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New York State False Claims Act (New York Whistleblowers Law)
October 10, 2019 by Brian Mahany
Great News for NEW YORK WHISTLEBLOWERS – New York Has One of the Most Aggressive Whistleblower Reward Laws in the Nation. Learn How to Stop Fraud and Get Paid for Doing So.
New York whistleblowers are lucky. The state has one of the most powerful whistleblower laws in the nation. Passed by the state legislature in 2007, New York is one of 29 states with its own whistleblower reward program.
The New York False Claims Act largely mirrors the federal whistleblower but with some important differences. Those differences include more powerful anti-retaliation provisions, the extension of the law to local governments such as cities and the inclusion of tax claims and more relaxed legal standards making it easier to collect a reward.
In this section we will discuss some of the differences between the federal and state false claims acts and give a quick overview of how the law operates.
Tax Fraud and New York False Claims Act
The federal False Claims and those of most states specifically exclude tax claims. Although the IRS has a whistleblower program for unpaid and unreported federal taxes, the law does not allow whistleblowers and their lawyers to privately prosecute tax violations. If the IRS does not take up your case, it's over. No appeal, no right of private prosecution.
That isn't the case in New York. Empire State whistleblowers can directly bring and prosecute tax claims for unpaid state taxes if the wrongdoer has net income or sales of over $1 million per year and damages that exceed $350,000.
NY State Finance Law Art. 13 §189(4)(a):
This section shall apply to claims, records, or statements made under the tax law only if
(i) the net income or sales of the person against whom the action is brought equals or exceeds one
million dollars for any taxable year subject to any action brought pursuant to this article;
(ii) the damages pleaded in such action exceed three hundred and fifty thousand dollars
In December 2018, Sprint settled with the New York Attorney General's Office. A whistleblower had filed a claim under the False Claims Act alleging that Sprint failed to collect state and local sales taxes on wireless phone calls. The fines and penalties in that case were $330,000,000.00. The whistleblower in that case was awarded $62.7 million.
Unfortunately, the IRS has not been as aggressive with their whistleblower law as we would like. That isn't the case with the New York whistleblowers law. The state is very aggressive in pursuing tax cheats and appreciates whistleblowers. In the words of New York Attorney general Eric Schneiderman,
"With this strengthened law, New York will . . . be able to recover millions of dollars stolen by tax cheats. Because New York is a major financial center, we think the state will be a bellwether for the nation in the arena of tax recovery. Without a doubt, the New York law will be used as a cat's paw to illuminate national tax fraud cases that have tentacles in New York."
Longer Statute of Limitations
The New York whistleblowers law has a long statute of limitations. Whistleblowers have 10 years to file a claim. The federal law is more complex but is generally 6 years.
NY State Finance Law Art. 13 §192(1):
A civil action under this article shall be commenced no later than ten years after the date on which the violation of this article is committed. Notwithstanding any other provision of law, for the purposes of this article, an action under this article is commenced by the filing of the complaint.
Often people do not know whistleblower rewards are available. By providing a 10 year statute of limitations, New York has made it easier for former employees to report frauds that occurred several years in the past.
New York Whistleblower Violations Are Easier to Prove
Many whistleblowers come forward only after they have suffered retaliation. Most of the people who seek our assistance come to us after they have quit. Some come to us after being fired.
The federal and state False Claims Act statutes are considered anti-fraud laws. In almost every jurisdiction, lawyers must plead fraud with "specificity". That means the lawyers drafting your whistleblower complaint must detail the "who, when, when, where and how." Specific examples of fraud are hard to come by after an employee leaves his or her place of employment. It's frustrating to know that rampant fraud is taking place but to be unable to find even a single example.
In a normal lawsuit, lawyers can use discovery techniques such as written questions or depositions to elicit important facts. That isn't the way it works in the typical whistleblower claim; one must allege specific incidents of fraud complete with names and dates in the complaint. If you can't, the result is likely a dismissal of the claim.
New York is the exception. The state's False Claims Act gives more leeway to whistleblowers who have evidence of fraud but lack specifics.
NY State Finance Law Art. 13 §192(1a):
For purposes of applying… the civil practice law and rules, in pleading an action brought under this article the qui tam plaintiff shall not be required to identify specific claims that result from an alleged course of misconduct, or any specific records or statements used, if the facts alleged in the complaint, if ultimately proven true, would provide a reasonable indication that one or more violations of section one hundred eighty-nine of this article are likely to have occurred, and if the allegations in the pleading provide adequate notice of the specific nature of the alleged misconduct to permit the state or a local government effectively to investigate and defendants fairly to defend the allegations made.
