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Overview of state methods for using the money recovered from state false claims act prosecutions - Virginia Qui Tam Law.com
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By Zachary Kitts on February 8, 2013 in False Claims Act Practice in Virginia, Potential Uses of the Virginia Fraud Against Taxpayers Act, Qui Tam practice in Virginia, State False Claims Act News, Uncategorized, Virginia Fraud Against Taxpayers Act
As regular readers are well aware, recoveries under the federal False Claims Act have, for the last four years, been record-breaking. In FY 2012, nearly $5 billion (to be exact, it was $4.959 billion) was recovered in settlements and judgments under the False Claims Act, which set a new record. Mind you, the previous record — $3.2 billion — was exactly one year old, having been set in 2012 for recoveries in FY 2011.
And this is just the federal portion of the money. Those states that have enacted appropriate state false claims legislation have also recovered record-breaking amounts. So the question arises — how do states with state false claims acts actually use the money they recover? This is real money by any stretch of the imagination, and there will be no shortage of state officials lining up to claim some of the money for thier agency…and that is true even in a good economy with booming tax revenues. In a bad economy like the current one, there is three or four times the demand for money.
Without question, then, the distribution of the money is important when it gets back to the government’s coffers. Lest money-starved state government officials kill the golden goose, it is very important that at least some of the money gets set aside to support future false claims act prosecutions. So today we will take a look, state-by-state, at how that is handled.
Our own Virginia Fraud Against Taxpayers Act states that “[a] person violating this section shall be liable to the Commonwealth for reasonable attorney fees and costs of a civil action brought to recover any such penalties or damages. All such fees and costs shall be paid to the Attorney General’s Office by the defendant and shall not be included in any damages or civil penalties recovered in a civil action based on a violation of this section.” See Va. Code § 801-216.3(A).
This seems to me to only include the hourly rates for the lawyers of the Virginia Attorney General’s office, and I do know that for the non-MFCU prosecutions no such claim has ever been made. Back in 2008, when I brought the first non-intervened non-healthcare VFATA action and it settled for a tidy sum, one of the debates was whether to put the money in the Literary Fund (which is where most criminal fines, speeding ticket revenue, etc. goes) or whether to use it for some other purposes. As of today, that problem has still not been solved.
Here is a look at how some other states handle the thorny issue of funding their own non-healthcare FCA enforcement units:
• Florida – Florida’s False Claims Act states that any defrauded agency “shall be awarded an amount not to exceed its compensatory damages,” and that any remaining
proceeds “shall be deposited in the General Revenue Fund.” Florida’s False Claims Act also provides that the State “shall be awarded its reasonable attorney’s fees, expenses
and costs,” should the State initiate an False Claims Act suit or assume control of a qui tam action. See Fla. Stat. §§ 68.085(4) and 68.086(1).
• Georgia – Georgia has a Medicaid-only False Claims Act, which provides that proceeds will be added to the “Indigent Care Trust Fund,” a state fund to provide healthcare to
indigent Georgia residents. See Ga. Code. § 49-4-168.2(i)(1) and (2).
• Hawaii – The Hawaii False Claims Act makes clear that in addition to damages and civil penalties, those who violate the Act will also be liable to the state for the costs and
attorneys’ fees of a civil action brought to recover the penalty or damages. See Haw. Rev. Stat. § 46-171(b)(3).
• Illinois – The Illinois False Claims Act states that “[t]he State shall receive an amount for reasonable expenses that the court finds to have been necessarily incurred by the
Attorney General, including reasonable attorneys’ fees and costs. All such expenses, fees and costs shall be awarded against the defendant.” See Ill. Comp.
Stat. 175/4. The Act also creates a “Whistleblower Reward and Protection Fund,” in which all proceeds will be deposited, and specifies that, “subject to appropriation,”
one-sixth of the proceeds deposited into the fund will be paid to the Illinois Attorney General’s Office, one-sixth will go to the Department of State Police, and
the rest will go to the State’s general revenue fund. See 740 Ill. Comp. Stat. 175/8.
