As the federal and state governments across the United States spend billions of dollars to stimulate the economy and create jobs, many have asked how does the government ensure that taxpayer funds are not the target of fraud, waste and abuse. Although the federal and state governments employ thousands of law enforcement officers and auditors, there are simply not enough government agents to police the billions of dollars in taxpayer funds spent each year. As a result of these limited government resources, the billions of dollars spent in New York alone have historically been an easy target for would-be criminals.
In April of 2007, the New York Legislature took bold action to ramp-up the State's efforts to combat fraud, waste and abuse of government spending by enacting the "New York False Claims Act." The New York False Claims Act (NY FCA), NY CLS St Fin § 187 et seq., became law on April 1, 2007, and applies to claims filed before, on or after this date. Although patterned after the federal False Claims Act (federal FCA or FCA), the New York statute contains interesting provisions which provide both traction for state qui tam realtors and incentives for both state prosecutors and state entities that fall victim to fraud. This article examines the similarities and differences between the federal and NY FCA, and discusses how the NY FCA may prove to be a powerful new tool in combating fraud, waste and abuse of NY taxpayer funds.
I. "The Model of Success:" The Federal False Claims Act
The Federal False Claims Act, 31 U.S.C. § 3729 et seq., is widely regarded as the most effective tool in combating fraud against the federal government. The FCA generally prohibits any individual or business from submitting, or causing someone else to submit, to the government a false or fraudulent claim for payment. Those who are found to have violated the FCA are required to pay the federal government three times the amount of damages sustained by the government and civil penalties of between $5,500 and $11,000 for each false or fraudulent claim. In addition to these damages and penalties, violations of the FCA can trigger a host of potential collateral consequences for defendants, such as disqualification from all future federal and state government contracts.
Congress enacted the FCA during the Civil War to combat fraud against the federal government by suppliers to the Union Army. The FCA, often referred to as "Lincoln’s Law," was used relatively sparingly as an enforcement tool during the century that followed its enactment. Despite some use during World War II, the FCA was largely ineffective at combating fraud against the federal government until the statute was dramatically revamped in 1986.
The 1986 amendments to the FCA were motivated in large measure by highly publicized accounts of abuses in the defense contracting industry, with the government being charged tens of thousands of dollars for everyday items such as hammers and toilet seats. These amendments significantly expanded the role of whistleblowers, increased financial incentives, and reduced a number of critical barriers to bringing actions against persons and entities alleged to have submitted false or fraudulent claims to the federal government.
Since the 1986 amendments were passed, the FCA has become the federal government’s most effective and successful tool in combating waste, fraud and abuse in federal spending. Since 1986, the federal government recovered in excess of $22 billion as a result of cases filed under the FCA. Nearly one-half of all recoveries, and the majority of the largest settlements, have come from health care related cases. The FCA is also highly effective in combating fraud and abuse in government contracts for defense, energy, construction, housing, natural disaster recovery, Iraq War reconstruction, and other forms of government procurement.
The success of the FCA has resulted in large measure from lawsuits brought by whistleblowers (otherwise known as "Relators"), under the "qui tam" provisions of the FCA. In general, the qui tam provisions authorize any person or entity to file a FCA case on behalf of the federal government. As a reward for reporting the fraud, the whistleblower may be entitled to receive between 15% and 30% of the government's recovery in the action.
Recognizing the tremendous success of the public and private partnership in combating fraud, waste and abuse in government spending, the Congress recently amended the FCA to broaden the scope of its protections and to strengthen this nearly 150 year-old fraud-fighting law. On May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA) (S. 386) (Pub .L. No. 111-21). The FERA Amendments to the federal FCA close some judicially created loopholes in the law, and provide added teeth to the federal government's most effective fraud fighting measure at a time when billions of dollars in taxpayer funds are being spent to stimulate the economy and rescue the nation's financial institutions.
II. "A Long Time Coming:" History of the NY FCA
Although the success of the federal FCA was widely recognized, many states, including New York, repeatedly failed to enact similar statutes protecting the billions of dollars in state government spending. While there are many reasons why states across the country have been slow to enact false claims laws, one common theme has been that powerful lobbyists have worked diligently to defeat state false claims laws. While many state legislators publicly pronounced that combating fraud, waste, and abuse of taxpayer funds was a worthy goal, in many cases developing the needed legislative focus needed to pass a state false claims act failed because the lobbyists working against false claims laws were simply too organized and too well-financed.
