False claims bill stirs debate
CHARLESTON, W.Va. -- A bill that would allow people to sue companies that commit fraud against West Virginia state government drew support Tuesday from a nonprofit group funded by whistleblowers and trial lawyers -- and sparked opposition from corporate lobbyists.
The legislation (HB4001) would make West Virginia the 30th state with a "false claims act," allowing whistleblowers to file lawsuits on behalf of the government. The federal government also has a false claims law.
"Federal and state false claims acts have proven to be critical tools in helping recover taxpayer money," said Patrick Burns, co-director of Taxpayers Against Fraud, at a legislative hearing Tuesday. "The core idea behind the False Claims Act is very simple: If we incentivize integrity, we'll get more of it."
But business-group lobbyists said the bill would kill jobs, and prompt companies to raise prices for goods and services sold to consumers and state government.
Brenda Nichols Harper, a lawyer with the West Virginia Chamber of Commerce, called the bill "duplicitous, horrible policy" that promotes "litigation for profit."
"You're going to reduce jobs," Nichols Harper said. "You're going to send small businesses out of business. It unfairly stacks the deck."
Chris Hamilton, a lobbyist for the West Virginia Business & Industry Council, said the bill would provide a "windfall" for trial lawyers.
"We believe it will serve to set our legal system and our legal fairness back decades," Hamilton told legislators.
Supporters of the legislation argued that the bill would help whistleblowers who report corporations that defraud state government programs.
"I don't see this as an anti-business bill," said Gary Zuckett, who heads the West Virginia Citizens Action Group. "I see this as an anti-fraud bill."
Burns disputed criticism that the bill would spark a flurry of frivolous lawsuits.
Whistleblowers and their lawyers file about 200 lawsuits a year under federal and state false claims acts, Burns said. State attorneys general typically sign onto the suits.
About 95 percent of the cases get settled before going to trial, he said. Whistleblowers and their lawyers typically collect about 15 percent of any settlement or award, while state governments get the rest.
"Those cases are returning $4 billion to $9 billion a year back to federal and state governments," Burns said. "These are big cases, big frauds."
Many states have recovered money from corporations after whistleblowers reported Medicaid fraud. The federal government would increase Medicaid supplemental payments to West Virginia by 35 percent, provided the state adopted a false claims law as strong as the federal government's, Burns said.
"It's legislation that promises to bring millions of dollars from the federal government," he said.
Delegate Kelli Sobonya, R-Cabell, who opposes the bill, predicted that consumers take a hit, if lawmakers pass a false claims act.
"It's really going to cost taxpayers," Sobonya said. "The product may go up in price to pay for that settlement litigation."
Delegate Cindy Frich, R-Monongalia, criticized Burns, questioning his motives for supporting the bill. Frich noted that Burns' Washington, D.C.-based nonprofit is largely funded from trial lawyers who stand to gain financially from false claims bills.
"Why do you care about West Virginia?" Frich asked.
Burns said out-of-state corporations have defrauded West Virginia and other states for far too long.
"They're not here to help people get clean water and better jobs," he said. "This is money that was ripped and robbed, and it all goes out of state.
"The truth of the matter is fraud doesn't create jobs. Fraud costs people jobs."
The House Judiciary Committee is expected to vote on the bill later this week or early next week.
Reach Eric Eyre at email@example.com or 304-348-4869.