted by: Cyrus Dugger | April 16, 2007 05:46 PM
Stalin taught this technique to Mao. Castro and Saddam Hussein learned and used it effectively. Chavez is setting up the same system. Have a spy on every corner, reporting every joke, every expression of dissent. Then, arrest the reportee, and execute them. Same will happen with the entities being reported by all employees now made agents of the KGB, New York edition. The lawyer wants to plunder, and destroy clinical care.
I propose the False False Claim Act.
1) Anyone making a false false claim gets to pay twice the legal cost of defense, each, to deter. That includes the cult criminal, biased lawyer running dog judge lawyer on the bench. Let the employer of this biased cult criminal pay for his pro-lawyer corruption.
2) The bogus whistleblower must do mandatory prison time of 5 years, as a perpetrator of fraud.
3) The lawyer must pay a standard formula exemplary damage of 9 fold the original false false claim.
4) Because all lawyers are presumptively liars and clinical care plunderers, no false claim may be filed without posting bond equivalent to 9 times the false claim.
5) The punitive damages provision is additive to the double defense cost compensation to be paid by the lawyer.
Posted by: Supremacy Claus | April 16, 2007 07:32 PM
Cyrus: I don't appreciate your misleading us civilians. After Rule 11 bit into frivolous claims, by only the tiniest amount, the criminal cult that is the lawyer profession struck back viciously. They amended Rule 11, the tiniest island of lawyer accountability in a Pacific of lawyer self-dealing, in 1993.
They put in a take backsies provision. Before sanctions, the offending lawyer has 21 days to withdraw or amend the offending motion. Nice, self-dealing immunity, totally unjust and unconscionable by the hierarchy of the self-dealing criminal cult enterprise that is the lawyer profession, in absolute control of the three branches of government.
Posted by: Supremacy Claus | April 16, 2007 08:17 PM
There is a tort for filing a false claim against a private party in court. It is called abuse of process. There are also lots of sanctions available against lawyers who file frivolous claims or multiply proceeding vexatiously. Lastly, few legal scholars believe that frivolous lawsuits are a serious problem in medical malpractice or other conventional tort areas.
An impartial observer might consider a false claims act an effort to privatize a portion of the function of auditing claims against governmental payers. Viewed this way, it is hard to argue against the approach, and it is especially hard to see why Republicans would do so. The point about making trial lawyers rich might have traction if the rates were excessive, but one should expect the labor market to even this out over time and across the legal sector.
The anti-trial lawyer point is, however, a good explanation for the entire Republican tort reform agenda. Indeed, it is the only convincing explanation of which I know.
Posted by: Charles Silver | April 17, 2007 12:21 AM
Charles: Again, the lawyer seeks to mislead.
An abuse of process tort requires malice. Short of a videotaped confession of the lawyer's knowledge of the falsity of the claim, and the recorded admission of an improper motive for the claim, no abuse of process claim can prevail. Such a case does exist, but the prevailing plaintiff was another lawyer. The defendant was indeed recorded making such admissions before other lawyer witnesses. One case. Went to another lawyer.
Yes, there is recourse, but its elements are impossible to fulfill. This is worse than giving absolute immunity to the lying cult criminal. It covers up the absolute lack of recourse with another lawyer lie and grants constructive absolute immunity.
You lawyers here are a trip. You think the public is idiotic, and can be misled like four year olds about my cousin, Santa.
I have proposed opening the courthouse door to the adverse third party victim of the careless lawyer. I have proposed the jury is good enough to regulate the lawyer.
If the out of control lawyer cannot be regulated in torts, self-help is totally justified morally, and intellectually. It would start with a nationwide boycott of all the members of the criminal cult enterprise. I will not discuss where it may end if the lawyer cannot be controlled by statutes and court actions.
Posted by: Supremacy Claus | April 17, 2007 06:17 PM
I am opposed to any portion of funds recovered going back to the whistleblower - The satisfaction of putting an end to a wrong should be all the satisfaction required by the the whistleblower - otherwise, all this really represents is bounty hunting (which, of course is what all civil litigation is about anyway).
Posted by: Paul W Dennis | April 18, 2007 02:15 AM
Paul - so what if it's bounty hunting? Like the Senator said, some percent of something is better than 100% of nothing.
By your logic, we shouldn't pay police officers for ending wrongs, either.
Posted by: Justinian Lane | April 18, 2007 01:26 PM
shouldn't pay police officers for ending wrongs, either
When was the last time police officers offered ther service on a case by case contingency basis (Or Govt. allowed them to be ) . And where is the bounty there ? Sorry Dear , apples and oranges.
Posted by: Anirban | April 18, 2007 01:56 PM
OK, I'll switch analogies. Attorneys general operate on a case by case basis and fees collected (treble damages, etc.) go to the government. Shouldn't it?