In New York, however, a powerful combination of strong legislative and executive leadership, along with substantial financial incentives from the federal government, finally came together in 2007 to pass a strong state false claims act. The road to enacting a NY FCA, however, was long and hard. In fact, the idea of a false claims act in New York existed at least as early as 2003. Based upon the unprecedented success of the federal FCA, then-New York Attorney General Elliot Spitzer recommended the adoption of a state false claims act with a qui tam provision. However, when this bill was introduced in the New York Legislature, two powerful lobbying groups, the Health Care Association of New York State and the State Medical Society opposed its passage. These groups predicted that "the bill would lead to an epidemic of frivolous allegations" and their opposition contributed substantially to the defeat of the bill.
The idea arose again when in July of 2005 the New York Times published a string of articles criticizing state authorities for losing billions to Medicaid fraud and abuse. These articles attributed the losses to relaxed regulation and inadequate policing of New York’s Medicaid program. The New York Times estimated that fraud and abuse might account for as much as forty percent of overall expenditures in the state’s $44.5 billion Medicaid program. The articles also identified various abuses of the Medicaid program, including a dentist who billed for nearly 1,000 patients a day, a school district’s referral of over 4,000 students in a single day for Medicaid-funded speech therapy, and fraudulent medical transportation companies purportedly providing transportation for the injured and sick.
In 2006, the New York Assembly proposed a state false claims act modeled on the federal FCA. This legislation would have provided for civil liability for the submission of any false claims to the state government. Legislation proposed by the New York Senate did not contain a similar provision. This time, the state Senate, in addition to the Healthcare Association of New York State, opposed the proposal. Senate opponents to the Bill argued that Medicaid fraud enforcement should remain as a governmental responsibility. Additionally, the opposition argued that so-called bounty hunters, or qui tam relators, would bring frivolous qui tam actions. The Healthcare Association of New York State argued that the proposal would conflict with existing law and protocols, would inhibit provider compliance efforts, and would result in abusive litigation. This focused opposition was enough to again defeat false claims legislation in New York.
II. "Carrots and Sticks:" The Perfect Mixture Needed to Pass the NY FCA
On January 1, 2007, the history of the New York False Claims Act was forever changed. On this date, Eliot Spitzer, a long time advocate of a New York False Claims Act, became the Governor of New York. In his first annual address to the legislature, Governor Spitzer stated that "we must aggressively fight Medicaid fraud through a state False Claims Act … which I will propose this year."
Also on this date, the key piece of the federal Deficit Reduction Act of 2005 (DRA) became effective. Importantly, the DRA amended the Social Security Act to provide that "if a State has in effect a law relating to false or fraudulent claims that meets the requirements of subsection (b), the federal medical assistance percentage with respect to any amounts recovered under a State action brought under such law, shall be decreased by 10 percentage points." Thus, states with false claims acts are entitled to retain a 10% greater share of the proceeds than states without a false claims act.
The 10% entitlement is not automatic. To receive this additional return, the state FCA must contain certain provisions and must be approved by the Inspector General of the Department of Health and Human Services (HHS), in consultation with the Attorney General. Fortunately, the NY FCA was easily approved by the Inspector General of HHS and the Attorney General on August 7, 2007.
In proposing this ultimate bill, the New York Legislature recognized that the "state is involved in the direct and indirect payment of tens of billions of dollars every year, and the payment of fraudulent claims has a significant adverse effect on the fiscal well being of the state." Submitted as an amendment to the state’s finance law, Governor Elliot Spitzer signed the NY FCA into law as part of the 2007 New York state budget.
III. The Federal And NY FCAs: Similarities And Differences
During President Abraham Lincoln’s administration, Congress enacted the federal FCA in order to fight fraud committed by unscrupulous defense contractors during the Civil War. The "qui tam" provisions of the federal FCA permit a private citizen to bring evidence of fraud against the federal government to the government’s attention. In recognition of the citizen’s assistance to the government in recovering the damages and penalties related to the fraudulent conduct, a citizen is entitled to receive a reward, namely a portion of the government’s recovery. Since its enactment, the federal FCA has been amended a number of times, including the two most significant amendments which occurred in 1986 and 2009.
Both the NY FCA and the federal FCA provide for the initiation of a false claims lawsuit by a qui tam plaintiff, also known as a "whistleblower" or a "relator." The private citizen who, in the name of the local, state and/or federal government, files a civil action against a defendant who is alleged to have commited false claims violations by, inter alia, making a claim for government funds to which it is not entitled.
