California False Claims Act Admendment Affects State Contractors

On September 27, 2012, Governor Jerry Brown signed into law Assembly Bill 2492 (“AB 2492”) amending the California False Claims Act (“CFCA”),1 bringing it more into line with the Federal False Claims Act (“FFCA”).2 The amendments to the CFCA took effect on January 1, 2013. The impetus behind the amendment was the California Attorney General being notified by the Office of Inspector General of the U.S. Department of Health and Human Services that the State was no longer in compliance with federal law, and that to continue to collect a 10% share of recoveries in Medicaid-related false claims act suits, the CFCA had to be “at least as effective” as the FFCA in rewarding and facilitating actions brought by Whistleblowers.

CFCA Background

The CFCA is codified in Government Code (the “Code”) sections 12650-56. Pursuant to Code sections 12651(a)(1) and 12651(a)(2) respectively, any person who knowingly presents or causes to be presented a false or fraudulent claim for payment or approval, and/or knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim, will be deemed to have violated the CFCA. Defendants that present false claims often have utilized false records or statements in support of their claims. Consequently, conduct violating Code section 12651(a)(1) often, in turn, also violates Code section 12651(a)(2).

The term “knowingly” is de ned by Code section 12650(b)(3) as a person, with respect to information, that 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.The application of the CFCA becomes more difficult when dealing with the definitions of “deliberate ignorance” and “reckless disregard” as set forth in Code sections (b)(3)(B) and (C). As an example, courts have imposed liability on a party for a failure to examine its own records as constituting deliberate ignorance or reckless disregard. In essence, any information in a contractor’s own files showing that a claim was false, such as job cost records or submissions from subcontractors that are inconsistent with the information submitted with the claim, can be used as evidence to support the “knowledge” element of the statute.