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Maryland’s Proposed False Claims Act Doesn’t Go Far Enough to Fight Fraud

Last month, Maryland’s recently elected Attorney General Brian Frosh proposed legislation to expand Maryland’s False Claims Act (“FCA”) law.  The bill was submitted with bipartisan support in the Maryland legislature and just this week passed with amendments in the Senate by a vote of 46-1.  False Claims Act laws allow private citizen whistleblowers (referred to as “relators”) to bring qui tam lawsuits for fraud on the government on behalf of themselves and the federal or state governments.  FCA lawsuits are huge moneymakers for federal and state treasuries, with the federal government recovering billions of dollars each year, largely as a result of whistleblowers, who often come forward at significant professional risk.  To encourage these individuals to report fraud, relators are awarded a share of any government recovery.

The majority of states and the District of Columbia have enacted FCA laws, most of which closely parallel the federal statute, with some providing additional protections.  Maryland, however, is among the minority of these states that have a “Medicaid only” False Claims Act, meaning that only claims of fraud on state-funded healthcare programs, such as Medicaid, are currently actionable.  In addition, unlike its federal counterpart, the current version of Maryland’s FCA only permits relators to pursue claims if the state consents (referred to in the FCA context as “intervening”).  Both of these gaps in Maryland’s FCA have likely caused the state to lose out on recouping millions of fraudulently obtained state dollars at the expense of taxpayers and government programs.

Instead of addressing both gaps at the same time, the expansion proposed by Frosh and being considered in the Maryland legislature, cures only one.  If passed, the proposed legislation will allow Maryland’s FCA to be utilized to prosecute other types of fraud, such as government contract fraud.  In the last two fiscal years alone, Maryland has reportedly recovered $56.7 million from its prosecution of health-care related fraud under its FCA.  But 40% of federal FCA recoveries involve other types of fraud, which to date have been left unchecked by Maryland’s FCA.

The proposed legislation will not, however, cure the weaknesses in Maryland’s qui tam provisions, namely the inability of relators to pursue non-intervened cases.  When a state or the federal government intervenes in an FCA case, it typically assumes the responsibility and cost of litigating the case.  Under the federal FCA, however, if the government declines intervention, a relator can pursue the case at his own expense, although the lion’s share of any recovery must still be turned over to the government, which also retains ultimate authority over whether to settle a case.

In other words, the federal government benefits substantially even from non-intervened cases without having to spend time or expense litigating them.  According to statistics released by the U.S. Department of Justice (“DOJ”), for example, since enactment of the federal FCA in 1987, over $1 billion was recovered on behalf of the federal government in declined cases that a relator pursued on his own, with an annual average of over $100 million in the past five years.

Yet, under Maryland’s qui tam provisions, a court is required to dismiss a relator’s case if the state elects not to intervene or decides to withdraw after intervening.  Thus, not only is Maryland foregoing substantial revenue that it could recover in non-intervened cases, it has no cost-benefit reason for doing so.  The DOJ, for example, may decline intervention for a myriad of reasons, including insufficient resources.  But in such instances, whistleblowers and their counsel are able to step in and help when needed.  By failing to allow for this in the state fraud context, Maryland is precluding an important avenue for relief from fraud on government programs, which only serves to hurt taxpayers.

A robust FCA is a critical tool in fighting fraud and abuse, which Maryland citizens recognize.  In fact, public support of a strong FCA was reflected in the recent electoral defeat of former Republican Sen. David Brinkley, who prevented similar 2014 amendments to Maryland’s FCA from reaching a full vote on the Senate floor.  Brinkley, a sitting incumbent at the time, was defeated by another more conservative member of his own party, Sen. Michael Hough, who is one of the co-sponsors of Frosh’s current bill.  The people’s vote in that election is a reminder that taxpayers know they bear the brunt of unaddressed fraud on the government and they expect their public representatives on both sides of the aisle to vigorously pursue anti-fraud enforcement efforts.  This should include strengthening Maryland’s FCA qui tam provisions to be at least as strong as the federal government.