False Claims Act

Here is the quick overview of the false claims act in California. Keep in
mind that the California AG has offered a $50,000,000 bounty or more for
information leading to successful false claims act cases that show that
wholesale prices were too high.

Thanks
Gary

< -----Original Message-----
< From: Smith, Amanda D.
< Sent: Tuesday, April 10, 2001 12:45 PM
< To: Fergus, Gary S.
< Subject: False Claims Act
<
< Gary,
<
< This is a brief description of the relevant provisions of the California
< False Claims Act. As we discussed, a more in-depth analysis will follow
< in memo form.
<
< -Amanda
<
<
<
< The California False Claims Act (CFCA), available at California Government
< Code Section 12650 et seq., provides that any person (natural person,
< corporation, firm, etc.) who commits various acts shall be liable to the
< state or political subdivision (city, county, etc) for treble damages
< sustained because of those acts. That person may also be liable for a
< civil penalty of up to $10,000 for each false claim and for the costs of
< any civil action brought to recover any penalties or damages.
<
< Initially the CFCA defines "claim" as including "any request or demand for
< money, property, or services made to any employee, officer, or agent of
< the state or of any political subdivision, or to any contractor, grantee,
< or other recipient, whether under contract or not, if any portion of the
< money, property, or services requested or demanded issued from, or was
< provided by, the state ... or by any political subdivision thereof ...."
<
< The CFCA then describes those acts which subject a person to treble
< damages. The covered acts potentially relevant to Enron are:
<
< * Knowingly presenting or causing to be presented to an officer or
< employee of the state or of any political subdivision thereof, a false
< claim for payment or approval. (Sec. 12651(a)(1))
< * Knowingly making, using, or causing to be made or used a false
< record or statement to get a false claim paid or approved by the state or
< by any political subdivision. (Sec. 12651(a)(2))
< * Conspiring to defraud the state or any political subdivision by
< getting a false claim allowed or paid by the state or by any political
< subdivision. (Sec. 12651(a)(3))
< * Having possession, custody, or control of public property or money
< used or to be used by the state or by any political subdivision and
< knowingly delivering or causing to be delivered less property than the
< amount for which the person receives a certificate or receipt. (Sec.
< 12651(a)(4))
< * Knowingly making, using, or causing 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 state or to any political subdivision.
< (Sec. 12651(a)(7))
< * Being a beneficiary of an inadvertent submission of a false claim to
< the state or a political subdivision who 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. (Sec. 12651(a)(8))
<
< Section 12652 of the CFCA provides, inter alia, that a person ("a qui tam
< plaintiff") may "bring a civil action for a violation of this article for
< the person and either for the State of California in the name of the
< state, if any state funds are involved, or for a political subdivision in
< the name of the political subdivision, if political subdivision funds are
< exclusively involved.... Once filed, the action may be dismissed only with
< the written consent of the court, taking into account the best interests
< of the parties involved and the public purposes behind this act."
< Section 12652 goes on to describe the procedures whereby the State or a
< Political Subdivision may intervene in a suit filed by a qui tam plaintiff
< and how the damages recovered in such a suit shall be divided.
<
< Several other provisions of Section 12652 could be extremely important:
<
< * When a qui tam plaintiff brings an action under this subdivision, no
< other person (qui tam plaintiff) may bring a related action based on the
< facts underlying the pending action. (Sec. 12652©(10))
< * A qui tam plaintiff may not bring an action that is based upon
< allegations or transactions that are the subject of a civil suit or an
< administrative civil money penalty proceeding in which the state or
< political subdivision is already a party. (Sec. 12652 (d)(2))
< * A qui tam plaintiff may only be "an original source" with direct and
< independent knowledge of the information on which the allegations are
< based. A qui tam plaintiff may not obtain information from the news media
< or from public disclosure of the information in governmental or regulatory
< hearings, investigations, reports, etc. and use it to bring suit under the
< CFCA. (Sec. 12652 (d)(3))
< * If the qui tam plaintiff is a state employee, that person must
< exhaust various internal procedures before filing suit under the CFCA
< (Sec. 12652 (d)(4))
< * If the state, a political subdivision, or the qui tam plaintiff
< proceeds with the action, the court may award to the defendant its
< reasonable attorney's fees and expenses against the party that proceeded
< with the action if the defendant prevails in the action and the court
< finds that the claim was clearly frivolous, clearly vexatious, or brought
< solely for purposes of harassment. (Sec. 12652 (g)(9)
<
<
< Other relevant provisions of the CFCA include:
<
< * The CFCA defines "knowing" and "knowingly" to mean that a person,
< with respect to information "(A) Has actual knowledge of the information.
< (B) Acts in deliberate ignorance of the truth or falsity of the
< information. [or] (C) Acts in reckless disregard of the truth or falsity
< of the information." Importantly, proof of specific intent to defraud is
< not required. (Sec. 12650(b)(2))
< * The CFCA has various damages limitations provisions for defendants
< who cooperate with the State's investigation
< * The CFCA has various "whistleblower" provisions protecting employees
< who disclose information about false claims.
< * In any action brought under Section 12652, the state, the political
< subdivision, or the qui tam plaintiff shall be required to prove all
< essential elements of the cause of action, including damages, by a
< preponderance of the evidence. (Sec. 12654©)
<
<

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