State false claims act proposals resurface

(Feb. 22, 2008) Two proposals to enact a state false claims act in Connecticut have resurfaced this year in the legislature — SB-31 in the Government Administration and Elections Committee, and a concept in the Judiciary Committee that has not yet been released as a bill.

The federal False Claims Act protects against fraud against the government, but it also has a provision in it that actually encourages and rewards whistleblowers. Consequently, it leaves the door open to abuse and unfounded accusations.

CBIA opposes enacting a strict state False Claims Act because Connecticut already has significant safeguards and remedies for fraud. Connecticut has a reformed statutory scheme for investigations, enables the attorney general to take civil actions and allows the Office of State Ethics to conduct investigations. In addition, the Chief State’s Attorney can assess penalties for instances of fraud.

Obviously, state government should be protected against fraud in contracted work. But adopting a state False Claims Act would have unintended and negative consequences.

A state false claims act could increase the costs of state contracts by discouraging potential contractors from bidding for work. And any company that decides to compete for a state contract would also have to incorporate into their bids the cost of potential, meritless false claims actions. What’s more, current state contractors might be forced out of business based on meritless false claims — and that would cost jobs.

Companies seeking long-term contracts would likely avoid markets in which abuse of a strict false claims act would create insurmountable exposure to prolonged investigations and litigation, public scrutiny and possible loss of ability to bid on a government contract.

For more information, please contact CBIA’s Kevin Hennessy at 860-244-1979 or kevin.hennessy@cbia.com.