ABQJOURNAL OPINION/GUEST_COLUMNS: False Claims Act Needs a Fix

Friday, November 12, 2010

False Claims Act Needs a Fix

By Kelly Sweetser
Sweetser Forensic Accounting
          At a time when the United States is in a recession and individuals, business and governmental agencies alike are feeling the economic crunch, there is a pool of additional money available right at our fingertips. The additional money is not in the form of higher taxes, but in the elimination of fraud!
        Congress amended a Civil War-era law and enacted the federal False Claims Act of 1986. Its purpose was to create a partnership between government and private citizens by creating incentives (15 percent to 30 percent of proceeds or settlement) for the citizens (qui tam plaintiffs) to report fraudulent activities of federal funds while protecting them from retaliation.
        States were encouraged to pass similar legislation to recover state funds lost due to fraud.
        New Mexico passed its false claims act titled the "Fraud Against Taxpayers Act" effective July 1, 2007.
        There is a difference between the federal and New Mexico acts in that under the New Mexico False Claims Act, a person cannot file a claim if public disclosure of that action has taken place.
        For example, I can't file a claim under the New Mexico False Claims Act if the fraudulent act was previously reported in a media outlet.
        Under the federal False Claims Act, a person can make a claim after that act has been publicly disclosed if the person filing the claim is the originator or "source" of that public disclosure.
        Using the same example, I could file a claim under the federal False Claims Act, if I was the person who provided the information to the media.
        This is significant because a bill will be presented during the 2011 legislative session requesting that the New Mexico False Claims Act be amended to incorporate the exception from the public disclosure limitation as stated under the federal act.
        If passed, the state will be able to retain additional federal dollars to assist in prosecuting Medicaid fraud.
        Here are some statistics to consider when evaluating the impact the New Mexico act could have on our state's economy:
        Per the U.S. Department of Justice from Oct. 1, 2008, through Sept. 30, 2009, there were 433 qui tam cases settled. The proceeds and settlement amounts totaled $1,970,450,777. The total amount paid to the qui tam plaintiffs totaled $254,794,658. In the period since enactment there has been $15,658,403,837 recovered and $2,477,236,248 paid to the qui tam plaintiffs!
        Earlier this year, Rep. Joseph Cervantes, D-Doña Ana, had expressed frustration that the New Mexico Attorney General's Office hadn't acted on nearly 100 qui tam cases.
        Attorney General Gary King responded stating that the cases were moving forward, but other issues prevented them from moving forward in a timely manner. One issue mentioned was the need for additional resources.
        I can assure you based on my experience with the New Mexico Attorney General's Office, that agency has more cases being referred to them than they have staff available to process. It's not that they don't want to prosecute; they simply lack the resources to do so in an efficient and timely manner.
        If it were possible to outsource the services we now rely on the government to provide, free enterprise, as well as the taxpayers, would benefit.
        As we all know, when businesses profit so does the government because their tax base is increased and therefore there would be a positive impact on the state's economy. Private attorneys and related businesses would be working to save government funds. Recovered taxpayer money stolen through fraud and corruption would by far outweigh the cost of outsourcing and reduce government in the bargain.
        It seems we need to do the following:
        • Bring the New Mexico False Claims Act into compliance with the Federal False Claims Act.
        • Convince the Legislature to authorize the use of "contract" investigators and attorneys by the Attorney General's Office to pursue fraudulent claims on behalf of qui tam plaintiffs.
        • Begin a publicity campaign to educate the public of the problem and the rewards of coming forward.
        There is an opportunity here to make government more efficient while at the same time holding government accountable. We can and must provide services to ferret out fraud and make government work even in times of reduced revenues.

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