Over the past two decades, as a result of the successful government-private relator working relationship, enormous benefits have resulted from the qui tam provisions of the federal FCA. The most obvious advantage of the qui tam provisions of the federal act (and its state counterpart) is that knowledgeable citizens have been encouraged to come forward to report fraud perpetrated upon the government. In return, the government has reaped the benefit of the qui tam relators’ efforts: the return to the treasury of taxpayer funds which had been obtained through false or fraudulent means. There have been less apparent, but equally important, benefits emanating from the qui tam provisions of the federal statute. These include the practical consequences of the concerted efforts of prosecutors working closely with the private relators’ bar. This successful relationship forged between government attorneys and the private relators’ bar has emerged since the 1986 amendements reinvigorated the federal FCA.
As a natural consequence of the similarities between the NY FCA and the federal FCA, the benefits emanating from a 23-year working relationship with seasoned federal prosecutors, proactive states attorneys' general, and private relators’ counsel under the federal act will all inure to New York’s fraud fighting efforts. Those charged with enforcing the NY FCA will benefit from the participation of seasoned relators’ counsel in false claims investigations and litigation. Relators’ counsel, having litigated along side the federal government and a number of already active states pursuing claims for more than two decades are able and willing to bring their expertise and resources to bear on cases filed under New York’s newly-minted act.
In most respects, the NY FCA is substantially similar to the federal FCA. However, there are certain substantive and procedural distinctions that are important to review and fully understand. The provisions of the NY FCA that differ from its federal predecessor can be generally grouped as follows: statutory penalties, initial obligation when fraud is suspected, initiating procedure, and related actions. The pertinent provisions of each act provide as follows.
A. Prohibited Conduct And Liable Parties
The NY FCA mimics the federal act's language, which imposes liability upon people who present or cause to be presented false or fraudulent claims for payment or approval to an employee or officer of the government. But the NY FCA also adds that "presenting" a false claim to an "agent of the State, or to any contractor, grantee or other recipient of State funds" will trigger a violation of the act. This provision appears to be a significant effort by New York legislators to assist the state in reaching fraud involving all government funds, wherever they may be found, when the false claim for the funds is presented, paid or approved. This language will cover contractors, subcontractors, consultants and other entities that contract directly or indirectly with New York. The 2009 FERA Amendments to the federal FCA recently clarified Congress' similar intent to impose potential liability, as the New York statute already provides, for false claims made to any recipient of federal funds.
In one important respect, however, the NY FCA is arguably more restrictive than the federal FCA. The NY FCA does not permit any action to be filed against a state or local government. The NY FCA broadly defines a "person" subject to the statute as "any natural person, partnership, corporation, association or any other legal entity or individual, other than the state or a local government." While the federal FCA does not contain similar language, the United States Supreme Court has held that states are not "persons" for purposes of qui tam liability under the FCA. However, local governments can be sued under the federal FCA for filing false or fraudulent claims. Thus, the NY FCA eliminates a potentially significant source of false claims act recovery; local governments.
B. NY FCA's Broad Definition of False "Claim"
The NY FCA imposes liability for making "a false or fraudulent claim." The definition of what constitutes a "claim" determines the scope of conduct, which will trigger the liability provisions of the act. The NY FCA defines the term "claim" broadly to include, as its federal counterpart does, "any request or demand, whether under a contract or otherwise, for money or property." In addition, a false "claim" under the NY FCA includes a false request or demand for government money or property made to "any employee, officer, or agent of the State or a local government," as well as to those listed in the federal act (contractors, grantees and other recipients of government funds). The New York Legislature has defined "state" very broadly to include: "the state of New York and any state department, board, bureau, division, commission, committee, public benefit corporation, public authority, council, office or other governmental entity performing a governmental or proprietary function for the state." Like the federal FCA, the NY FCA is triggered where the state government "provides any portion of the money, [or] property … requested or demanded." The NY FCA also attaches liability if the state "will reimburse ... for any portion of the ... services requested or demanded."
The New York Legislature's decision to include claims to local government within the scope of the NY FCA is important for several reasons. First, by including claims made to local governments, the NY FCA has the ability to protect funds spent by a "county, town, village, school district, board of cooperative educational services, local public benefit corporation or other municipal corporation or political subdivision of the state." Second, under the NY FCA, the Attorney General and a local government may bring a civil action. The addition in the New York FCA of local government provides hundreds of local governments with the opportunity to recover money for fraud schemes perpetrated against it.
