While the DOJ continues to vigorously pursue FCA cases against companies in the health care and other sectors, cash-strapped states are now following suit. State Attorneys General (AGs) have increasingly pursued novel and creative FCA actions, as have private plaintiffs, who are authorized by qui tam provisions to stand in the shoes of states to sue and receive part of any recovery. A driver of this action was the Deficit Reduction Act (DRA) of 2005, which authorized states to receive, in addition to their own recoveries, 10 percent of the federal government’s share of recovered Medicaid funds if their FCAs are at least as robust as the federal FCA. As a result, since 2005 nearly a dozen states have either enacted false claims statutes or have amended existing statutes to make them equally or more robust than the federal FCA, including incorporating qui tam provisions and broadening the circumstances under which companies can be found liable for violations.

For example, late last year, in response to the DRA, New York state amended its FCA (New York State Finance Law § 187, et seq. (NY FCA)), to bring its false claims law more in line with the federal FCA. The New York statute now includes a “reverse false claims” provision that imposes liability as broadly as the federal FCA, providing that a person may be held liable for violating the NY FCA if that person “[k]nowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the state or a local government, or conspires to do the same….” (NY FCA § 189(1)(h)). The New York amendments also allow the state, as intervenor in a qui tam case, to relate back to the qui tam plaintiff’s filing date for statute of limitations purposes, expanding the period for which the state can seek recoveries. In addition, the law provides attorneys’ fees for successful qui tam plaintiffs, incentivizing the plaintiff’s bar to partner with the state or pursue their own cases under the NY FCA.

Recent developments in California also have made California False Claims Act (CFCA) cases more likely. In October of last year, California Governor (and former AG) Jerry Brown signed into law amendments to California’s general whistleblower statute (Cal. Labor Code § 1102.5) extending already existing whistleblower protections to employees who report illegal behavior internally to supervisors or those responsible for compliance. The amendments also imposed liability on any person working on an employer’s behalf who retaliates against an employee who engages in protected whistleblowing activity. In addition, a California appellate court, in San Francisco United School District ex. rel. Contreras v. First Student, Inc., No. A136986, Cal. Court App. (1st Dist. Mar. 11, 2014), recently expanded liability under the CFCA by approving the “implied certification” theory, holding that “a vendor impliedly certifies compliance with express contractual requirements when it bills a public agency for providing goods or services.” As a result, government contractors that do business with the state of California are now exposed to CFCA liability if they knowingly submit an invoice while in breach of a material contract term, whether or not they expressly certified compliance with material contract terms.

California and New York are just two high-profile examples of a national trend. Florida AG Pam Bondi worked with the legislature to significantly amend the Florida FCA last year to expand its scope and provide new subpoena powers and penalties. In Vermont, AG Bill Sorrell worked with several state senators to introduce a new FCA patterned on the federal act, after the state collected more than $23.5 million since 2010 through cooperative work with the DOJ on Medicaid fraud cases.

Because many states are facing substantial budget pressure, FCA activity, in particular Medicaid fraud cases, are likely to substantially increase in 2014 and beyond. In January Texas AG Greg Abbott announced that Hi-Tech Pharmacal Co. will pay $25 million to settle claims that it submitted inflated pricing information for certain prescription drugs from 1995 to 2013. In April Texas settled a state FCA lawsuit against HEB Grocery Co. for $12 million, settling claims that HEB overcharged the Texas Medicaid program for prescription drugs. Florida also reached a $7 million agreement recently with All Children’s Health System to settle allegations that the hospital violated the federal and Florida’s FCA by submitting illegal Medicaid claims.

FCA cases are not limited to health care. New York AG Eric Schneiderman, who as a state legislator sponsored a substantial 2010 expansion of the NY FCA, has pursued a ground-breaking FCA reverse false claims case against Sprint Nextel Corporation for allegedly under-collecting and underpaying more than $100 million in New York state and local sales taxes. In late February a New York appellate court upheld a lower court’s decision denying Sprint’s motion to dismiss the case. FCA cases have also recently been brought against or settled with technology providers and construction firms for providing allegedly defective products and services or inflating their billing, energy companies for underpaying royalties, and mortgage lenders for alleged false applications for HUD-sponsored insurance and federal loan financing.

