Home » Stumbo files False Claims Act to target fraud across state government

Stumbo files False Claims Act to target fraud across state government

FRANKFORT, Ky. (Feb. 5, 2014)With the twin goals of rooting out fraud and saving the state potentially millions of dollars, Kentucky House Speaker Greg Stumbo today filed legislation that would give whistleblowers strong financial incentive to step forward if state tax dollars are being misused.

“The False Claims Act is such a simple step to take, which is why so many states and the federal government have already gone this route,” said Stumbo, D-Prestonsburg.  “I have tried to include Kentucky on this list for several years now and hope, given the tight budgetary constraints we face, that this is the year I am successful.”

The chief co-sponsor of the legislation is state Rep. John Tilley, who chairs the House Judiciary Committee. Tilley, D-Hopkinsville, noted that the act has a long history in, dating back to the Civil War. The Federal Government created a new False Claims Act in 1986, and now more than two dozen states have their own version, including Illinois, Indiana, Tennessee and Virginia.

Under the legislation, those found guilty would be liable for up to three times the amount they had fraudulently billed the state, and whistleblowers would be eligible to receive anywhere from 15 to 30 percent of the monies recovered as a reward for their service.  Other civil penalties and attorney fees would be an additional cost for those found guilty.

If the False Claims Act is adopted, the speaker’s bill would have whistleblower begin legal proceedings, and the Attorney General would have the option to join on behalf of the state; that office would then be eligible for a portion of any amount awarded. Stumbo said he had pushed similar legislation while he was Attorney General, and noted that this legislation would give that office an even better tool to pursue fraud.

Stumbo’s bill also could make Kentucky eligible for 10 percent more money recovered under Medicaid fraud. This is subject to federal approval, but it would let Kentucky receive up to 40 percent of the recovered funds rather than 30 percent, which mirrors the traditional rate the state provides as part of its match for the multi-billion dollar program.  The remaining funds would principally go to the federal government and the one who brought the initial legal action.  While Stumbo’s bill goes beyond Medicaid fraud, he noted that the federal Center for Medicaid and State Operations “strongly supports” this type of legislation.

He said that the law does not create new levels of fraud, but offers an avenue for more cases to be prosecuted.  It also does not apply in tax-related cases or those solely involving local governments.

“This legislation has a lot of potential, and I’m hoping we can move it through the House quickly,” Stumbo said.  “The sooner we can get it enacted, the sooner we can bring about the kind of accountability Kentuckians deserve – not just in Medicaid, but everywhere in state government.”

Analysis by the Legislative Research Commission in 2012 said this could generate as much as $25 million a year for Kentucky.  The Cabinet for Health and Family Services estimated that, while difficult to forecast, it could potentially recover $10 for every $1 invested.

Stumbo pointed to successes other states and the federal government have seen using their False Claims Acts.  During the 2012 fiscal year alone, according to the Taxpayers Against Fraud website, these governments saw more than $9 billion returned, $300 million of which came from a single case of Medicaid fraud in California.  A look at the top 100 false-claims awards of all time shows civil fines reaching as high as $2 billion, with total claims in the modern era exceeding $50 billion.

“With this one bill, we can improve oversight of critical state-run programs like Medicaid; we can be better stewards of each taxpayer dollar; and we can give pause to those criminals who think they can get away with stealing the tax payers’ money,” he  said.  “There is only so much our law enforcement and auditing officials can do and a limit to how far they can reach; this will put every citizen on the look-out for fraud.”