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New York’s False Claims Act Cleans Up Business Practices and Rewards Whistle Blowers

By Nicholas Papain, Esq.

In 2007, New York State enacted into law the New York False Claim Act.

The law, modeled after a federal statute created during the Civil War to combat corrupt contractors, imposes liability on those who “knowingly present or cause to be presented to the state or a local government, a false or fraudulent claim for payment or approval”. (New York State Finance Law; Chapter 56/Article XIII: New York False Claims Act) Among other things, the False Claims Act proscribes: false Medicaid claims submitted by unscrupulous healthcare centers; overcharging for services provided pursuant to government contract; and the sale of flawed or even bogus goods to a government agency.

The law is a powerful tool to counter fraud in business dealings with the government. Its provisions enable private citizens to bring lawsuits against those who profit from dishonest practices, enriching themselves with public monies. When a suit is successful, the government’s money is returned to it.

The penalty for violating the provisions of the False Claims Act is liability in an amount up to double the amount of the government’s damages. In other words, for every dishonest dollar he or she earns, a wrongdoer will owe two dollars back as a punishment. In addition, any “person who violates this section shall also be liable for the costs, including attorneys’ fees, of a civil action brought to recover any such penalty or damages.” This means that a violator is also responsible for court and trial costs.

New York’s False Claims Act offers incentives to those with knowledge of fraudulent or wrongful conduct to become “whistle blowers.” Any person, not just State officials or prosecutors, can step forward and commence a lawsuit against an alleged violator to recover government money. In some instances, the Attorney General’s office will intervene in a private lawsuit, and assist the whistleblower. The reward anticipated is that “the person or persons who initiated the civil action shall be entitled to receive between fifteen and twenty-five percent of the proceeds recovered in the action or in settlement of the action.” The larger the fraud at issue, the larger the reward to be recovered.

The sums of money involved can be substantial.

Just last month, a major managed care provider operating in New York, and participating in the State’s Medicaid program, agreed to pay $35 Million Dollars to settle a False Claim action. The provider was alleged to have offered bonuses to its workforce to swell the ranks of Medicaid patients it treated, a prohibited practice.

In August 2005, the City of New York enacted its own False Claims Act. According to the City Law Department, “the statute creates a way for people to help the City recover money lost through fraud…As an incentive to bring suits, this new law allows successful citizen plaintiffs, under certain circumstances, to keep as much as 30% of funds they help recover.”

If you are aware of a dishonest business practice that costs the State or local government money, you should consult with an attorney at once.

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