Fraud by Nick Youngson CC BY-SA 3.0 Pix4free

Donald Shubert’s recent CT Viewpoints commentary opposing the current proposal to extend Connecticut’s False Claims Act (the “CT FCA”) to industries beyond health care reflects the tried-and-true tactic of business interests hoping to avoid accountability: resort to fear-mongering and unsubstantiated claims, and hope nobody is paying attention.

Shubert, the President of the Connecticut Construction Industries Association, writes that expanding the CT FCA to other industries like construction will lead to higher costs for businesses while failing to protect state coffers.  But Shubert is wrong on both the law and the facts.

First, Shubert argues that “[t]he loose legal standards of the FCA are remarkably problematical when applied to construction disputes.”  In reality, the federal False Claims Act (“FCA”), on which the CT FCA is based, has proven to be a valuable tool in fighting fraud in the construction industry. 

For example, just last year, the U.S. Attorney for the District of Connecticut announced a $3.2 million dollar settlement with a contractor based on fraud committed by the company in connection with public construction contracts in Connecticut that were principally funded by the U.S. Department of Transportation.  The legal standards of the FCA worked just fine for the Department of Justice in combatting contractor fraud.  The same would be true under the CT FCA’s identical legal standards.

Second, Shubert argues that the legislation fails to define the words “false” or “fraudulent” and raises the specter that a “simple math error” could accordingly be a violation of the Connecticut FCA.  He fails to mention that the FCA has always required a violation to be “knowing,” meaning that an accidental “simple math error” has never been sufficient to establish liability.  That would not change with this proposed amendment, and courts, including those in Connecticut, would continue evaluating what constitutes an FCA violation based on over 35 years of statutory and judicial law.

Indeed, given that Shubert purports to support the current use of the CT FCA against the health care industry (even though the current version also does not define “false” or “fraudulent”), it seems that his argument is less a genuine effort to identify the proposed amendment’s legal ramifications, and more a naked attempt to help his construction industry members operate without accountability.

Third, Shubert falls back on the argument upon which companies of all stripes hoping to avoid accountability often rely:  any law that leads to potential liability will impose costs that will put companies out of business. 

Does that mean we should sweep Connecticut’s anti-discrimination and consumer protection laws off the books simply because claims brought under those laws can be costly for businesses that are found liable of discrimination or swindling their customers? Of course not, and the same is true here. 

The civil litigation system provides defendants with numerous opportunities to have frivolous claims dismissed.  These routine safeguards are made even stronger under the CT FCA and its federal analogue due to the many obstacles a claimant must overcome to have a successful case.  Indeed, the CT FCA also permits a court to award attorneys’ fees to defendants if a claim is deemed to be “clearly frivolous.”  The real concern is not frivolous lawsuits but rather the knowledge that the continuation of fraudulent practices will be met with meritorious lawsuits.

The current proposal to expand the CT FCA is an important step that will protect the tax dollars of Connecticut residents and disincentivize fraud across a range of industries.  It would help bring the CT FCA in line with its federal counterpart, which has been highly effective in fighting fraud across a wide range of industries.  (Just in 2021 alone, the United States Department of Justice recovered roughly $160 million in procurement fraud cases). 

It would also bring Connecticut’s law in line with its neighboring states; New York, for instance, has recovered millions resolving successful FCA cases against a range of non-health care companies including an electrical company, hedge funds, a heating oil company, and a mobile phone carrier.

Connecticut taxpayers should have the chance to protect themselves against this type of fraud, too.

Nico Gurian is an associate at Getnick & Getnick LLP, a boutique law firm in New York that represents whistleblowers.