C. Requisite State of Mind
Neither the federal FCA nor the NY FCA require that a defendant have actual knowledge that he or she is submitting a false claim before liability will attach. Rather, liability attaches when a defendant acts "knowing" or "knowingly." In this regard, the terms "knowing" and "knowingly" "mean that a person, with respect to information: (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required." Additionally, of comfort to some, the New York FCA expressly states that "acts occurring by mistake or as a result of mere negligence are not covered by this article."
D. Statutory Penalties
Both the federal and NY FCAs impose penalties upon persons who violate either Act. The statutory penalties under the NY FCA are more stringent than under its federal counterpart. Under the federal FCA, a defendant is liable "to the United States government for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages which the government sustains because of the act of that person." In 1999, the Department of Justice issued a Final Rule increasing these penalty amounts to not less than $5,500 and not more than $11,000.
In contrast, under the NY FCA, a defendant is liable "to the state for a civil penalty of not less than $6,000 and not more than $12,000, plus three times the amount of damages that the state sustains because of the act of that person." Additionally, in New York, an actor is liable "to any local government for three times the amount of damages sustained by such local government because of the act of that person."
Both the federal and New York FCAs provide for reduction of these civil penalties under certain prescribed circumstances. Penalties may be reduced, under both FCAs, when: (1) the violator informs the government of the violation within 30 days after the violator first learned of the violation; (2) the violator fully cooperates with any government investigation; and (3) at the time the violator informed the government of the violation, there was no criminal prosecution, civil action, or administrative action under either FCA, and the violator did not know of any investigation into such violation. Essentially, penalties may be reduced when the violator comes clean and fully cooperates with the government.
Although statutory penalties are greater in New York, reduced penalties under the federal FCA are equal to or greater than those under the New York FCA. Under the federal FCA, the reduced penalties are limited to "not less than two times the amount of damages," while under the NY FCA, "the Court may assess not more than two times the amount of damages." Thus, when the government is damaged in the amount of $100,000, statutory penalties under both FCAs are $300,000. When the circumstances authorize the reduction of penalties, the amount due under the federal FCA is between $200,000 to $300,000, while the amount due under the NYC FCA is between $0 and $200,000. Given this illustration, it is clearly in the violator’s best interest to come clean to the government, self report and cooperate fully with any investigation.
An action under the NY FCA may be filed in federal or state court, with the Supreme Court exercising jurisdiction over state court actions. In contrast, a federal FCA case is filed only in the federal district court in which the defendant may be found, resides, transacts business or in which the false claims act violations occurred. The federal FCA expressly provides, however, that federal district courts have pendent jurisdiction over state claims. There is, however, a clear incentive for filing false claims act cases in federal court, even those initiated by the state attorney general. On one hand, it relieves the state courts of the cost of administration of these cases, but it also provides the litigants with the federal judiciary's longer experience with the issues presented under the similarly worded federal statute.
There are 62 counties in New York, each serving as a seat for the Supreme Court, New York's civil trial division. Each of the 62 county clerk's offices that may receive filings for the New York Supreme Court must become comfortable with all of the nuances of the seal provisions, which are an integral part of the NY FCA. A false claims litigant and his counsel must likewise feel comfortable walking into any New York State Court clerk's office and meeting with staff who will assist in making certain that the technical aspects of filing a case under seal are meticulously met. Most but not all federal district court clerks' offices are conversant with the seal provisions. The training of 62 state clerks offices to handle delicate filing requirements designed to preserve the seal will take some time. However, as the NY FCA becomes more widely known, frauds that are perpetrated solely against the state and its agencies will be exposed and provide opportunities for cases involving NY FCA violations to be filed in New York state court only.
Both the federal and NY FCAs contain qui tam provisions that authorize a private individual, known as a relator, to bring an action on behalf of either the "government" or "the people of the state of New York or a local government." Because the NY FCA authorizes the local government to pursue relief, in addition to the state of New York, there are procedural distinctions between the federal and NY FCAs regarding the filing of the complaint.
Under the NY FCA, a copy of the complaint and the material evidence must be filed in camera and remains under seal for sixty (60) days. If the allegations in the complaint allege a violation involving damages to a local government, the Attorney General may at any time provide a copy of such complaint and written disclosure to the Attorney General for such local government; provided, however, that if the allegations in the complaint involve damages only to a city with a population of 1,000,000 or more, or only to the state and such a city, then the Attorney General shall provide such complaint and written disclosure to the corporation counsel of such city within thirty (30) days.
