Author: Erin M. Campbell, Esq.
Nursing home residents left to wallow in urine- and feces–soaked beds; a resident suffering from an open bedsore the size of a cantaloupe when persistent and purposeful under staffing leaves residents unturned and in unchanged diapers; residents suffering from repeat scabies infections; residents suffering very high rates of falls and perhaps even left lying overnight on the floor; residents whose diabetes is intentionally mismanaged so that the nursing home can seek higher reimbursements; residents whose untreated wounds result in amputation and death, and facilities falsifying records to hide inadequate staffing levels.
Allegations like these and more have resulted in civil liability for nursing homes and criminal liability for nurses.1
Government regulators did not expose these nursing homes. Rather, nurses and staff members filed state and federal False Claims Act suits against them on behalf of the United States and the states of Delaware and Illinois.
Twenty-six states, including business friendly Florida, North Carolina, and Texas,2 all have state false claims acts with qui tam provisions. Qui tam False Claims Act statutes allow private persons—called relators—who uncover false claims and fraud against government entities to bring lawsuits to recover otherwise lost taxpayer funds. If the relator wins, the state receives the lion’s share of the proceeds. Depending upon factors such as whether the state intervenes, the whistleblowing relator receives a reward for their work of up to 30%.3 However, false claims acts often provide for both treble damages and civil penalties,4 so in many cases governments are made whole even after the relators are compensated for their efforts.5
Ohio does not have its own false claims act; nor do any of Ohio’s municipalities.6 Therefore, Ohio residents cannot file cases on Ohio’s behalf to expose squalid conditions, to recover Medicaid money paid to nursing homes that provide inhumane care, or to recover for other false claims and fraud upon the State Treasury. And while Ohio itself can sue on its own behalf, common law fraud actions allow recovery of only single damages, not the make-whole recovery of treble damages and civil penalties that false claims acts provide.
There are three reasons why Ohio should enact an FCA with qui tam provisions: (1) under federal law, Ohio would receive a higher share of blockbuster nationwide Medicare/Medicaid settlements; (2) with the retaliation protections and financial incentives of a qui tam false claims act, more Ohioans would risk coming forward to report false claims and fraud draining the Treasury; and (3) the deterrence provided by a state false claims act would level the playing field for the state’s honest contractors.
(1) A False Claims Act with Qui Tam Provisions Would Return Millions of Extra Dollars to Ohio from Nationwide Medicare/Medicaid Settlements.
When the federal False Claims Act was signed by Abraham Lincoln in 1863, Congress was concerned about relatively simple frauds, such as defense contractors supplying the Union Army with sawdust filled shells.7 While defense contracting remains an issue, the largest drain on federal and state treasuries is Medicare and Medicaid Fraud. In fiscal year 2012, the Department of Justice reported that the United States recovered over $164 million dollars for qui tam False Claims Act cases involving the Department of Defense, but recovered over $2.5 billion dollars in Department of Health and Human Services related qui tam cases.8
Ohio and other states receive back a portion of each of these massive Medicaid settlement. But the federal government deducts an additional 10 percentage points from the recoveries of states like Ohio without qui tam Medicaid False Claims Act that are “at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims” as the federal False Claims Act.9
According to statistics assembled by Patrick Burns, Taxpayers Against Fraud Education Fund’s Director of Communications, Ohio’s share in the top 20 False Claims Act cases through January 2011 with a Medicaid component was $207 million. Most of these funds go back to the federal government, which pays for most of Ohio’s Medicaid program. Therefore, from the $207 million recovered in just these 20 cases, Ohio received $92.3 million, but the United States received $114.7 million. If Ohio had a False Claims Act in place, the state would have received $115.2 million. Even after paying a relator’s share, millions of additional dollars would have been returned to the State Treasury.
(2) A False Claims Act with Qui Tam Provisions Would Protect and Incentivize Whistleblowers to Report Fraud on the State.
Not only would Ohio receive more money from national Medicare/Medicaid settlements, an Ohio False Claims Act would allow whistleblowers to expose false claims and fraud on public pension funds, schools, and other state programs. For instance, California is using its state False Claims Act to sue mortgage rating agency Standard and Poors for knowingly providing misleading ratings on risky securities to influence the state’s teachers and public employees pension funds to purchase these securities.10
While state regulators prosecute fraud, they lack the inside knowledge and details necessary to prosecute false claims and fraud that often only insider whistleblowers can provide. But whistleblowers have little incentive to come forward. Those who do are demoted, fired, blacklisted, or are otherwise retaliated against. Without the retaliation protection and the financial incentive provided by qui tam provisions, potential whistleblowers have no reason to imperil their jobs and even their future livelihood by speaking out.
