Florida updates qui tam whistleblower statute.

Author:McCabe, Ryon M.
 
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In 2013, the Florida Legislature made substantial changes to the Florida False Claims Act (FFCA), codified at F.S. [section][section]68.081, et seq. The FFCA is modeled after its federal counterpart, the False Claims Act (FCA), which was first enacted during the Civil War to combat fraud against the government by defense contractors. (1) The FFCA authorizes private individuals to bring "qui tam" suits in the name of the state against persons or entities who have defrauded the state in contracting or other matters. (2) As an incentive to bring these suits, the FFCA allows successful plaintiffs, sometimes called whistleblowers or relators, to share in the damages recovered. (3) Both the state and federal acts have proven enormously successful, with one study estimating a 15-to-1 return on investment for every dollar spent by the federal government on FCA enforcement. (4)

Florida's recent changes follow a rash of amendments made by Congress since 2009 to strengthen the federal version of the law through three major pieces of legislation. (5) Like the federal amendments, last session's Florida amendments strengthen the FFCA and provide added anti-fraud protections to state government and taxpayers. This article examines some of the major changes.

Overview of the FFCA

The FFCA prohibits persons and companies who do business with the state from the following actions, among others:

* Knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval;

* Knowingly making, using, or causing to be made or used false records or statements material to a false or fraudulent claim;

* Knowingly making, using, or causing to be made or used false records or statements material to an obligation to pay or transmit money or property to the state;

* Knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the state; and

* Conspiring to do any of the above. (6) The FFCA imposes a penalty on violators equal to three times the amount of damages sustained by the state as a result of the improper conduct, plus a statutory fine of $5,500 to $11,000 per violation. (7)

A private relator begins a qui tam suit on behalf of the state by notifying the attorney general and the chief financial officer of the alleged misconduct and disclosing "all material evidence and information the person possesses" regarding the violation. (8) The relator then files a sealed complaint in the Second Judicial Circuit in and for Leon County. (9) The attorney general, or in certain circumstances, the chief financial officer, has 60 days to review the case and decide whether to "intervene," thereby taking over prosecution of the case from the relator. (10) If neither officer elects to intervene, the relator is free to pursue the case on his or her own, prosecuting the case on behalf of the state. (11)

Like its federal counterpart, the FFCA provides financial incentives for private persons to become relators. If the state intervenes in a case, the relator may recover "at least 15 percent but not more than 25 percent" of the proceeds of the action, "depending upon the extent to which the person substantially contributed to the prosecution of the action." (12) If the state declines to intervene and the relator thereafter decides to pursue the case on his or her own, the relator receives a greater share of the proceeds, between 25 percent and 30 percent. (13) In either case, the court has the discretion to reduce a qui tam award if it finds that the relator "planned and initiated" the wrongful conduct at issue. (14)

2013 Legislative Amendments

At the federal level, Congress has made significant changes to the FCA over the past four years. Because Florida patterned its law on the FCA, Florida has historically followed suit whenever Congress has amended the FCA. (15) This year, Florida again amended its own act, and legislative history confirms a specific intent behind the 2013 amendments to "conform to the Federal False Claims Act." (16) This makes sense given that the two acts are often prosecuted simultaneously against fraudsters. Public policy, therefore, supports keeping both statutes in conformity to facilitate dual prosecution and enforcement.

The following provisions underwent revision.

* Direct Presentment--First, the legislature updated the FFCA to conform to the FCA on the issue of "direct presentment." This issue arose from previous language in the FCA that made it unlawful to "knowingly present[], or cause[] to be presented, to an officer or employee of the United States government ... a false or fraudulent claim for payment or approval." (17) Several courts had interpreted this italicized language to mean the false claim at issue had to be "directly presented" to the government for payment. (18)

This requirement proved problematic in the face of modern government contracting, which involves multiple layers of contractors and subcontractors, many of whom never deal directly with a government officer. What if a subcontractor presents a bogus claim to a general contractor, knowing full well that the claim will be paid with government money? Congress thought this situation should be covered by the FCA, and in 2009, Congress amended the law to eliminate any "direct presentment" requirement. (19) The legislative history makes clear that Congress believed that FCA liability should attach "whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the [g]overnment without regard to whether the wrongdoer deals directly with the [f]ederal [g]overnment." (20)

Congress accomplished this change by deleting the prepositional phrase "to an officer or employee of the [g]overnment, or to a member of the armed forces" from 31 U.S.C. [section]3729(a)(1). (21) With the removal of this phrase, liability attaches to any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval." (22)

Last session, the Florida Legislature made a near-identical change to the FFCA, deleting the prepositional phrase "to an officer or employee of an agency" from F.S. [section]68.082(2)(a). (23) This change eliminates any "direct presentment" requirement under Florida law. Like the FCA, the FFCA now clearly covers situations in which an unscrupulous subcontractor submits false claims to a general contractor operating under a state contract, regardless of whether the subcontractor deals directly with the state.

* Intent to Defraud the State--The legislature likewise followed Congress in clarifying a significant issue of intent that arose from the U.S. Supreme Court decision in Allison Engine Co., Inc. v. U.S. ex rel. Sanders, 553 U.S. 662 (2008), another case involving multiple layers of contractors. In that case, a general contractor for the U.S. Navy required all subcontractors to certify that their work complied with Navy specifications. Certain subcontractors were accused of submitting bogus "certificates of conformance" to the general contractor, knowing the work was not in compliance. The subcontractors argued, in opposition to the relator's claim under then [section]3729(a) (2), (24) that they did not...

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