New York Whistleblowers Reward Law Extends to Cities and Counties
Unlike many whistleblower laws, the New York False Claims Act extends to local governments. Specifically, the law includes fraud against any "county, city, town, village, school district, board of cooperative educational services, local public benefit corporation or other municipal corporation or political subdivision of the state, or of such local government."
Double Rewards for New York Healthcare Whistleblowers
The federal government pays rewards for information about fraud involving the taxpayer funded Medicare and Tricare (military) healthcare programs. They also pay rewards for the federal portion of Medicaid. New York is one of 29 states that also pays rewards for information on Medicaid fraud. That means two rewards are possible (and common).
New York Has Important Anti-Retaliation Protections for Whistleblowers
Unfortunately, 20% or more of whistleblowers will experience some type of retaliation. New York has stiff penalties for employers who retaliate against present or former workers who blow the whistle. These protections include double back pay, reinstatement with comparable seniority, special damages, interest and attorneys' fees.
Section 191 of the New York False Claims Act provides:
Any current or former employee, contractor, or agent of any private or public employer who is discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against in the terms and conditions of employment, or otherwise harmed or penalized by an employer, or a prospective employer, because of lawful acts done by the employee, contractor, agent, or associated others in furtherance of an action brought under this article or other efforts to stop one or more violations of this article, shall be entitled to all relief necessary to make the employee, contractor or agent whole. Such relief shall include but not be limited to:
an injunction to restrain continued discrimination;
(b) hiring, contracting or reinstatement to the position such person would have
had but for the discrimination or to an equivalent position;
reinstatement of full fringe benefits and seniority rights;
payment of two times back pay, plus interest; and
(e) compensation for any special damages sustained as a result of the
discrimination, including litigation costs and reasonable attorneys' fees.
New York's anti-retaliation protections are somewhat unique in that they specifically extend to former employees.
The anti-retaliation protections in New York don't stop with the False Claims Act. Two other state laws provide valuable protections.
Section 740 of New York's Labor Law prohibits an employer from taking retaliatory action against an employee when the employee discloses information about the employer's policies, practices or activities to a regulatory, law enforcement or other similar agency or public official. Unlike the New York False Claims Act, these protections only apply if the employee first reports the improper activities internally and gave the employer a reasonable opportunity to correct the alleged violation. If the employer takes retaliatory action, the employee may seek reinstatement to his or her former position (or an equivalent position), back wages, lost benefits and attorneys' fees.
A parallel provision under section 741 of the Labor Law allows courts to assess an additional $10,000 if the aggrieved employee is a healthcare worker and the court finds the employer acted in bad faith. This section applies when a healthcare worker seeks to report conduct which poses a "substantial and specific danger" to public health or a "significant threat" to the health of a specific patient.
How Much Money Can I Expect from New York Whistleblower Reward?
The New York False Claims Act tracks the federal statute when it comes to rewards. If the New York Attorney General intervenes and takes over the case, the reward will be between 15% and 25% of whatever the state collects from the wrongdoer. If your own lawyer prosecutes the case the reward will be between 25% and 30%. The court will generally also award attorneys' fees and costs.
The actual percentage is based on a number of factors including the value of the information provided by the whistleblower, how much assistance the whistleblower and the whistleblower's lawyer provided and whether the misconduct involved a safety issue.
Both the federal and state False Claims Act allow the government to collect triple damages. Fines under the New York law are between $6,000 and $12,000 per violation. That means the total fines in these cases are often huge. Big fines mean big whistleblower rewards.
What Happens If I Participated in the Fraud?
Some of the best whistleblowers are those closest to the fraud. It's better to come forward and cooperate than spend the next 10 years looking over your shoulder.
Under New York law, you can still qualify for a reward even if you participated in the wrongdoing. We often see this with billing clerks who were ordered by their boss to submit false billing statements to Medicaid. Typically, prosecutors aren't interested in prosecuting rank and file workers or others who were just carrying out orders.
If you merely participated in the wrongdoing and nothing more, you can receive a reward. If you were the mastermind or a leader of the wrongful scheme, the court can reduce your reward below 15%. If you were criminally convicted for your role in the scheme, you are prohibited from receiving a reward.
