Articles Posted in State False Claims Acts

WhistleAn imbroglio involving an alleged kickback scheme perpetrated by employees of a San Francisco-based garbage collection company has shone a spotlight on the perils faced by individuals who go public with information concerning potential fraud committed against the government, and the importance of robust protections at all levels of government for whistleblowers.

Brian McVeigh was initially hired by the garbage collector, Recology, in 2000, and received positive performance evaluations. He was later transferred to a sorting facility to oversee a California Redemption Value (CRV) Buyback Center operated by the company. Recology has a monopoly with the City of San Francisco, and receives millions of dollars in diversion incentive bonuses from the State of California to participate in the buyback program. As a manager at the CRV Buyback Center facility, McVeigh’s responsibilities included preventing fraud and theft of CRV recyclable materials. In that capacity, he became aware of a fraudulent scheme in which Recology employees were inflating CRV weights, manipulating the figures in order to qualify for the bonuses from the state. McVeigh was summarily terminated in 2008 after bringing the fraud to the attention of Recology management and the local authorities.

McVeigh has filed a civil claim against his former employer under California’s False Claims Act (“FCA”), alleging that Recology management was likely involved in the scheme and that the termination was retaliation for his reporting of the wrongful conduct to the authorities. Both the fraudulent scheme on the part of the garbage collection company, a contractor which generates $220 million in annual revenues from local San Francisco ratepayers as an unregulated monopoly, and the retaliation are actionable under California’s False Claims Act.

WhistleNational life insurers MetLife Inc. and Prudential Financial Inc. are the target of a whistleblower lawsuit alleging the two life insurers the Minnesota False Claims Act by failing to notify families of the deceased policy holder or appropriate government officials as required by state law.  According to the recently unsealed complaint, the whistleblowers have identified at least 584 unclaimed policies worth millions of dollars wrongfully withheld by MetLife and Prudential.

Under Minnesota state law, insurance companies must notify the state Department of Commerce of life insurance benefits left unclaimed for more than three years and then turn over the value of those benefits to the state’s unclaimed property unit which works to locate the beneficiaries entitled to the money.  By failing to turn over the proceeds to the state, MetLife and Prudential are alleged to have violated the state False Claims Act which imposes liability on one who acts to “conceal, avoid, or decrease an obligation to pay or transmit money or property to the state or a political subdivision.”  Although the state has not yet decided to intervene in the case, the state attorney general office has aggressively investigated life insurance companies and practices concerning unclaimed benefits due under a deceased policyholder’s life insurance policy.

Similar to the federal False Claims Act, the Minnesota False Claims Act imposes civil monetary penalties up to $11,000 per violation and authorizes recovery of up to three times the amount the state lost due to the fraud.  To encourage whistleblowers to come forward and report fraud, qui tam provisions of the federal and Minnesota False Claims Act enable whistleblowers to share in up to 30 percent of the recovery obtained by the government and receive protection from employer retaliation arising from acts in furtherance of an action under the False Claims Act.

Governor David Paterson has signed into law a bill that will strengthen the New York False Claims Act and give the state greater opportunity to collect money that has been fraudulently withheld from defendants. Specifically, the bill provides a qui tam provision which will allow private citizens to sue defendants in the name of the government for tax law violations.  If a whistleblower is helpful in providing the government with information that leads to a recovery of lost tax revenue, he or she will be able to collect a portion of the recovery. Continue reading ›

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