F. Investigating Cases Under the NY FCA
Upon receipt of the false claims complaint, both the federal and NY FCA call for the Attorney General to investigate the qui tam relator's allegations of fraud. In particular, under the federal FCA, the "Attorney General diligently shall investigate a violation under Section 3729. If the Attorney General finds that a person had violated or is violating Section 3729, the Attorney General may bring a civil action under this section against the person."
By contrast, the NY FCA, "the Attorney General shall have the authority to investigate a violation," and "if the Attorney General believes that a person has violated or is violating such section, then the Attorney General may bring a civil action on behalf of the people of the State of New York or on behalf of a local government against such person. A local government also shall have the authority to investigate violations that may have resulted in damages to such local government under [the NY FCA], and may bring a civil action on its own behalf to recover damages sustained by such local government as a result of such violations." The differences in this italicized language suggest that the Attorney General is required to investigate a violation under the federal FCA, while the New York Attorney General and the local government are authorized, but not required, to investigate a violation under the NY FCA. Additionally, the Attorney General, New York Attorney General, and New York local government are authorized, but are not required, to pursue a civil action. Furthermore, in New York, the attorney general "shall consult with the office of Medicaid Inspector General prior to filing any action related to the Medicaid program."
The state may elect to supersede or intervene and proceed with the action, or to authorize a local government that may have sustained damages to supersede or intervene, within sixty (60) days after it receives both the complaint and the material evidence and information; provided, however, that if the allegations in the complaint involve damages only to a city with a population of 1,000,000 or more, then the Attorney General may not supersede or intervene in such action without the consent of the corporation counsel of such city. The Attorney General shall consult with the office of the Medicaid Inspector General prior to superceding or intervening in any action related to the Medicaid program.
The respective Attorney Generals, as well as local counsel, may move to extend the period under which the complaint remains sealed. Under both acts, such a motion must be for "good cause," and may be supported by affidavits or other submissions in camera. Neither act defines the term "good cause."
Prior to the expiration of this sixty (60) day period, or any extension, the New York Attorney General may elect to "file a complaint against the defendant on behalf of the people of the state of New York or a local government, and thereby be substituted as the plaintiff in the action and convert the action in all respects from a qui tam civil action brought by a private person into a civil enforcement action by the Attorney General under subdivision 1 of this section." "If the Attorney General elects to convert the qui tam civil action into an Attorney General enforcement action, then the state shall have the primary responsibility for prosecuting the action." The conversion of the action into an Attorney General enforcement action does not impact the rights of the qui tam relator to a portion of the proceeds.
Under the federal FCA, the Attorney General also has sixty (60) days (or longer if an extension is granted) to proceed with the action, in which case the action shall be conducted by the Government. The Attorney General’s decision to proceed with the action does not impact the rights of a qui tam relator to a portion of the proceeds. Thus, when the government elects to proceed, the action, the government bears the responsibility for prosecuting the action, while the relator retains a right to a portion of the proceeds.
G. Pending State Action May Bar the Qui Tam Plaintiff's Case
The federal and NY FCAs also differ with respect to whether a second party may bring a related action. Under the federal FCA, when a qui tam action is brought, "no person other than the government may intervene or bring a related action based on the facts underlying the pending action." Under the NY FCA, however, a person "may intervene or bring a related civil action based upon the facts underlying the pending action" if that person "has first obtained the permission of the Attorney General to intervene or to bring such related action." This is a meaningful distinction between the two statutes and, if administered thoroughly by the Attorney General's Office, may help it shape the scope of litigation and amicably resolve relator disputes in this area.
H. The Qui Tam Plaintiff's Share of the Recovered Proceeds
Under both the NY FCA and the federal statute, a qui tam plaintiff receives 15 to 25 percent of proceeds of the action or settlement of the claim in cases where the government intervenes and 25 to 30 percent if the government does not intervene (thereby leaving the relator, through his counsel, to prosecute the claim without any government resources or assistance). In addition, the qui tam relator is entitled to receive their reasonable attorney's fees, expenses, and costs. These attorney's fees, expenses and costs are paid by the defendant, and do not reduce the relator's share of the recovery by the state and/or local government.
These provisions indicate that the New York Legislature recognizes the integral role of qui tam relators in efforts to prosecute fraud, waste and abuse. This provision sends a message to potential relators and to the qui tam bar, in general, that the New York Legislature views the private citizen who reports false claims violations as an integral component in the effort to fight fraud — even in those instances where the recovery is ultimately based predominantly on the government's own information.
