North Carolina and the False Claims Act

Miller Law Group, W. Stacy Miller, II

The federal law that covers most of these cases is called the False Claims Act. Many states also have their own False Claims Acts. North Carolina has a False Claim Act, which applies if you find that someone is cheating our state out of taxpayer dollars. There are also federal and state laws that protect some whistleblowers who discover fraud on the job.

The Importance of an Attorney in Your Case

If you think that you have discovered fraud against the government, it is crucial that you call a whistleblower lawyer right away. The next steps you take are very important and sensitive and it’s important that you get it right. An experienced whistleblower attorney can tell you if you potentially have a case, and can talk with you about how to preserve the claim.

A whistleblower claims attorney will file a qui tam case “under seal” at first, so the public does not know about the case, and the whistleblower’s identity remains anonymous. The government will investigate the whistleblower’s claims. If the government finds that there was fraud committed, the government’s lawyers can decide whether to join in the lawsuit and pursue it individually. State whistleblower claims have a different procedure.

The penalties against people or businesses that commit fraud against the federal government are severe. Those who are found to have committed fraud will have to pay the government and the individual “treble,” or triple, damages plus attorneys’ fees and costs. As an incentive to bring the claims, the whistleblower typically recovers 15-25% of the total recovery as well as his or her attorney fees and costs for bringing the case.

Spotting a Whistleblower Claim

A whistleblower claim exists anytime a person or business submits a false claim to the government in order to get a payment from the government. Most of the time the companies committing fraud do it on a grand scale. They submit fraudulent charges to the government over and over, so that even the smallest charges add up.

There is also private whistleblowing when an employee internally reports fraud, sexual harassment, sexual assault, corruption, discrimination, or other misconduct. Our whistleblower attorneys have represented and advised many clients who have reported misconduct internally to someone in their company. It is against the law to retaliate against someone for reporting sex, race, or religious discrimination in a company with more than 15 employees. It is also illegal to retaliate against someone who reported fraud in a company that is publicly traded. We help these individuals file a lawsuit if necessary and negotiate agreements with the employer to protect their reputations and prospects for future employment.