• Louisiana – Louisiana’s healthcare-only False Claims Act provides that those found liable for violating the Act will also be liable “for all costs, expenses, and fees related to
investigations and proceedings associated with the violation, including attorney fees,” and specifies that the Secretary of the State’s Department of Health and
Hospitals or the State Attorney General “shall promptly remit awards for the costs, expenses, and fees incurred by the various clerks of court or sheriffs involved in the
investigations or proceedings to the appropriate clerk or sheriff. See La. Rev. Stat. §438.6D. The Louisiana statute also creates a “Medical Assistance Programs Fraud
Detection Fund” and states that after the defrauded medical assistance program has been made whole, any remaining proceeds will be deposited into the fund, with
50% of the money going to the Medicaid Fraud Control Unit in the State Attorney General’s Office and the other 50% going to the State’s Department of Health and
Hospitals. See La. Rev. Stat. § 440.1.
• Maryland – Maryland’s False Claims Act states that when the State files a civil action under the statute, the State may recover its court costs and attorney’s fees. See Md. Code
Ann. Health – Gen. § 2-603(b)(2). The Maryland False Claims Act also states that all proceeds will be deposited “in the General Fund of the States.” See Md. Code Ann. Health –
Gen. § 2-610.
• Massachusetts – The Massachusetts False Claims Act states that in addition to civil penalties and treble damages, those who violate the statute “shall also be liable to the
commonwealth or any political subdivision for the expenses of the civil action brought to recover any such penalty or damages, including without limitation
reasonable attorney’s fees, reasonable expert’s fees and the costs of investigation.” See Mass. Gen. laws ch. 12, § 5B. The statute also states that all proceeds will be
deposited in a “False Claims Prosecution Fund.” See Mass. Gen. laws ch. 12, §§ 5H and 5I.
• Michigan – Michigan has a Medicaid-only False Claims Act that states that, after restitution to Medicaid (i.e. “the state’s funding match for the medicaid fraud control unit”) is paid, the State Attorney General “may recover all costs this State incurs in the litigation and recovery of medicaid restitution under this act, including the cost of investigation and attorney fees.” Any remaining amounts “shall be deposited in the Michigan medicaid benefits trust fund.” See Mich. Comp. Laws. § 400.610b.
• Minnesota – Minnesota’s False Claims Act states that if the State prevails in a State False Claims Act action, then “the court may authorize the prosecuting attorney . . . to recover reasonable
costs, reasonable attorney fees, and the reasonable fees of expert consultants and expert witnesses.” See Minn. Stat. § 15C.12.
• Montana – The Montana False Claims Act specifies that those who violate the statute are “also liable to the governmental entity for the expenses, costs, and attorney fees of the
civil action brought to recover the penalty or damages.” See Mont. Code § 17-8-403(2)(b). The statute also states that all proceeds will be deposited with the
defrauded governmental entity, except that if a trust fund of the entity suffers the loss, then the trust fund must first be reimbursed and the governmental entity will
receive any remaining funds. See Mont. Code § 17-8-410(6).
• California – California’s False Claims Act (False Claims Act) specifies that proceeds will be deposited into a “False Claims Act Fund” and that, “upon appropriation by the
legislature,” the California Attorney General can use these funds to support False Claims Act investigations and prosecutions. See Cal. Government Code § 12652(j).
Nevada – Nevada’s False Claims Act states that proceeds will be deposited into the State General Fund and/or into the general fund of any defrauded political
subdivision. The Nevada False Claims Act also provides that if the State Attorney General initiates the False Claims Act action, then the Attorney General will receive 33% of any proceeds
to use for False Claims Act investigations and prosecutions. See Nev. Rev. Stat. §§ 357.200 and 357.230.
• New Hampshire – The New Hampshire False Claims Act states that those who violate the statute “shall also be liable to the state for the costs and attorneys’ fees arising
from any civil action brought to recover the penalty or damages.” See N.H. Rev.
Stat. § 167:61-b(II)(b).
• New Jersey – The New Jersey False Claims Act states that if the State Attorney General initiates an False Claims Act action or assumes control of a qui tam action, then “the Attorney General
shall be awarded reasonable attorney’s fees, expenses, and costs. All such expenses, fees, and costs shall be awarded against the defendant.” See N.J. Rev.