I. Fees and Costs Available for Initiating, Assuming Control
Under the NY FCA, when the attorney general or local counsel becomes involved in a False Claims Act case, either by initiating the action or by assuming control of an action previously brought by a qui tam plaintiff, the attorney general and/or the local counsel shall be entitled to receive their reasonable attorney's fees, expenses, and costs. A number of state false claims acts contain similar provisions. Surprisingly, the federal False Claims Act has never contained such a potent funding tool. Therefore, the federal government's attorneys lack similar incentives and the potential for the U.S. attorney general to recoup the considerable resources it dedicates to fighting fraud.
Of course, the opportunity of the New York Attorney General or local counsel to recover attorney fees and costs is completely contingent upon their initiating a false claims action on their own or assuming control (aka "taking over") of an action brought by a qui tam relator under the NY FCA. The New York Legislature wisely both enacted this legislation requiring the enforcement of the NY FCA and simultaneously provided the necessary funding. The office charged with enforcing the NY FCA, namely the attorney general or local government counsel, has a compelling incentive to become actively engaged with a qui tam plaintiff's case early on — the promise of receiving their counsel fees and costs at the resolution of the matter. This funding provision empowers the New York Attorney General or local government counsel to make their intervention decisions with the knowledge that they will directly benefit from active prosecution of a NY FCA case. The fees and costs provision of the NY FCA should be a clear incentive for the Attorney General's Office and local government counsel to take an early and active investigative and prosecutorial role — and, at the very least, should soften any reticence on their part to become involved in meritorious qui tam matters because of funding or staffing concerns.
J. Employee Protection Under The Act
An employee who knows that his or her employer is submitting false claims is placed in a precarious situation. The employee may refrain from reporting this conduct if the employee feels it may result in retaliation. Both the federal and New York FCAs provide protection that discourages employers from retaliating against the employee for either initiating or participating in a false claims action. The FCAs prohibit discrimination and authorize all relief necessary to make the employee whole, providing that "any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of the lawful acts done by the employee on behalf of the employee or others in furtherance of an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, two (2) times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. An action for relief under the federal FCA may be brought in "the appropriate district court of the United States," while under the NY FCA the action may be brought "in the appropriate supreme court." Claims for retaliation under these provisions are governed by a six year statute of limitations.
K. Statutes Of Limitations And Burdens Of Proof
Regarding the time for initiating an action, both FCAs provide that the civil action must be commenced either six (6) years after the date of the violation or three (3) years after the date when the material facts are known or reasonably should have been known, whichever occurs later, but in no event more than ten (10) years after the date of the violation. Additionally, the plaintiff in either a federal or New York action has the burden of proving all essential elements of the cause of action by a proponderance of the evidence.
In addition to the False Claims Act, New York has a second method by which to combat Medicaid fraud. On July 26, 2006, New York established the Office of the Medicaid Inspector General (OMIG) as an independent formal state agency in the New York State Department of Health. The current Medicaid Inspector General, James G. Sheehan, reports directly to the Governor.
Under New York law, the Inspector General, is directed "to pursue civil and administrative enforcement actions against any individual or entity that engages in fraud, abuse, or illegal or improper acts, or unacceptable practices, perpetuated within the medical assistance program."
Thus, New York, through the NY FCA and the OMIG, fights fraud through both the private and the public sectors. These statutes, working together, cover all possible avenues for detecting, reporting, and prosecuting Medicaid fraud. While both provisions are relatively new, there can be no doubt that numerous civil actions and recoveries for the state are forthcoming. In 2008 alone, New York, acting through the Attorney General, Medicaid Inspector General and other agencies, recovered $551 million from Medicaid fraud. These outstanding results should only increase as greater knowledge and resources are committed to the public and private partnership for combating fraud embodies in the NY FCA.
New York has a potent new statute, which, if properly cultivated, utilized and protected, will reap significant rewards for the taxpayers of the Empire State. Most other states that have passed similar laws have experienced a sizeable increase in their fraud recoveries. The next few years will be crucial to watch how the state, the Attorney General's Office and local government counsel, qui tam relators and their counsel, as well as the Medicaid Inspector General, choose to give shape to these new fraud enforcement abilities for the benefit of the New York taxpayer. The state should do everything it can to encourage the filing of meritorious claims under its new statute. Only time will reveal the benefits to the taxpayers of New York from their Legislature's bold and ambitious efforts.
Reprinted with permission from- New York State Bar Association Journal, February 2010 Vol. 82, No. 1, published by the New York State Bar Association, One Elk Stree, Albany, NY 12207.