Maryland Ponders Whistleblower Law
Maryland becomes the newest state to propose a comprehensive state whistleblower law. Introduced by Maryland State Attorney General Brian Frosh, the new package is designed to reduce fraud and help close the state’s budget deficit. Since the first false claims act legislation was enacted by the federal government during the Civil War, state and federal governments have recouped tens of billions of dollars lost through fraud and corruption.
Earlier this month Frosh appeared before the Senate’s Judicial Proceedings Committee and the House Judiciary Committee to present the Maryland False Claims Act of 2015. Modeled after the federal law, the bill allows a whistleblower to receive an award of up to 25% of whatever the state receives from a wrongdoer. The federal False Claims Act allows whistleblowers to receive up to 30%, however the average awards are usually between 15 and 20%.
Maryland already has a whistleblower law on the books but it is limited to Medicaid claims. Many states passed similar healthcare fraud laws after the federal government provided economic incentives to states that took measures to curb Medicaid fraud. Medicaid is funded both with state and federal tax dollars.
Maryland’s healthcare fraud law brought in $40 million last year. The new law would extend the whistleblower reward provisions to any fraud against the state.
State Senator Jamie Raskin (D-Montgomery) praised the bill and said, “If we had passed this bill years ago, we would be trying to decide how to use the extra dollars to pay for programs that support our taxpayers instead of leaving them in the pockets of people who are ripping off our taxpayers.”
Several other legislators also support the bill. Although early in the legislative process, the bill appears to have support from both Democratic and Republican state legislators.
One proponent of the bill told legislators at a hearing that nearby Virginia collected millions from their whistleblower law including claims from faulty pension claims; defective road barriers; and faulty water pipes.
Predictably, the Maryland Chamber of Commerce opposes the bill “because the new standards in this bill for prosecuting alleged fraud are unfair to businesses and would put a chilling effect on businesses contracting with the State.”
We take the opposite view and believe the legislation is both pro-business and pro-taxpayer. By strengthening the tools to pursue fraudsters, the legislation would provide a more level playing field for honest companies. Dishonest businesses that cut corners and cheat are usually able to charge lower prices thus hurting the very businesses that the Chamber should want to protect.
Some of the most powerful companies in the U.S. are the same companies that have been prosecuted under various false claims acts. Companies like Boeing and Bank of America. Unfortunately, we believe the Maryland Chamber of Commerce is protecting the wrong businesses.
In addition to allowing whistleblowers to receive cash awards, the bill also contains whistleblower anti-retaliation provisions.
A summary prepared by the Maryland Office of Legislative Services says the law would:
(1) prohibit a person from knowingly making a false or fraudulent claim for payment or approval by a governmental entity;
(2) authorize a governmental entity to file a civil action against a person who makes a false claim;
(3) establish civil penalties for making a false claim;
(4) permit a private citizen to file a civil action on behalf of a governmental entity against a person who has made a false claim;
(5) require the court to award a certain percentage of the proceeds of the action to the private citizen initiating the action; and
(6) prohibit retaliatory actions by a person against an employee, contractor, or grantee for disclosing a false claim or engaging in other specified false claims related activities.
Maryland attempted to pass the bill last year. Although passed in the House, it ultimately died on the Senate floor last year.
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