Section 190 (8) of the New York False Claims Act provides:
If the court finds that the qui tam civil action was brought by a person who planned or initiated the violation of section one hundred eighty-nine of this article upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise be entitled to receive under subdivision six of this section, taking into account the role of such person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the qui tam civil action is convicted of criminal conduct arising from his or her role in the violation of section one hundred eighty-nine of this article, that person shall be dismissed from the qui tam civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the attorney general to supersede or intervene.
If you are worried about your involvement in a questionable scheme, speak with us first. In New York, prosecutors can grant immunity to whistleblowers.
Other Important Details about the New York False Claims Law
The New York whistleblowers law provides many opportunities to whistleblowers. The state is one of the most aggressive in the nation when it comes to prosecuting fraud against taxpayers. From high rewards to excellent whistleblower protections, becoming a whistleblower in the Empire State offers many benefits. The best benefit, of course, is knowing that you are making a difference in the war on dishonesty, corporate greed and fraud.
Things You Need to Know to Qualify for a New York Whistleblowers Reward
There are a couple more important things to know if you hope to receive a reward.
First, you must be the original source of the information about the fraud or misconduct.
The state specifically excludes from rewards information based on the following:
allegations contained in a state or local government criminal, civil, or administrative hearing in which the state or a local government or its agent is a party;
allegations or findings in a federal, New York state or New York local government report, hearing, audit, or investigation that is made on the public record or disseminated broadly to the general public;
information found in the news media, "provided that such allegations or transactions are not 'publicly disclosed' in the 'news media' merely because information of allegations or transactions have been posted on the internet or on a computer network."
Once again, if you have questions, talk to us. There are times when an investigation may be ongoing but a whistleblower can still receive a reward. Typically, this happens if the whistleblower has unique information not known to investigators.
Second, you need a lawyer. Claiming a reward means filing a lawsuit under seal (secret) in the New York Supreme Court. You need a lawyer to file lawsuit in the name of the State or a city, county or other local government.
Third, you must generally be the first to file. Like the federal whistleblower program, New York typically only pays an award to the first who files. If you think you may qualify for a reward, don't delay. Call us right away.
Finally, let's answer the question of what type of wrongdoing qualifies for a cash whistleblower reward. The short answer is any conduct by a company or person that defrauds a New York state or local government program.
Officially, the New York False Claims Act says the following acts or omissions qualify for a reward:
(a) knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval [An example is doctor who submits a claim to Medicaid knowing that the services were not performed or were medically unnecessary.]
(b) knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim [Using our example above, if the doctor created false chart notes to support the bogus claims, he could also be prosecuted under the false records provision.]
(c) conspiring to commit a violation of [any of these sections]
(d) possessing or controlling of property or money used, or to be used, by the state or a local government and knowingly delivering, or causing to be delivered, less than all of that money or property [The common example is a car dealer who collects thousands of dollars of sales taxes from customers but never turns them over to the state.]
(e) making or delivering a document certifying receipt of property used, or to be used, by the state or a local government and, intending to defraud the state or a local government
(f) knowingly buying, or receiving as a pledge of an obligation or debt, public property from an officer or employee of the state or a local government knowing that the officer or employee violates a provision of law when selling or pledging such property [N.Y.'s anti-corruption measure]
(g) knowingly making, using, or causing to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the state or a local government; or
(h) knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the state or a local government or conspiring to do the same.
The last section is known as a reverse false claims. In the typical false claims act case, the bad actor illegally bills the government for a defective service or product that was never delivered. In a reverse false claim, the bad actor fails to pay money to the state.
One common reverse false claims example would be tax case where the taxpayer is concealing money in order to avoid taxes. Another example might relate to a wastewater permit that says a company must pay $100 for every gallon of toxic waste discharged into the Hudson River. If the company dumps 1000 gallons but doesn't tell the state, it has "knowingly concealed" or "decreased an obligation" to pay money owed to the state.
Seeking New York Whistleblowers
If you have information about wrongdoing involving New York state or local government or the federal government, you may be entitled to a cash reward. More importantly, by stepping forward and reporting misconduct you are making a real difference in the fight against fraud, corporate greed and corruption.
To learn more, contact us online, by email
or by phone at 202-800-9791. We accept cases anywhere in the United States. Worried about hiring some out-of-state lawyer? We have been filing whistleblower cases in New York for years and have dedicated New York licensed counsel. Worried about confidentiality? All inquiries are protected by the attorney – client privilege and kept strictly confidential.
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Filed Under: Fraud Recovery
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