State FCAs have also become fertile ground for creative plaintiff’s attorneys. Prominent plaintiff’s firms have long cultivated relationships with AGs as they sought to represent the states in civil lawsuits such as the tobacco litigations of the 1990s and more recent consumer protection and public nuisance suits against the pharmaceutical and other industries. Plaintiff’s lawyers have also taken notice of the potential for large automatic recoveries in qui tam suits. 647 federal qui tam suits were filed by private plaintiffs in 2012 alone, compared to only 30 in 1987. This upward trend is likely to continue as plaintiffs increasingly assert multiple state FCA claims alongside federal claims and attempt to work alongside AGs in pursuing such cases.

There are steps companies can take to reduce their potential exposure to FCA actions brought by the federal government, AGs, and/or qui tam plaintiffs. Any company that provides goods or services to the government, or even subcontracts to do so, should do the following:

(1) Create and update its compliance program to ensure current compliance with all applicable legal requirements and to flag potential problems early before they give rise to an FCA claim.

(2) Establish appropriate and continuous training programs that inform employees of key legal obligations, and encourage employees to bring problems to the attention of supervisors and compliance officers.

(3) Periodically audit business activities to ensure those activities conform to the company’s compliance program by conducting interviews, surveying employees, and providing employees with opportunities to provide feedback regarding potential wrongdoing.

(4) Fully and seriously investigate all allegations of impropriety, no matter how unlikely, and regardless of the whistleblower’s credibility or motivations.

(5) Carefully consider the ramifications of strategies that impact taxes or royalties remitted to the government and whether such plans might become the basis for reverse FCA claims.

More broadly, companies involved in supplying goods or services paid for by the government should familiarize themselves with, and even develop relationships with the DOJ authorities and AGs who are authorized to bring FCA cases or oversee qui tam litigations. Given the increasingly innovative ways FCA claims are asserted, companies cannot risk hiding their heads in the sand regarding their potential exposure. Knowing the government authorities responsible for such cases can provide critical insight to understanding their priorities, their complex relationships with qui tam plaintiffs, and the future directions and likely developments in this increasingly important area of the law.

Contributing Authors:

Merle DeLancey primarily represents healthcare clients involved in a broad spectrum of government contracting issues and litigation. He also formulates strategies for expanding contracting opportunities using the General Services Administration (GSA) and Department of Veterans Affairs (DVA), Federal Supply Schedules (FSS), and other government-wide acquisition and indefinite delivery, indefinite quantity contract vehicles. Merle also has substantial experience in complex, multidistrict litigation in federal district courts throughout the United States.

Bernard Nash joined Dickstein Shapiro in 1988 and leads the firm’s State Attorneys General Practice, where he represents clients in complex state and federal legal and legislative matters. Bernie’s work typically involves cases of first impression, matters having public policy implications and/or a governmental interest, and complex litigation. He routinely counsels major private sector clients on a wide range of matters involving State Attorneys General and also has represented states in significant policy disputes.  According to Chambers USA: America’s Leading Lawyers for Business, Bernie is “the leading practitioner in the country” who has “cornered the market” in representing clients before State Attorneys General and is known as “the godfather of State Attorney General work.”

Andrew Smith is an associate in Dickstein Shapiro’s Government Contracts Practice. Andrew focuses on complex civil litigation matters relating to antitrust, unfair trade, mass torts, product liability, and general commercial law. He also has represented and counseled clients in government investigations and government contract matters, including False Claims Act investigations and litigation, and claims and bid protests before the U.S. Government Accountability Office. Additionally, Andrew has been actively involved in providing pro bono legal research assistance to the American Antitrust Institute.

Christopher Allen joined Dickstein Shapiro in 2007. Chris is an associate in the State Attorneys General Practice. He represents clients primarily in connection with state government investigations and complex public policy issues, including outreach, negotiations, and litigations involving consumer protection, pharmaceutical products, data breach, information security compliance, antitrust, and environmental issues.

