In 1987, the State of California adopted the California False Claims Act (“California FCA”), its own version of the federal False Claims Act (“FCA”). California was the first state to adopt its own False Claims Act. The California FCA allows private individuals who know about fraud against California to bring a qui tam case on behalf of the State against a person or entity for submitting or causing the submission of false claims to California State or local governments.
California False Claims Act and Federal False Claims Act Similarities
Key provisions of the California FCA mirror the federal FCA, such as:
- Liability attaches under the California FCA for, among other violations: submitting a false claim for payment to the State, making or using a false record or statement material to a false claim, conspiring to do either of these actions, failing to deliver all of the property owed to the State, creating or submitting a false receipt, making a false purchase, or making a reverse false claim.
- A private citizen who knows about fraud against the State of California can bring a claim on behalf of the State. If the California Attorney General decides not to pursue the case, the citizen has the right to proceed with the litigation in Court.
- Once an action is brought under the California FCA, it remains under seal for at least 60 days (the State can petition the Court to have the action remain under seal for longer than 60 days).
- Employers are prohibited from retaliating against whistleblower employees. Retaliation includes firing, demoting, suspending, threatening, or harassing the employee. If the employer does retaliate, the employee is entitled to the reinstatement of their position, two times the amount of back pay, interest on the back pay, and compensation for any damages sustained because of the discrimination.
California False Claims Act and Federal False Claims Act Differences
While the California FCA and the federal FCA have numerous similarities, they also have several differences:
- Unlike the federal FCA, the California FCA includes an “inadvertent false claims” provision. This provision states that if a party inadvertently submits a false claim, later realizes that the claim was false, and fails to disclose the false claim to the State or political subdivision within a reasonable time period after discovery of the false claim, that party can potentially be liable under the California FCA. There is no “inadvertent false claims” provision in the federal FCA.
- While the California FCA and the federal FCA both offer financial awards to whistleblowers for bringing an action, the incentive amounts differ. Under the California FCA, if the State decides to intervene in a case, the whistleblower may receive 15-33% of the recovery. If the State does not intervene and the whistleblower pursues the case on their own, they may receive 25-50% of the recovery. Under the federal FCA, if the government decides to intervene in a case, the whistleblower may only receive 15-25% of the recovery. If the government does not intervene and the whistleblower pursues the case on their own, they may only receive 25-30% of the recovery.
Previous California False Claims Act Cases
Numerous qui tam cases have been prosecuted under the California FCA, recovering funds for both the state government and California taxpayers:
- Walgreens: In April 2017, Walgreen Co. (Walgreens) agreed to a settlement of $9.86 million to resolve allegations that the company falsely billed California’s Medicaid Program, Medi-Cal.
- JM Eagle: A former engineer of JM Eagle filed a whistleblower suit against his employer for manufacturing and selling substandard PVC piping to the government. The case settle for $22.5 million in 2014; JM Eagle admitted no wrongdoing.
- Fresenius: In August 2015, Fresenius Medical Care Holdings was faced with a whistleblower suit alleging that the company violated the federal FCA and the California FCA by paying nephrologists kickbacks to send Medicare and Medicaid patients to its dialysis clinics. This case is captioned Jean Diesto v. Fresenius Management Services Inc. et al, case number 2:15-cv-05957, filed in the U.S. District Court for the Central District of California.
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