(3) Deterrence Benefits Honest Hardworking Ohio Businesses.
Most businesses should have only modest impact from a state false claims act. Honest contractors have nothing to fear from a state false claims act. In fact, they would only benefit from the more level playing field resulting from the added deterrence of an Ohio False Claims Act.
State taxpayers fund Medicaid to keep our poor elderly cared for in their final years. And the pensions of our teachers, police, and other public servants should be protected from financial frauds. An Ohio State False Claims Act would protect our elderly, our pensioners, and other state programs funded by the Treasury at no additional cost. As taxpayers of this state, we owe it to ourselves to enact an Ohio False Claims Act.
Erin M. Campbell thanks Patrick Burns and James B. Helmer, Jr. for reviewing a draft of this post. Mr. Burns is the Director of Communications of Taxpayers Against Fraud Education Fund, an organization that works tirelessly to promote and maintain the integrity of whistleblower reward and private enforcement provisions in federal and state laws. Mr. Helmer is the Senior Partner and President of Ms. Campbell’s firm, Helmer, Martins, Rice, & Popham, Co., L.P.A. Ms. Campbell is proud to work with Mr. Helmer and all of her courageous, dedicated, and inspiring colleagues at Helmer, Martins, Rice, & Popham, Co., L.P.A.. Ms. Campbell also thanks B. Nathaniel Garrett, Editor-in-Chief of the University of Cincinnati Law Review, and Kevin Tamm and Kacey Marr, UC Law Review Blog Editors, for their editorial suggestions and comments.
1 See Taxpayers Against Fraud 2008 Award Winners, Whistleblower of the Year Awards to Sherry Scharff and Walter T. “Tom” Decyk, Taxpayers Against Fraud (Sept. 18, 2008), http://www.taf.org/whistle213.htm; Doc. 324, Plaintiffs/Relators’ Mem. in Opp’n to Defendants’ Combined Mot. for Summ. J., United States & Illinois ex rel. Absher v. Momence Meadows Nursing Ctr. Inc., No. 2:04-cv-02289-HAB-DGB (C.D. Ill. Jan. 24, 2012); Doc. 380, Order Den. Mot. for Summ. J., United States & Illinois ex rel. Absher v. Momence Meadows Nursing Ctr. Inc., No. 2:04-cv-02289-HAB-DGB (C.D. Ill. Jan. 15, 2013). Following trial, an over $9 million dollar judgment was entered in Absher. However, the Absher court declined to enter award an additional $19 million dollars in civil penalties due to the Eighth Amendment’s Excessive Fines Clause. Doc. 414, J. in a Civil Case, United States & Illinois ex rel. Absher v. Momence Meadows Nursing Ctr. Inc., No. 2:04-cv-02289-HAB-DGB (C.D. Ill. Feb. 16, 2013).
2 Fla. Stat. Ann. §§ 68.081–68.092; N.C. Gen. Stat. §§ 1-605–1-618; Tex. Hum. Res. Code Ann. §§ 36.001–36.117.
3 E.g. Fla. Stat. Ann. § 68.085; N.C. Gen. Stat. § 1-610.
4 E.g. Fla. Stat. Ann. § 68.082(2); N.C. Gen. Stat. § 1-607.
5 But see Cook County, Ill. v. United States ex rel. Chandler, 538 U.S. 119, 131 (2003) (treble damages allow the government to recoup money lost due to fraud, compensate the whistleblower, and recover other “elements of make-whole recovery”, such as prejudgment interest and consequential damages, for which the federal False Claims Act does not provide a method of recovery).
6 Attorney General Mike DeWine drafted a bill creating a State False Claims Act with qui tam provisions that was introduced in the Ohio Senate in 2011 by Senators Hughes and Oelslager and co-sponsors Schaffer, Skindell, Stewart, and Wagoner. S.B. 143, 129th General Assembly (2011-2012). The bill has not yet been passed.
7 Cong. Globe, 37th Cong., 3rd Sess. 955 (1863).
8 Civil Division United States Department of Justice, Fraud Statistics (Oct. 24, 2012), http://www.justice.gov/civil/docs_forms/C-FRAUDS_FCA_Statistics.pdf.
9 42 U.S.C. § 1396h. A state act must also meet several additional requirements for the state to qualify for the additional 10 percentage points. Id.
10 Alison Frankel, California AG’s false claims case vs S&P: secret route to issuers?, Thomson Reuters News & Insight (Feb. 11, 2013), http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=68152&terms=%40ReutersTopicCodes+CONTAINS+’ANV.