In 2013, the Florida Legislature amended the Florida False Claims Act (“FFCA”), codified at sections 68.081 et seq., Florida Statutes. The FFCA is modeled after its federal counterpart, the False Claims Act (“FCA”), which was first enacted during the Civil War to combat fraud against the government by defense contractors. The FFCA authorizes private individuals to bring qui tam suits in the name of the State against persons or entities who have defrauded the State in contracting or other matters.
The following provisions, among others, underwent revision.
First, the Legislature updated the FFCA to conform to the FCA on the issue of “direct presentment.” Under previous versions of the FCA, courts had held that false claim had to be “directly presented” to the government for payment. See U.S. ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 490-91 (D.C. Cir. 2004). But what if a subcontractor presents a bogus claim to a general contractor, knowing full well that the claim will be paid with government money? Congress thought this situation should be covered by the FCA, and in 2009, Congress amended the FCA to eliminate any “direct presentment” requirement. See S. REP. NO. 111-10, at 11 (2009), as reprinted in 2009 U.S.C.C.A.N. 430, 439 (“[T]he bill clarifies that direct presentment is not required for liability to attach.”).
Last session, the Florida Legislature made a near-identical change to the FFCA. Like the FCA, the FFCA now clearly covers situations where an unscrupulous subcontractor submits false claims to a general contractor operating under a state contract, regardless of whether the subcontractor deals directly with the State.
Overpayments & “Reverse” False Claims
The Legislature also strengthened the provision for so-called “reverse false claims” – the term applied to situations where someone knowingly underpays a government obligation. Before the recent amendments, the FCA and FFCA imposed liability against persons who made an affirmative record or statement in order to lower or decrease a pre-existing obligation to pay money to the government. See Am. Textile Mfrs. Inst., Inc. v. The Limited, Inc., 190 F.3d 729, 735-36 (6th Cir. 1999) (“Thus, we hold that a reverse false claim action cannot proceed without proof that the defendant made a false record or statement at the time the defendant owed to the government an obligation sufficiently certain to give rise to an action of debt at common law.”).
But what about situations where no affirmative false record or statement is made? Many times, a violator remains silent in the face of an obligation to pay money, or the violator receives an overpayment of government funds and remains silent in the face of an obligation to repay those funds. The violator cheats the government, but he or she never makes an affirmative statement or record in the process. This “affirmative act” requirement left a significant loophole in both acts.
To cure the problem, Congress amended the FCA to clarify that liability attaches whenever one knowingly makes or uses a false record or statement “material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” See 31 U.S.C. § 3729(a)(1)(G)) (emphasis added). This change eliminates any requirement that the violator take an affirmative act to conceal the obligation to pay the government money. If one owes the government money and knowingly fails to pay, liability may attach.
Recognizing the benefits of these amendments, the 2013 Florida Legislature incorporated them into the FFCA as well. See Ch. 13-104, § 2, 2013 Fla. Sess. Law Serv. Ch. 2013-104 (C.S.C.S.H.B. 935) (West) (codified at § 68.082(2)(g), Fla. Stat.) (imposing liability on one who “[k]nowingly makes, uses, or causes to be made or used a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to an agency”). As a result, fraud on the State by omission or by concealment can now be remedied through a qui tam suit, regardless of whether the violator makes affirmative misrepresentations or records in the process of doing so.
Definition of “State”
The Legislature also broadened the scope of government agencies entitled to protection under the FFCA. Prior to the 2013 amendments, the act prohibited false or fraudulent claims only when made to or paid by an “agency,” which was defined as “any official, officer, commission, board, authority, council, committee, or department of the executive branch of state government.” § 68.082(1)(a), Fla. Stat. (2012) (emphasis added). This definition excluded two branches of state government and a host of other subdivisions and instrumentalities of the State.
In 2013, the Legislature deleted the word “agency” and replaced it with “state.” See Ch. 13-104, § 2, 2013 Fla. Sess. Law Serv. (codified generally at § 68.082, Fla. Stat.). The FFCA defines “state” as “the government of the state or any department, division, bureau, commission, regional planning agency, board, district, authority, agency, or other instrumentality of the state.” Id. This definition is far broader, and the committee staff analysis confirms the purpose of the change was to “expand the applicability of the FFCA to state divisions and instrumentalities where prior law limited it to agencies.” See HB 935 Staff Analysis 3.
The change opens the FFCA to portions of state government that did not fit cleanly into the previous definition of “agency.” Such portions include school districts, water management districts, the Office of the State Courts Administrator, the Public Service Commission, and other entities with some budgetary autonomy, all of which could be victims of fraud.