North Carolina False Claims Act

Below, Tony Munter summarizes the North Carolina state False Claims Act statute. Tony Munter is not a North Carolina False Claims Act lawyer, and he is not licensed to practice in North Carolina.

31 U.S.C. Sections 3729 et. seq. and

N.C. Gen. Stat. Sections 1-605-1-618 et seq.

The North Carolina False Claims Act is virtually identical to the Federal False Claims Act and that is a good thing for those who wish to report fraud committed against the State of North Carolina and/or the Federal Government.

Under the Federal and the North Carolina laws if either government has some connection to the funding, and there has been some action to commit fraud, then the defendant may be liable for three times the damages. The causes of action creating liability and important terms, such as “claim,” are all defined and outlined in a relatively similar manner. For more information on qui tam rights in the North Carolina False Claims Act, please click here.

Rewards in North Carolina FCA Cases

The Plaintiff-Relator, otherwise known as the whistleblower, stands to receive 15 percent to 25 percent of any rewards the government receives on a case. Cases in which the government does not intervene, or refuses to take over, may result in rewards of 25 percent to 30 percent when the Plaintiff-Relator handles the action on his or her own and prevails.

North Carolina False Claims Venue Provision

The North Carolina law has a pretty explicit venue provision, giving wide latitude to a plaintiff and allowing that plaintiff to bring a case “in Wake County or in any county in which a claim originated, or in which any statement or record was made, or acts done, or services or property rendered in connection with any act constituting part of the violation of this article.” See Sections 1-605. It’s not a big deal but some state laws require a case to be filed in a particular county court.  Here, the North Carolina Law is more like the federal law which allows for a wider venue provision.

The North Carolina law also has a requirement for reporting on the progress of qui tam litigation in the state. However, the law itself is new to the state. It was enacted only five years ago, in 2009. Therefore it is a little early to be expecting huge results and North Carolina-only recoveries. Of course, the North Carolina False Claims Act makes it much more possible for the state to recover funds lost as part of a nationwide scheme. North Carolina can work in conjunction with a case filed under the federal law and if the fraud is based on the same scheme it is possible to file a nationwide case with North Carolina claims. Then when there is a collection, the state and the federal government can determine the appropriate amounts to divide.

The law has already been part of a several collections including a modest but local settlement regarding allegations filed against a pretty well known North Carolina institution. Duke University settled a case under the False Claims Act to dispense with allegations that “it made false claims in conjunction with certain services provided to beneficiaries of federal health care programs.”

The case is United States of America and State of North Carolina ex rel. Leslie Johnson v. Duke University Health System, Inc, et al., 5:12-CV-822-BO

See http://www.justice.gov/usao/nce/press/2014/2014-mar-21.html.

It’s “only” a $1 million settlement, but one thing to watch for in False Claims Act cases is that while a million dollars may not seem like a huge amount under a federal contacting scheme, such an amount may make a much bigger financial impact for the successful state. As always, we tip our cap to the whistleblower, Leslie Johnson, and her attorneys in this matter.

North Carolina FCA Restrictions

North Carolina does not allow for employees of the state to be Plaintiff-Relators under the State False Claims Act if they gain their information through their employment. There is no similar restriction under the federal law; although some district courts have taken it upon themselves to determine that federal employees may not collect as plaintiff-relators, others have upheld the right for government employees to take such action.

The states that allow for a state employee to be a relator often have reporting requirements prior to filing a qui tam action. No such provision allowing a North Carolina state employee to handle a case exists. This brings up a perplexing possibility of an employee of the state learning of an action that truly merits a false claims case being filed and being stymied when the higher-ups prevent any action from within. Of course, nothing prevents a North Carolina state employee from filing a case under the Federal False Claims Act as long as the employee has information that would make a strong case that federal law was violated.

North Carolina is sure to see more and more cases filed both with the federal and the state false claims acts now that the Attorney General’s Office and the North Carolina Bar becomes more aware of the rights afforded individuals to file such cases. We’ll be watching and looking to read the North Carolina Attorney General’s report on the progress of the law.


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