Stat. § 2A:32C-8. New Jersey’s False Claims Act also states that the “State entity injured by the submission of a false claim shall be awarded an amount not to exceed its
compensatory damages,” and that any remaining funds will be deposited in the State General Fund. If the State False Claims Act claim was based on Medicaid fraud, then 15%
of the funds deposited in the State General Fund will be sent to the “Medicaid Fraud Control Fund.” And if the State Attorney General brought the False Claims Act claim,
regardless of the subject matter, then the Attorney General’s office will receive “a fixed 10% of the proceeds in any action or settlement of the claim that it brings,
which shall be deposited in the ‘False Claims Prosecution Fund.’” The False Claims Prosecution Fund is described as “a nonlapsing revolving fund in the Department of
the Treasury” that the Attorney General can draw from to support False Claims Act investigations and prosecutions. See N.J. Rev. Stat. § 2A:32C-7.
• New Mexico – New Mexico has both a Medicaid False Claims Act and a more general “Fraud Against Taxpayers Act.” New Mexico’s Medicaid False Claims Act specifies that proceeds – as
well as the State’s “legal fees or costs of investigation” – will be remitted to the state’s general fund “to be used for the state’s Medicaid program,” except that the
State Attorney General’s office can claim any civil penalties recovered under the statute. See N.M. Stat. § 27-14-15. The State’s Fraud Against Taxpayers Act
requires that civil penalties be deposited in a school fund, and that all other proceeds must first be “returned to the fund from which the money, property or
services came.” Then, half of any remaining funds would go to the Attorney General to use in furtherance of that Act and the other half would go to the state’s
general fund. See N.M. Stat. § 44-9-7.
• New York – The New York False Claims Act provides that “the court may award the attorney general, on behalf of the people of the state of New York, and any local
government that participates as a party in the action, and any person who is a qui tam plaintiff, an amount for reasonable expenses which the court finds to have
been necessarily incurred, plus reasonable attorneys’ fees, plus costs” and that “[a]ll such expenses, fees and costs shall be awarded directly against the defendant
and shall not be charged from the proceeds, but shall only be awarded if the state or a local government or the qui tam civil action plaintiff prevails in the action.”
N.Y. State Finance Law § 190(7).
• North Carolina – The North Carolina False Claims Act states that Attorney General can retain a portion of the proceeds as reimbursement for costs and attorneys’ fees incurred in
investigating and bringing an action. See N.C. Gen. Stat. § 1-608(c).
• Rhode Island – Rhode Island’s False Claims Act creates a special false claims act fund, in which all proceeds will be deposited. See R.I. Gen. Laws § 9-1.1-8.
• Tennessee – The Tennessee False Claims Act states that if the State Attorney General and/or another prosecuting authority initiated the action, prosecuted the
action together, or intervened in a qui tam action, then the State Attorney General and/or the other prosecuting authority will receive a fixed 33% of the proceeds,
which will be deposited in a False Claims Act Fund to support False Claims Act investigations and prosecutions. All remaining proceeds will revert to the state and/or any
defrauded political subdivision. See Tenn. Code § 4-18-104(g).
• Texas – The Texas False Claims Act states that proceeds will be deposited “in the State Treasury to the credit of the General Revenue Fund.” See Texas Human Resources Code §
32.039(t). The statute also allows the State Attorney General to “recover fees, expenses, and costs reasonably incurred in obtaining injunctive relief or civil
remedies or in conducting investigations under this chapter, including court costs, reasonable attorney’s fees, witness fees, and deposition fees.” See Texas Human
Resources Code § 36.007.
• Washington, D.C. – The District of Columbia’s False Claims Act states that when the District’s Corporation Counsel conducts the action, 25% of the proceeds will go into the
District’s “Antifraud Fund,” to be used by the corporation Counsel “to carry out the enforcement of this chapter, including all costs reasonably related to prosecuting
cases and conducting investigations pursuant to this chapter.” Any remaining fund shall be deposited in the District of Columbia Treasury. See D.C. Code §§ 2.308-
15(f) and 2.308-20.
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