CHARLESTON – A bill that would establish a False Claims Act for West Virginia got a second look Thursday, and was passed out of the House Judiciary Committee.
Earlier this week, House Judiciary Chairman Tim Manchin had said the panel would reconsider House Bill 4001.
The committee took up the bill again Thursday, and it was passed back to full House of Delegates after a 15-9 vote.
“The House leadership chose to send the false claims bill back to the Judiciary Committee because there was a great deal of concern expressed, however unfounded, about whether the bill would cause a wave of baseless lawsuits,” Manchin said Monday in a press release. “I believe we can tweak some of the language to alleviate those concerns and move forward with a solid piece of legislation that will save millions of taxpayer dollars by fighting fraud and abuse.”
Manchin says the bill, once fine tuned, has the potential to return to taxpayers up to $90 million a year. He says those funds could be used for road repair, in-home care for seniors and assistance for volunteer firefighters.
HB4001, or the False Claims and Taxpayer Protection Act of 2014, is designed to uncover and encourage the reporting of fraud that is being committed upon state government. It encourages the reporting of suspicious activity involving taxpayer funds and empowers the state Attorney General to investigate such fraud.
Listed as sponsors of the bill are nine democrats, including Manchin and three fellow personal injury lawyers.
The bill encourages the reporting by a person -- whether working in or outside state government -- to bring a civil action in court against anyone who knowingly causes the state to pay a false claim. That private citizen would share in the proceeds of any recovery.
“The reason 29 states and the District of Columbia have enacted false claims laws is it is a very simple method of combating fraud against the government,” Manchin said in a press release. “The concept dates back to the Civil War, and House Bill 4001 is closely modeled after the federal False Claims Act, which was first established in 1863.
“In 2012, federal and state false claims suits recovered $9 billion in taxpayer funds. We know that providing an incentive for people to come forward with information about fraud against the government works.”
Last week, Kentucky House Speaker Greg Stumbo, former Kentucky Attorney General, filed similar whistleblower legislation. Research indicates the law could generate as much as $25 million a year for Kentucky, he noted.
By enacting false claims statutes, both West Virginia and Kentucky also could become eligible for 10 percent more funds recovered in instances of Medicaid fraud. Currently, the state receive up to about 30 percent of recovered funds, while states that have false claims statutes approved by the federal government receive up to about 40 percent.
“West Virginia taxpayers will benefit from this legislation, plain and simple,” Manchin said. “The only people who should be concerned about this bill are those who are cheating the taxpayers.”
Last month, the House Judiciary Committee held a hearing on the measure. Manchin and representatives of a group funded and run by successful whistleblowers and law firms had snippy exchanges at that meeting.
Patrick Burns, co-director of the pro-False Claims Act group Taxpayers Against Fraud, appeared before the committee to lobby for the bill.
Burns said the core of the bill is simple – “If we incentivize integrity, we’ll get more of it,” Burns said during last month's hearing. “When fraudster companies are engaged in theft through deceit, this is often a core part of their business practice.
“When employees come to them or go to the government, they are universally isolated, humiliated and terminated.”
Twenty-nine states and the District of Columbia have versions of the False Claims Act.
When Burns was through speaking, Manchin announced that the five remaining speakers would have five minutes apiece.
Chris Hamilton, chairman of the West Virginia Business and Industry Council, suggested the Legislature seek a jobs impact report that studies the FCA’s possible effects.
“Let’s see where it shakes out, if it’s gonna create jobs or we’re gonna risk losing jobs,” he said. “We amass a public hearing and bring in a national organization (TAF) whose members are set to gain financially over this bill, not to speak to HB 4001 in detail but to generally talk in conceptual terms about the benefits of a False Claims Act?”
Burns made no secret about who is funding and running his non-profit. He freely admitted that TAF’s biggest donors are whistleblowers who are attempting to “pay it forward.”
Under the federal False Claims Act, the federal government has the option to join a whistleblower lawsuit if it feels the suit has merit. The whistleblower earns a percentage of any recovery.
FCA claims can lead to major settlements and awards because a statutory penalty can be assessed for each false claim, and the total recovery can be tripled under the statute in an effort to deter wrongdoing.
Fiscal Year 2013 brought in the most recovery from FCA claims in the act’s history. The federal government accounted for $3.8 billion in settlements and judgments, though some judgments are being appealed.
TAF’s website thanks its highest monthly donors. On top are Cheryl Meads, a woman who was paid $96 million as a result of a whistleblower lawsuit she brought against pharmaceutical drug maker GlaxoSmithKline, and Dinesh Thakur, a New Jersey man who took in almost $49 million from his whistleblower case against Ranbaxy Laboratories.
Also listed as donors are several law firms that file lawsuits on behalf of whistleblowers. Burns added that TAF’s board of directors is composed of whistleblowers and whistleblower attorneys, as well as former judges.
Under West Virginia’s proposed FCA, whistleblowers would file complaints under seal and notify the Attorney General’s Office, which would then decide if it wanted to join in the suit.
Also, the state would receive a higher percentage of the recoveries from national whistleblower suits because it would have a law on the books that is equally as strong as the federal FCA, Burns said.
He added that because the cases are complex and take a long time to resolve themselves, plaintiffs attorneys are wary to bring any suit that does not have merit because they only get paid if they win the case.
Easy courtroom victories for the state could be a result, he argued.
Gary Zuckett, executive director of West Virginia Citizen Action Group, spoke at last month's hearing in support of TAF. He argued that businesses that are following the law should have nothing to fear.
But two members of the West Virginia Chamber of Commerce – president Steve Roberts and general counsel Brenda Nichols Harper – testified against it, as did Danielle Swan of the Defense Trial Counsel of West Virginia. Roberts said he found 15 flaws in the legislation.
Harper said the legislation “unfairly stacks the deck against West Virginia’s own businesses,” and that even persons who are committing the FCA violations while at work could collect whistleblower awards.
“I think that this bill provides litigation-for-profit,” she said.