Previously, SUGARMAN provided a general overview of both Federal and Massachusetts Whistleblower Claims. In continuation of a series of blogs, Sugarman Partner David McCormack explores the Massachusetts False Claims Act.
The Massachusetts False Claims Act is set forth in Massachusetts General Laws, Chapter 12, Secs. 5A - 5O and was based, in part, on its federal counterpart. The Massachusetts False Claims Act contains a whistleblower provision that encourages private citizens to report fraud against the government of Massachusetts - fraud that would likely remain undiscovered without the whistleblower bringing it to light. In order to encourage whistleblowers to come forward, the Massachusetts False Claims Act provides strong financial incentive to do so if the whistleblower's claims are proven to be legitimate.
Section 5B is the "meat" of the statute and defines what actions can subject a person or corporation to liability under the Massachusetts False Claims Act. For example, Section 5B makes it unlawful to (1) present a false or fraudulent claim for payment from the Commonwealth or any state agencies; (2) enter into a contract with the Commonwealth knowing that the information in the contract is false; or (3) conspire to defraud the Commonwealth through the payment of a fraudulent claim. Examples that would violate these provisions include a physician performing a non-medically indicated procedure and then billing Mass Health or a contractor charging the Commonwealth for materials that it never delivered. Section 5B makes a corporation, partnership or person liable for acts of its agents, but specifically excludes liability for any acts related to limiting, reducing or evading the payment of taxes.
Section 5C provides the mechanism for a whistleblower (referred to as a "relator" in the statute) to bring a qui tam civil action on behalf of the whistleblower himself and the Commonwealth for violations of the Massachusetts False Claims Act. The whistleblower, through his attorneys, may file a lawsuit detailing the alleged violations along with any supporting documents or materials. The time limit for filing lawsuit for violations of the Massachusetts False Claims Act is found in Section 5K Although there are certain exceptions set forth, all actions must generally be brought within 6 years from the date a violation occurred.
Once filed, a whistleblower lawsuit remains under seal for at least 120 days while the Attorney General's Office investigates the claim to determine whether or not it wishes to pursue the fraud claim on behalf of the Commonwealth. Should the Attorney General chose to pursue the matter (described as "intervening" in the statute), the lawsuit is unsealed and the Attorney General assumes control of and primary responsibility for the litigation. According to Section 5D, the Attorney General is given wide discretion once it assumes control of the litigation and many limitations may be placed on the participation of the whistleblower and his attorneys in the case. The Attorney General may even settle a fraud claim over a whistleblower's objection, provided a Court finds that the proposed settlement is "fair, adequate and reasonable under all the circumstances." Should the Attorney General initially decline to pursue the matter, the whistleblower retains the right to have his attorneys pursue the action, but the Attorney General may intervene at a later date.
Section 5B sets forth the monetary liability of any person or corporation who violates the Massachusetts False Claims Act, subjecting wrongdoers to civil penalties between $5,000 and $10,000 for each violation of the statute plus three times the amount of damages that the Commonwealth sustains as a result of the violations. If a wrongdoer's established fraudulent business practice results in repeated violations, such penalties can rise into the millions of dollars. Section 5F then details the proceeds that may be allocated to a whistleblower should a suit be successful and result in the recovery of money from the defendant. In false claim cases where the Attorney General intervenes and is successful in recovering money, a whistleblower is entitled to between 15 and 25 percent of the recovered proceeds, plus the awarding of the whistleblower's attorney's fees and costs (paid for by the defendant). Should a Court determine that the false claim case and ultimate recovery was based primarily on information other than that provided by the whistleblower, the whistleblower is only entitled to up to 10 percent of the recovered proceeds. In cases where the Attorney General has declined to intervene and the whistleblower and his attorneys successfully recover money from a defendant, the whistleblower is entitled to between 25 and 30 percent of the recovered proceeds. If a Court determines that a whistleblower knowingly participated in any of the alleged violations, the Court, however, may reduce or even eliminate the whistleblower's share of recovered proceeds.
If you have questions regarding a potential whistleblower case under either federal or Massachusetts law, please fill out a Contact Form, call Benjamin Zimmermann or David McCormack at 617-542-1000 or e-mail Benjamin Zimmermann or David McCormack.