“We are beyond thrilled to welcome Ms. Duke to our Board of Advisors.  Her 28 year career in the Federal government, and particularly her exceptional understanding of DHS is a tremendous asset to the Coalition’s work,” said Kristina Tanasichuk, Founder & CEO of GTSC.  “We believe that her commitment to improving acquisition to infuse more agility, mission focus and ultimately, accountability for mission is exactly in-line with the Coalition’s focus.”

“I am excited at the opportunity to engage with GTSC in support of the homeland mission,” said Ms. Duke, “GTSC has proven in just a few years that the organization and its members are committed to the agencies tasked with securing the country.  They recognize that this is a complicated process – from requirements building to acquisition to execution – there are a variety of factors that result in success.  I look forward to contributing to each of these factors with constructive partnerships between industry and the government.”

Learn more about Ms. Duke here.

Read the full release.

Mr. Robert J. Carey, Principal Deputy Chief Information Officer, U.S. Department of Defense

Mr. Robert J. Carey serves as the Department of Defense Principal Deputy Chief Information Officer.  Selected to this position in October 2010, his main focus is to help lead the consolidation and standardization of the Defense information technology enterprise while strengthening its cybersecurity posture and the enterprise architecture.  His additional focus is to align, strengthen and manage the office of the DoD Chief Information Officer to have it better serve the Department’s mission and help lead the IT/Cyber workforce into the 21st century.

From November 2006 to September 2010, he served as the fifth Department of the Navy (DON) Chief Information Officer (CIO) where he championed transformation, enterprise services, the use of the internet, and information security.  Mr. Carey joined the staff of the DON CIO in February 2000, serving as the DON CIO eBusiness Team Leader through June 2003.  During this period, he also served as the Director of the DON Smart Card Office from February through September 2001.  Mr. Carey entered the Senior Executive Service in June 2003 as the DON Deputy Chief Information Officer and was responsible for leading the DON CIO staff to achieve IM/IT enterprise integration across the Navy & Marine Corps.

Mr. Carey’s Federal service began with the U.S. Army at the Aberdeen Proving Ground in October 1982, where he worked as a Test Director evaluating small arms, automatic weapons and ammunition.  He began his service with the Department of the Navy in February 1985 with the Naval Sea Systems Command.  He worked in the Anti-Submarine/Undersea Warfare domain where he served in a variety of engineering and leadership positions.

Mr. Carey earned a BS in Engineering in 1982 from the University of South Carolina and a Master of Engineering Management from the George Washington University in 1995.  He has been awarded the Department of the Navy Distinguished Civilian Service Award (twice) as well as the Superior and Meritorious Civilian Service Awards.  He received the prestigious Federal 100 Award in 2006, 2008, and 2009, recognizing his significant contributions to Federal information technology.  He was selected to the InformationWeek Top 50 Government CIOs in 2009, 2010, and 2011.  Mr. Carey was named the Defense Executive of the Year for 2009 by Government Computer News, and he also received the prestigious Association for Federal Information Resources Management (AFFIRM) Executive Leadership Award – Defense for 2011.

A native of West Chester, PA, Mr. Carey is an active member of the United States Navy Reserve and currently holds the rank of CAPTAIN in the Civil Engineer Corps.  He was recalled to active duty for Operation Desert Shield/Storm and Operation Iraqi Freedom where, in 2006-2007, he served in the Al Anbar province with I Marine Expeditionary Force.

View the panel discussion here.

“We are very excited to partner with IACCM to expand our understanding of best practices to improve the efficiency, speed and success of government procurement,” said Kristina Tanasichuk, CEO of GTSC. “An excellent procurement and acquisition process is particularly critical for homeland and national security.”

IACCM is a non-profit organization that promotes the international standards and best practices for defining and managing trading relationships while encouraging innovation and collaboration to support economic growth and organizational success by ensuring commitments are ethical, achievable and sustainable. IACCM provides executives and practitioners with advisory, research and benchmarking services, and worldwide training for contracts, commercial and relationship management professionals.

“IACCM is looking forward to providing GTSC members with insight to commercial and contracting best practice and to working together with GTSC leadership on tackling the continued challenge of SDBs and mid-size enterprises in winning sustainable business in the Government sector,” said Tim Cummins, President and CEO of IACCM.