North Carolina False Claims Act

Article 51. False Claims Act. § 1605. Short title; purpose. (a) This Article shall be known and may be cited as the False Claims Act. (b) The purpose of this Article is to deter persons from knowingly causing or assisting in causing the State to pay claims that are false or fraudulent and to provide remedies in the form of treble damages and civil penalties when money is obtained from the State by reason of a false or fraudulent claim. (2009554, s. 1.) § 1606. Definitions. The following words and phrases when used in this act have the following meanings, unless the context clearly indicates otherwise: (1) “Attorney General.” The Attorney General of North Carolina, or any deputy, assistant, or associate attorney general. (2) “Claim.” Any request or demand, whether under a contract or otherwise, for money or property and whether or not the State has title to the money or property that (i) is presented to an officer, employee, or agent of the State or (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the State’s behalf or to advance a State program or interest and if the State government: a. Provides or has provided any portion of the money or property that is requested or demanded; or b. Will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. A claim does not include requests or demands for money or property that the State has paid to an individual as compensation for State employment or as an income subsidy with no restrictions on that individual’s use of the money or property. (3) “Judiciary.” A justice or judge of the General Court of Justice or clerk of court. (4) “Knowing” and “knowingly.” Whenever a person, with respect to information, does any of the following: a. Has actual knowledge of the information. b. Acts in deliberate ignorance of the truth or falsity of the information. c. Acts in reckless disregard of the truth or falsity of the information. Proof of specific intent to defraud is not required. (5) “Material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property. (6) “Obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantorgrantee, or licensorlicensee relationship, from a feebased or similar relationship, from statute or regulation, or from the retention of any overpayment. (7) “Public employee,” “public official,” and “public employment” includes federal, State, and local employees and officials. (8) “Senior executive branch official.” The Governor, Lieutenant Governor, member of the Council of State, or head of department as defined in G.S. 143B3. (2009554, s. 1.) § 1607. False claims; acts subjecting persons to liability for treble damages; costs and civil penalties; exceptions. (a) Liability. Any person who commits any of the following acts shall be liable to the State for three times the amount of damages that the State sustains because of the act of that person. A person who commits any of the following acts also shall be liable to the State for the costs of a civil action brought to recover any of those penalties or damages and shall be liable to the State for a civil penalty of not less than five thousand five hundred dollars ($5,500) and not more than eleven thousand dollars ($11,000) for each violation: (1) Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval. (2) Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim. (3) Conspires to commit a violation of subdivision (1), (2), (4), (5), (6), or (7) of this section. (4) Has possession, custody, or control of property or money used or to be used by the State and knowingly delivers or causes to be delivered less than all of that money or property. (5) Is authorized to make or deliver a document certifying receipt of property used or to be used by the State and, intending to defraud the State, makes or delivers the receipt without completely knowing that the information on the receipt is true. (6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from any officer or employee of the State who lawfully may not sell or pledge the property. (7) Knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the State, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the State. (b) Damages Limitation. Notwithstanding the provisions of subsection (a) of this section, the court may limit the damages assessed under subsection (a) of this section to not less than two times the amount of damages that the State sustains because of the act of the person described in that subsection and may assess no civil penalty if the court finds all of the following: (1) The person committing the violation furnished officials of the State who are responsible for investigating false claims violations with all information known to that person about the violation within 30 days after the date on which the person first obtained the information. (2) The person fully cooperated with any investigation of the violation by the State. (3) At the time the person furnished the State with information about the violation, no criminal prosecution, civil action, or administrative action has commenced with respect to the violation, and the person did not have actual knowledge of the existence of an investigation into the violation. (c) Exclusion. This section does not apply to claims, records, or statements made under Chapter 105 of the General Statutes. (2009554, s. 1.) § 1608. Civil actions for false claims. (a) Responsibilities of the Attorney General. The Attorney General diligently shall investigate a violation under G.S. 1607. If the Attorney General finds that a person has violated or is violating G.S. 1607, the Attorney General may bring a civil action under this section against that person. (b) Actions by Private Persons. A person may bring a civil action for a violation of G.S. 1607 for the person and for the State, as follows: (1) The action shall be brought in the name of the State, and the person bringing the action shall be referred to as the qui tam plaintiff. Once filed, the action may be dismissed voluntarily by the person bringing the action only if the court and Attorney General have given written consent to the dismissal. (2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Attorney General pursuant to applicable rules of the North Carolina Rules of Civil Procedure. The complaint shall be filed in camera, shall remain under seal for at least 120 days, and shall not be served on the defendant until the court so orders. The State may elect to intervene and proceed with the action within 120 days after it receives both the complaint and the material evidence and information. (3) The State may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under subdivision (2) of this subsection. Any such motions may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to any complaint filed under this section until 30 days after the complaint is unsealed and served upon the defendant pursuant to the North Carolina Rules of Civil Procedure. (4) Before the expiration of the 120day period or any extensions obtained under subdivision (3) of this subsection, the State shall: a. Proceed with the action, in which case the action shall be conducted by the State; or b. Notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action. (5) When a person brings an action under this subsection, the federal False Claims Act, 31 U.S.C. § 3729 et seq., or any similar provision of law in any other state, no person other than the State may intervene or bring a related action based on the facts underlying the pending action; provided, however, that nothing in this subdivision prohibits a person from amending a pending action in another jurisdiction to allege a claim under this subsection. (c) The Attorney General may retain a portion of the damages recovered for a State agency out of the proceeds of the action or settlement under this Article as reimbursement for costs incurred by the Attorney General in investigating and bringing a civil action under this Article, including reasonable attorneys’ fees and investigative costs. Retained funds shall be used by the Attorney General to carry out the provisions of this Article. (2009554, s. 1; 201096, s. 25(a).) § 1609. Rights of the parties to qui tam actions. (a) If the State proceeds with an action under G.S. 1608(b), it shall have the primary responsibility for prosecuting the action and shall not be bound by an act of the qui tam plaintiff. The qui tam plaintiff shall have the right to continue as a party to the action, subject to the limitations set forth in subsections (b) through (e) of this section. (b) The State may dismiss the action for good cause notwithstanding the objections of the qui tam plaintiff if the qui tam plaintiff has been notified by the State of the filing of the motion and the court has provided the qui tam plaintiff with an opportunity for a hearing on the motion. (c) The State may settle the action with the defendant, notwithstanding the objections of the qui tam plaintiff, if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good cause, the hearing may be heard in camera. (d) Upon a showing by the State that the qui tam plaintiff’s unrestricted participation during the course of the litigation would interfere with or unduly delay the State’s prosecution of the case or would be repetitious, irrelevant, or for purposes of harassment, the court may, in its discretion, impose limitations on the person’s participation, such as any of the following: (1) Limiting the number of witnesses the qui tam plaintiff may call. (2) Limiting the length of the testimony of those witnesses. (3) Limiting the qui tam plaintiff’s crossexamination of witnesses. (4) Otherwise limiting the participation by the qui tam plaintiff in the litigation. (