W.Va. False Claims Act dies as Republicans vent during debate

CHARLESTON, W.Va. (Legal Newsline) - West Virginia's version of the federal False Claims Act, which is designed to incentivize whistleblowers who feel government programs are being cheated, died Tuesday in the House of Delegates.

After more than an hour of debate that heard some Republican lawmakers express frustration with the way in which the Democrat-led House conducts itself, House Judiciary Chair Tim Manchin's bill was rejected in a 55-42 vote.

The bill would have allowed whistleblowers to bring lawsuits in West Virginia courts against businesses alleged to have submitted false claims for reimbursement to state- and federal-run programs like Medicaid. It also would have given the state a law compatible with the federal FCA, thus entitling West Virginia to a greater percentage of multi-state recoveries.

Critics said the bill also sent the wrong message to the business community and would encourage "sue-and-settle" litigation that benefitted only plaintiffs lawyers and the whistleblowers they would represent.

"Our strategy now appears to be to sue ourselves into prosperity," Del. John Shott, R-Mercer, said. "If we can just find another way to have someone sue somebody, maybe we can solve our problems.

"This is a terrible message that we're saying with this bill."

The bill would have provided whistleblowers with 15 percent to 25 percent of the recovery that resulted from the lawsuits they filed. After their lawsuits were filed under seal, the Attorney General's Office would have had the option to review them and decide if it wanted to join, much like the federal government does with federal FCA claims.

The bill also set up a system for handling the proceeds that were left. Some monies would have gone to secondary roads, senior citizens and volunteer fire departments.

Republicans argued there was no need for the bill. A part of state law still allows for claims like the ones that would have been brought by whistleblowers but does not provide for whistleblower awards.

After a back-and-forth between Manchin and Shott over certain sections of the bill, several Republicans made their arguments against the bill while also using their time to vent about their fellow lawmakers.

Paul Espinosa, R-Jefferson, noted Manchin's amendment that changed the bill's title to the Government Fraud Protection Act and said, "you can put lipstick on a pig, but it's still a pig."

Espinosa said the bill duplicated existing regulations and said the vote would be a defining moment in the House that would show whether the delegates would side with the business community or plaintiffs lawyers.

But during his remarks, Espinosa also called the hearing held Jan. 27 in the House Judiciary Committee a "charade of an informational hearing."

During the hearing, the co-director of a group that is funded by whistleblowers and whistleblower attorneys testified and answered questions for more than 90 minutes, but the remaining four speakers - two of whom were from the business community and another a representative of defense attorneys - were only given five minutes.

During Shott's remarks, he complained that the bill was "launched on us" on the first day of the session and that serious study wasn't conducted. He wished other states with similar legislation had been contacted, as well as the Attorney General's Office to see what kind of resources would be needed to pursue the suits it wanted to join.

He also noted that West Virginia was again named a Judicial Hellhole by the American Tort Reform Association in its December report. It has been every year since the report began in 2002.

"Whether we agree with that assessment or not, the perception is pervasive outside of the state," Shott said.

"So it troubles me that our strategy to counter that perception is to basically say, 'You ain't seen nothing yet.'"

Perhaps the loudest argument came from Preston County Republican Randy Smith, who was bothered by the inclusion of seniors, fire departments and the roads system in the bill.

After personal injury lawyer and bill co-sponsor Stephen Skinner, D-Jefferson, argued that a vote against the bill was a vote against seniors, fire departments and secondary roads, Smith started his remarks quietly but grew increasingly frustrated.

"I'm fed up with having this group of individuals drug into every piece of bad legislation we try to pass," he shouted.

He said those groups are brought into bad legislation with a promise of "a crumb here and there" for them.

The last Republican to speak, John McCuskey of Kanawha, agreed.

"If this budget doesn't have enough money to fund senior programs and fire departments, then I commit to you that we've already failed," McCuskey said.

"This bill is a way to create plaintiffs. This is not a way to fix our state's budget problems."

Barbara Evans Fleischauer of Monongalia joined fellow Democrats Skinner and Manchin in verbally supporting the bill. She argued that the bill would help bring money into the state while only punishing those who would defraud it.

"What is the reality," Manchin asked after the lawmakers' remarks. "The reality is there is nearly, by some accounts, a hundred billion dollars a year in Medicaid fraud.

"We talk about helping the taxpayers. What more can we do to help taxpayers than stop people from cheating them, from taking their money?"

Manchin said that businesses that abide by the rules should support the bill so they do not have to compete with businesses that are cheating.

Of the nine sponsors of the bill, all were Democrats and four are personal injury lawyers, including Manchin.

Manchin had said the bill, once fine-tuned, had the potential to return to taxpayers up to $90 million a year.

Fiscal Year 2013 brought in the most recovery from FCA claims in the act's history. The federal government accounted for $3.8 billion in settlements and judgments, though some judgments are being appealed.

Democrats account for 53 spots in West Virginia's 100-person House. Those Democrats who voted against the bill were: Joshua Barker of Boone; Denise L. Campbell of Randolph; Kevin Craig of Cabell; William Hartman of Randolph; Jim Morgan of Cabell; Rupert Phillips of Logan; Doug Reynolds of Cabell; Doug Skaff of Kanawha; Dale Stephens of Cabell; and Ted Tomblin of Logan.

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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