And why the hell are we demonizing contingency fees because they enrich lawywer who go after companies who steal from taxpayers?
Posted by: Justinian Lane | April 18, 2007 02:55 PM
I don't think government should be in the business of bounty hunting in civil matters, only in criminal cases.
I also believe that punitive damages should be payable 100% to the government since punitives are a quasi-criminal sanction.
Posted by: Paul W Dennis | April 18, 2007 03:47 PM
Justinian: The lawyer is lying today. The lawyer misrepresents the contingency fee as increasing access to justice for the poor.
In the 19th Century, lawyers were paid by the hour, as his British pals did. Plaintiffs would win, collect the settlement or verdict. Then, they paid the lawyer nothing. The contigency fee collected the verdict to the lawyer by agreement, a legally shady proposition. The lawyer took his contingency fee, his expenses, then left the orts to the plaintiff. Meanwhile, the plaintiff has to pay taxes on the full verdict if not for an injury. After fees and taxes, the plaintiff may be in negative earnings territory and declare bankruptcy or go to jail for inability to pay taxes.
If the lawyer has failed to review the tax implications prior to the contingency agreement, the winning plaintiff should see another lawyer to review legal malpractice claim.
The contingency fee is a conversion by misrepresentation of the plaintiff's legal chattel, the money. It actually may punish the plaintiff by IRS hassles.
Is this your idea of access to justice? Were you ever told any this reality of the contingency fee by your lawyer pals?
Posted by: Supremacy Claus | April 18, 2007 09:04 PM
To quote trial lawyer and former Florida Bar presid ent Rutledge R. Liles. :
“While it is easy to defend the philosophy of the contingent fee, it is impossible
to defend its abuses. . . . It has been accurately said, in justification of the contingent
fee, that it is the ‘poor man’s key to the courthouse.’ Professionalism, however,
demands that we be ever mindful that keys are made of brass — not solid gold.”
Posted by: Anirban | April 19, 2007 11:51 AM
i need to file a false claim, since not only did the governmental employee know he did not do his day to day daily requirements nor did any of his Regional County Directory Vera Hockett, Regional Cities Supervising Director of the Desert Communities in Riverside Mark Baker-after the conversation due to violations from not investigating my home, to intentionally omitting various factual information to intentionally back dating of documents that were "accusations" and not validating while ignoring not only the minor children in 2004 statements re-confirming on 2007 and a two year gap between the first and the second statement originally when minors were 7 & 5, abuse and neglect as well as sexual abuse in addition the Ad Leiutem Eunice Jones intentionally released Screaming minors to the Abusive and Not willing to go with the now custodial parent omitting the Orange County Child Protective Services File to intentionally become awarded per minor $4,000 to $6000 in bonus for each Children Protective Service Agent, and the Welfare to work Case worker's in Riverside lowering their case by two children and extraditing them to Los Angeles, as well as utilizing the Social Security Title IV -B & E to go to the families and Title X a block grant totaling over $255 Billion in 70% fraudulent cases and I have a private Investigator who has worked in Indio, for 28 years and giving me his cases to show the annual waste; in addition to the fraudulent foster care families as on 1.12.2007 Barbara Brand and Vera Hockett intentionally allowed the annual income of 130K to a foster care family consisting of 11 kids, sexually abused, physically and psychologically tormented and death of child to occur, and faild to follow up on the family or children; reflecting the statement the CPS Agent Christopher Torvik, V, of the Indio office under Angela Zuspan who was informed of the lack of duty and responsibility as well as investigation and intentionally allowed Mr. Torvik, regardless of repeated calls from myself mother and the alleged allegations and declined to investigate my home, my medical records in Orange County, Ca under Medical and intentionally decided to use his own bias as he stated on 3.19.07 in the Riverside Juvenile Superior Court originally held in Indio, Superior Court and illegally Transfered and held since the time to have Jurisdictional/Dispositional hearing intentionally prevented and two witness to testify were intentionally turned away by bailiff of Christopher Sheldon Court Room 240, Indio Juvenile Branch, on 1.16.07.
In addition County Counsel breached Client Confidentiality by all respondents to arrive at court to seen only next to my name "51/50 Physchological and Possible Physical Threat to All" further intentionally using a bias as did the Agent on 3.19.07 113 days after the physical removal of minors on 11.27.06 and opposing counsel of placed as stated under oath a restraining order, without following up as to if the allegations were true on 12.22.06, not to mention failure to properly notify, and intentionally alter certified documents I've currently consealed due to harrassment and paperwork vandalism only trying to obtain original documents, I have showing Juduicial and Governmental Bias in a Trial Court with other witnesses and Foster Home Abuse from sexual assult to physically harming minors while living in substandard conditions while the Children's Protective Service Agent knows and intentionally ignors.
Danielle Scotia
949/689.9537
dscotia1@yahoo.com
Posted by: danielle scotia | April 25, 2007 12:21 AM