BILL ANALYSIS                                                                                                                                                                                                    Ó



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          ASSEMBLY THIRD READING
          AB 2492 (Blumenfield)
          As Amended April 16, 2012
          Majority vote 

           JUDICIARY           7-3         APPROPRIATIONS      12-4        
           
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          |Ayes:|Feuer, Atkins, Dickinson, |Ayes:|Fuentes, Blumenfield,     |
          |     |Huber, Monning,           |     |Bradford, Charles         |
          |     |Wieckowski,               |     |Calderon, Campos, Davis,  |
          |     |Bonnie Lowenthal          |     |Gatto, Hall, Hill, Lara,  |
          |     |                          |     |Mitchell, Solorio         |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Wagner, Gorell, Jones     |Nays:|Donnelly, Nielsen, Norby, |
          |     |                          |     |Wagner                    |
           ----------------------------------------------------------------- 
           SUMMARY  :  Amends various provisions of California's False Claim 
          Act (CFCA) to conform to the Federal False Claim Act.  
          Specifically,  this bill  , among other things:   

          1)Expands the ability of the Attorney General (AG) and other 
            government prosecutors to contest dismissal of false claims 
            actions on the basis of public disclosure, consistent with 
            federal law.

          2)Allows current and former government employees to file a false 
            claims action for Medi-Cal fraud without exhausting internal 
            procedures, consistent with federal law.

          3)Authorizes the court to reduce the share of proceeds that a 
            qui tam plaintiff would otherwise receive if the court finds 
            that the action was brought by the person who planned and 
            initiated the underlying violation, in conformity with federal 
            law.

          4)Authorizes the court to award attorneys' fees to a prevailing 
            defendant in an action brought by a qui tam plaintiff or by 
            the state or political subdivision, consistent with federal 
            law.

          5)Increases anti-retaliation protections for employees, 
            contractors or agents who pursue false claims actions in a 








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            manner consistent with federal law, including reinstatement 
            with the same seniority status, two times the amount of back 
            pay plus interest, and compensation for special damages.

          6)Amends the statute of limitations for filing a false claims 
            complaint to conform to the federal statute of limitations, 
            and establishes a "relation-back" clause consistent with 
            federal law.

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee:

             1)   Making the conforming changes described above preserves 
               the state's ability to continue receiving federal incentive 
               awards in Medicaid-related false claims recoveries.  These 
               awards have been in the range of $20 million to $30 million 
               annually since 2008.

             2)   Any additional costs to the AG would be absorbable, and 
               the courts may experience a minor increase in costs due to 
               additional filings under the CFCA.
           
          COMMENTS  :  The federal Social Security Act (SSA) provides a 
          financial incentive for states to enact laws that establish 
          liability to the state for individuals that submit false or 
          fraudulent claims to the state Medicaid program.  For a state to 
          qualify for this incentive, the state false claims law must meet 
          certain requirements enumerated under the SSA, as determined by 
          the Office of Inspector General (OIG) of the U.S. Department of 
          Health and Human Services (DHHS) in consultation with the 
          Department of Justice.

          Earlier this year, OIG notified the California Attorney General 
          that the state is no longer in compliance with federal law that 
          allows California to potentially recover tens of millions of 
          taxpayer dollars in federal incentive awards on Medicaid-related 
          false claims recoveries.  In its letter, the OIG methodically 
          listed a number of specific provisions of the California False 
          Claims Act that, in its determination, should be changed "were 
          not at least as effective in rewarding and facilitating qui tam 
          actions as the Federal False Claims Act."  According to the 
          author, this bill is intended to make the changes "deemed 
          necessary by DHHS to maintain California's eligibility for the 
          10% Medicaid recovery awards, as well as conform to other 








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          amendments to the federal law made by Congress in 2010." 

          This bill therefore seeks to implement a number of changes to 
          the state False Claims Act, as identified by the OIG, that are 
          needed to conform CFCA to its federal counterpart and preserve 
          the state's eligibility for the federal funds.  Among other 
          things, this bill modifies the definition of some key terms, 
          increases civil penalties, increases anti-retaliation 
          protections for employees and others who pursue false claims 
          actions, and clarifies application of the statute of 
          limitations, all consistent with federal law.

          Opponents of the bill express concern with two major 
          provisions-the public disclosure bar and the award of attorneys' 
          fees to a prevailing defendant.  With respect to the former, 
          they assert that the bill "eviscerates the public disclosure bar 
          - a limitation that prohibits private lawsuits by qui tam 
          plaintiffs who sue based on information already public, which 
          could expose employers to numerous frivolous lawsuits all based 
          on the same public facts. Instead, this bill would allow the 
          Attorney General or prosecutor for any reason to permit the 
          private plaintiff's lawsuit to go forward, even when it is based 
          on public information."  Supporters of the bill note that the 
          public disclosure rule in this bill simply reflects existing 
          federal law, namely 31 United States Code Section 3730(e)(4), 
          that the Inspector General has indicated state law must conform 
          to in order to preserve California's eligibility for federal 
          incentive awards.  In other words, opponents' objection to the 
          public disclosure rule in this bill appears to be an objection 
          to existing federal law that, if not conformed to in California, 
          could jeopardize access to significant federal incentive awards.

          Opponents also contended that the bill's provision on prevailing 
          defendant's attorneys' fees is not in fact conforming to the 
          federal False Claims Act with respect to the award of attorneys' 
          fees to a prevailing defendant.  The April 16 amendments seek to 
          reflect better conformity between the bill and federal law, and 
          were successful in removing the opposition of at least one other 
          opponent, the Southern California Contractors' Association.  It 
          is unknown at the time of this analysis whether these remaining 
          opponents have changed their view of the bill in light of this 
          recent amendment to the attorneys' fees provision.
           









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          Analysis Prepared by  :    Anthony Lew / JUD. / (916) 319-2334  
                                                                FN: 0003400