California False Claims Act – Qui Tam Whistleblower

Passed in 1987, California’s False Claim Act (FCA) was modeled after the newly amended federal false claims act [link to fed page]. The California False Claims Act permits the Attorney General to bring a civil action to recover damages and penalties against any person who knowingly uses or makes a false statement or document, to obtain money or property from the State or avoid paying to the State.

California also allows for “qui tam” lawsuits, which are civil suits brought by a whistleblower (or “relator”) to prosecute false claims on behalf of the state and obtain a portion of the award.  Though the government may, upon review of the allegations, join or “intervene” in the lawsuit, the whistleblower is still eligible to receive a percentage of the recovery (15-33%), depending upon the extent of his/her contribution to the prosecution of the fraud.    

California False Claims Act

The California False Claim Act makes it illegal to knowingly do any of the following:

  • Present or cause to be presented to the government a false claim for payment or approval;
  • Make, use, or cause to be made or used a false record or statement to get a false claim paid or approved by the government;
  • Conspire to defraud the government by getting a false claim allowed or paid;
  • Deliver or cause to be delivered less public property or money than reflected on a receipt or certificate;
  • Make or deliver a receipt by an authorized person that falsely represents the property to be used by the government;
  • Buy or receive a pledge of public property from any person who may not lawfully sell or pledge it;
  • Make, use, or cause to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the government (also known as a reverse false claim); or
  • Be the beneficiary of an inadvertent false claim who discovers its falsity and fails to disclose it to the government within a reasonable time.

Though very similar to the federal False Claims Act, the California False Claims Act differs from its federal counterpart in that it makes illegal an additional category of conduct: failing to report an inadvertent benefit after discovering it.  Thus, if a party inadvertently submits a false claim and fails to report the mistake to the government once discovered, that party can be potentially liable under the California False Claims Act.   Failure to report it after discovery of the inadvertent false claim can lead to the same penalties as knowingly committing the original act. 

California False Claim Act Penalties

Like its federal counterpart, the California FCA provides for “treble” damages – that is, a person who violates the FCA is liable for three times the amount of damages sustained by the government.  The California FCA also penalizes each instance of misconduct up to $10,000 and allows for individual whistleblowers and their attorneys to file qui tam lawsuits. Whistleblower rewards can be up to 50 percent of the amount recovered on behalf of the government.

California False Claim Act Rewards

The California FCA rewards whistleblowers who prosecute false claims on behalf of the government to up to 50 percent of the total amount recovered by the state.  Given the significant penalties and fines provided under the California FCA, the whistleblower reward can be substantial.  For example, in 2018, one whistleblower received $27 million after a natural gas company agreed to pay $102 million to resolve claims it overcharged the state of California for natural gas.

California False Claim Act Rules

California Government Code Section 12650:

Section 12650:

(a) This article shall be known and may be cited as the False Claims Act.

(b) For purposes of this article:

(1) “Claim” means any requests or demand, whether under a contract or otherwise, for money, property, or services, and whether or not the state or a political subdivision has title to the money, property, or services that meets either of the following conditions:

(A) Is presented to an officer, employee, or agent of the state or of a political subdivision.

(B) Is made to a contractor, grantee, or other recipient, if the money, property, or service is to be spent or used on a state or any political subdivision’s behalf or to advance a state or political subdivision’s program or interest, and if the state or political subdivision meets either of the following conditions:

(i) Provides or has provided any portion of the money, property, or service requested or demanded.

(ii) Reimburses the contractor, grantee, or other recipient for any portion of the money, property, or service that is requested or demanded.

(2) “Claim” does not include requests or demands for money, property, or services that the state or a political subdivision has paid to an individual as compensation for employment with the state or political subdivision or as an income subsidy with no restrictions on that individual’s use of the money, property, or services.

(3) “Knowing” and “knowingly” mean that a person, with respect to information, does any of the following:

(A) Has actual knowledge of the information.

