House panel weighs expanding state’s whistleblower law
Daily Record Legal Affairs Writer
ANNAPOLIS — Maryland businesses squared off against local governments and plaintiffs’ attorneys Wednesday over legislation that would permit whistleblower lawsuits against companies that intentionally overbill the state, the city of Baltimore or a county government.
In testimony to the House Judiciary Committee, the Maryland Chamber of Commerce called the proposed Maryland False Claims Act “unfair to businesses.”
But Baltimore Mayor Stephanie Rawlings-Blake’s office said the measure’s whistleblower provision would enable the city and other jurisdictions to uncover potential fraud in public construction and procurement.
Maryland law currently permits whistleblower lawsuits only under the False Health Care Claims Act, which the General Assembly passed in 2010. At the time, getting the law enacted “took everything we had,” Lt. Gov. Anthony G. Brown said before the session began in January.
The proposed measure would move Maryland’s law closer to the federal False Claims Act.
House Bill 509 would enable employees and contractors who prevail in a lawsuit alleging fraud by their employers to collect between 15 percent and 25 percent of the proceeds they recover on behalf of the government. The workers, who would have legal protection against retaliation, would also be able to recover court costs and attorneys’ fees.
The possible proceeds to the government could include a civil penalty against the company of up to $10,000 for each instance of overcharging and recovery of up to three times the monetary damages incurred by the governmental entity.
Current law does make procurement fraud a felony, punishable by up to five years in prison, the Apartment and Office Building Association of Metropolitan Washington stated in its opposition to the bill. The state can also seek a civil remedy and damages of up to three times the state’s financial loss, the association added.
“The tools are currently there to prevent fraud if the state wishes to use them,” the association added in its written testimony. “The legislation is unfair to defendants, is unnecessary and simply offers one more reason for businesses to avoid doing business with the state whenever possible.”
In written testimony, the Maryland Chamber said it supports “vigorous enforcement of the law by the state against persons attempting to defraud state programs.” But the chamber added it opposes “creating a new private cause of action for individuals to pursue these claims.”
“If the state contracts out its enforcement responsibilities to private individuals, businesses will face increased defense costs and the state will have no incentive to curtail cases of marginal merit,” the chamber added.
Support for the bill also came from the Montgomery County Office of Intergovernmental Relations. In written testimony, it said the expanded statute – and particularly the whistleblower provision – is needed to uncover fraud “by those who are motivated” to cheat the state and its subdivisions.
The whistleblower provision “provides the county with additional observers who may see evidence of a false claim that would otherwise go unnoticed,” the office wrote.
Under the bill, companies that retaliate against a whistleblower could be held civilly liable to him or her. Available damages could include reinstatement, two times back pay plus interest, litigation costs, attorney’s fees and punitive damages.
Attorney Brian J. Markovitz, who represents whistleblowers, said such protections would embolden workers to come forward if they witness employers intentionally overbilling the state or its subdivisions.
“They are not protected from retaliation under the current law and are in danger of losing their jobs without recourse if their employer is defrauding the state of Maryland,” wrote Markovitz, of Joseph, Greenwald & Laake P.A. in Greenbelt. “So, even the most egregious non-health care fraud is likely to not be exposed, investigated and prosecuted.”
Under the measure, the statute of limitations for brining a lawsuit against a company would be three years from the date the official of the governmental entity charged with overseeing the contract knew or reasonably should have known of the fraud. However, no action could be taken against the company if 10 years have passed since the violation occurred.
The law would go into effect on Oct. 1.
Lawsuits could be brought against companies for violations that occurred before the law’s effective date — Oct. 1, 2013 — provided the limitations period has not passed.
Beginning Oct. 1, 2014, the Maryland attorney general and the attorneys for Baltimore and each county would have to report annually to the General Assembly on the number of false claim lawsuits filed and those which resulted in a judgment. The report would also have to include the number of settlements reached without the filing of a suit.
The state’s costs for implementing the legislation would be about $247,000, according to the state Department of Legislative Services. The cost reflects the hiring of two lawyers, a paralegal and an administrative assistant in the attorney general’s office to help with false claim cases generated by the measure, DLS stated.
The measure is sponsored by Del. Sam Arora, D-Montgomery. He has 15 co-sponsors, including four Republicans. Similar legislation has not been introduced in the Senate.