The partnership will focus on organization to organization support and information exchange to improve practices for fair, efficient procurement and contracting activities that meet the increasing demand for transparency and speed while achieving positive outcomes. In the spirit of cooperation, discounts to conferences and events will be offered to respective members.

The Chertoff Group, Dickstein Shapiro, Linden Resources and the Security Industry Association are GTSC’s other strategic partners. More information on each is available at www.GTSCoalition.com.

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The Government Technology & Services Coalition (GTSC) is a nonprofit, non-partisan 501(c)(6) association of companies that create, develop and implement solutions for the federal homeland and national security sector. Our mission is two-fold: first, to provide exceptional advocacy, capacity building, partnership opportunities and marketing in the Federal security space for small and mid-sized companies. Second, to support and assist our government partners achieve their critical missions with the highest integrity; best and most innovative technologies; and results-based, quality products and services to prevent, protect against, mitigate, respond to and recover from any terrorist attack or natural disaster. For more information on these mentors and the Government Technology & Services Coalition, please visit www.GTSCoalition.com.

The International Association for Contract & Commercial Management (IACCM) enables both public and private sector organizations and professionals to achieve world-class standards in their contracting and relationship management process and skills. It provides executives and practitioners with advisory, research and benchmarking services, and worldwide training and certification for contracts, commercial and relationship management professionals. IACCM is a non-profit membership organization that supports innovation and collaboration in meeting the demands of today’s global trading relationships and practices. Through its worldwide presence and networked technology, IACCM members gain access to the thought leadership and practical tools that are essential for competitiveness in today’s fiercely contested global markets. For more information, please visit www.IACCM.com.

>>Read the full press release here.

Emile Monette, the Senior Advisor for cyber security policy for the U.S. General Services Administration (GSA), will join us to discuss the agency wide and interagency implementation of cyber security initiatives related to government facilities and acquisition. Linda Mathes, CEO of the American Red Cross in the National Capital Region, will talk about the American Red Cross Ready Rating program and its importance to GTSC’s Designation of Leadership Excellence. Jose Arrieta, DHS Ombudsman, will discuss the year ahead at DHS.

Given sequestration, budget cuts and possible future government shutdowns, GTSC is committed to exploring every business opportunity possible for your success. From the Small Business Collaboration Group to forming vigorous Action Groups and developing the Contracting Officers workshop, we’ve accomplished a lot over the past year and we’re excited to keep moving!

Please note: this is a GTSC Member only meeting. Thank you!

Agenda

I. Welcome and overview of GTSC’s 2012-2013: Discussion of Lion’s Den, Mentor and Workgroup activity.

• Kristina Tanasichuk, CEO, GTSC
• Jon Ostrowski, COO, GTSC
• Workgroup Chairs
  • Chair, International Initiative: RADM Donald P. Loren, CEO, Old Dominion Strategies
  • Chair, Human Capital and Learning: Dr. Sheri Dougherty, President & CEO, DAI
  • Co-Chair, DHS Engagement: Sara Kindsfater0-Yerkes, Managing Partner, The Big Brain Co.

II. A View of the Year Ahead

• Jose Arrieta, Ombudsman, DHS

III. Meeting the Challenges

• Emile Monette, Senior Advisor, Cyber Security Policy, GSA
• Linda Mathes, CEO, American Red Cross in the National Capital Region
• Bruce Davidson, Director, SAFETY Act Office, S&T, DHS

IV. Government Relations

• Incoming Secretary Jeh Johnson
• Hill Activity
  • Michelle Mrdeza, Partner, Cornerstone Government Affairs & GTSC Founding Strategic Advisor
  • Chani Wiggins, President & Founder, Winn Strategies & GTSC Strategic Advisor
• Broadening our Base

V. Business Development

• Overview of procurements and focus areas for business development
  • Bill Carroll, Senior Partner, Strike Force Consulting
  • Andrea McCarthy, Senior Director NTT Data
  • Tony Sacco, Former Vice President, SAIC

VI. What do you see as our top priorities for 2014-2015?