(B) Acts in deliberate ignorance of the truth or falsity of the information.

(C) Acts in reckless disregard of the truth or falsity of the information.

Proof of specific intent to defraud is not required.

(4) “Material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money, property, or services.

(5) “Obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.

(6) “Political subdivision” includes any city, city and county, county, tax or assessment district, or other legally authorized local governmental entity with jurisdictional boundaries.

(7) “Political subdivision funds” means funds that are the subject of a claim.

(8) “Prosecuting authority” refers to the county counsel, city attorney, or other local government official charged with investigating, filing, and conducting civil legal proceedings on behalf of, or in the name of, a particular political subdivision.

(9) “Person” includes any natural person, corporation, firm, association, organization, partnership, limited liability company, business, or trust.

(10) “State funds” mean funds that are the subject of a claim.

 

California Government Code Section 12651:

Section 12651:

(a) Any person who commits any of the following enumerated acts in this subdivision shall have violated this article and shall be liable to the state or to the political subdivision for three times the amount of damages that the state or political subdivision sustains because of the act of that person. A person who commits any of the following enumerated acts shall also be liable to the state or to the political subdivision for the costs of a civil action brought to recover any of those penalties or damages, and shall be liable to the state or political subdivision for a civil penalty of not less than five thousand five hundred dollars ($5,500) and not more than eleven thousand dollars ($11,000) for each violation, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990, Public Law 101–410 Section 5, 104 Stat. 891, note following 28 U.S.C. Section 2461.

(1) Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval.

(2) Knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim.

(3) Conspires to commit a violation of this subdivision.

(4) Has possession, custody, or control of public property or money used or to be used by the state or by any political subdivision and knowingly delivers or causes to be delivered less than all of that property.

(5) Is authorized to make or deliver a document certifying receipt of property used or to be used by the state or by any political subdivision and knowingly makes or delivers a receipt that falsely represents the property used or to be used.

(6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property.

(7) Knowingly makes, uses, or causes to be made or used a false record or statement material to an obligation to pay or transmit money or property to the state or to any political subdivision, or knowingly conceals or knowingly and improperly avoids, or decreases an obligation to pay or transmit money or property to the state or to any political subdivision.

(8) Is a beneficiary of an inadvertent submission of a false claim, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery of the false claim.

(b) Notwithstanding subdivision (a), the court may assess not less than two times and not more than three times the amount of damages which the state or the political subdivision sustains because of the act of the person described in that subdivision, and no civil penalty, if the court finds all of the following:

(1) The person committing the violation furnished officials of the state or of the political subdivision responsible for investigating false claims violations with all information known to that person about the violation within 30 days after the date on which the person first obtained the information.

(2) The person fully cooperated with any investigation by the state or a political subdivision of the violation.

(3) At the time the person furnished the state or the political subdivision with information about the violation, no criminal prosecution, civil action, or administrative action had commenced with respect to the violation, and the person did not have actual knowledge of the existence of an investigation into the violation.

(c)  Liability under this section shall be joint and several for any act committed by two or more persons.

(d) This section does not apply to any controversy involving an amount of less than five hundred dollars ($500) in value. For purposes of this subdivision, “controversy” means any one or more false claims submitted by the same person in violation of this article.

(e) This section does not apply to claims, records, or statements made pursuant to Division 3.6 (commencing with Section 810) of Title 1 or to workers’ compensation claims filed pursuant to Division 4 (commencing with Section 3200) of the Labor Code.

(f) This section does not apply to claims, records, or statements made under the Revenue and Taxation Code.

(g) This section does not apply to claims, records, or statements for the assets of a person that have been transferred to the Commissioner of Insurance, pursuant to Section 1011 of the Insurance Code.

 

California False Claim Lawyer

Schneider Wallace represents California whistleblowers. Schedule a consult with our false claim lawyers for a free and confidential consultation. Contact us at 1-800-689-0024 or info@schneiderwallace.com.

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