The Georgia General Assembly recently enacted the Georgia Taxpayer Protection False Claims Act (the “Act”) to combat fraud and false claims directed to the state and local governmental funds.
The Act has very important implications for everyone involved with public works projects in Georgia. First, it is an obvious tool for public owners in combatting false claims by or on behalf of public contractors. Second, it may be used by public contractors in combatting spurious claims by their subcontractors and suppliers (or those who purport to be). Third, public subcontractors and their employees may even find some usefulness in the Act’s reward for reporting and prosecuting false claims.
What Are “Claims”?
The Act applies only to “claims” involving state or local governmental money or property (“governmental funds”). Claims include demands made directly to the state or local government (“governmental entity”). And claims include indirect demands for governmental funds, such as where a subcontractor improperly demands funds from a public contractor.
Such indirect claims specifically include any requests or demands for funds that are made to a contractor, grantee, or other recipient of governmental funds, but only if (a) the funds are to be spent or used on the governmental entity’s behalf and (b) the governmental entity (i) provided some of all of the funds demanded or (ii) will reimburse the contractor (or other intermediary) for any portion of the demand. On the other hand, claims do not include demands for funds that the governmental entity has paid to an individual as compensation or as an income subsidy with no restrictions on their use.
What is Prohibited by the Act?
The Act prohibits seven types of claims. A person violates the Act when such person:
1. Knowingly presents (or causes to be presented) a false or fraudulent claim for payment or approval (“false claim”);
2. Knowingly makes or uses, or causes to be made or used, a false record or statement material to a false claim;
3. Has possession, custody, or control of governmental funds and knowingly delivers, or causes to be delivered, to less than all of such governmental funds;
4. Certifies receipt of governmental property without completely knowing that the information on the receipt is true, where (i) such person is authorized to certify receipt of such property and (ii) such person intends to defraud the governmental entity;
5. Knowingly buys public property, or receives such property as a pledge of an obligation or debt, from a governmental entity’s officer or employee who is not lawfully authorized to sell or pledge the property;
6. Knowingly makes or uses, or causes to be made or used, a false record or statement material to an obligation to pay a governmental entity, or knowingly conceals, or knowingly and improperly avoids, or decreases an obligation to pay a governmental entity; or
7. Conspires to commit any of the above acts.
What is the Result of a False Claim?
A person who commits any of the prohibited activities may be liable for a civil penalty in an amount between $5,500 and $11,000 for each false claim. In addition, such person is liable for three times the amount of damages sustained by the governmental entity.
In certain circumstances, a court may award only two times the damages. The court must find the following:
1. The person provided all information known about the false claim to the governmental official within 30 days upon obtaining the information;
2. The person fully cooperated with the government investigation; and
3. At the time such person provided the information to the governmental official, (i) no criminal prosecution, civil action, or administrative action had commenced pursuant to the Act, and (ii) the person did not have actual knowledge of the investigation.
In addition to the above penalties, a person will be liable for all costs, reasonable expenses, and reasonable attorney fees incurred in the prosecution of the civil action under the Act.
Other Important Provisions of the Act
A civil action brought for violation of the Act may be prosecuted by the Attorney General or a designee, or even a private person (also known as a relator) in certain circumstances. If a relator files an action under the Act, the governmental entity and the state Attorney General have the option to prosecute the claim.
In many cases, the Act provides a reward to the relator. In cases where the Attorney General or a designee prosecutes the claim, the relator is entitled to between 15 and 25 percent of the proceeds. If, however, the relator filed the action based primarily on public information, except information provided by the relator, then the recovery is limited to 10 percent.
If the Attorney General elects not to proceed with the action, the relator will receive between 25 and 30 percent, plus certain reasonable expenses in prosecuting the claim. The court has authority to reduce or eliminate the relator’s recovery if such person planned or initiated the violation.
Finally, the Act contains new and extensive civil investigative procedures, similar to civil discovery, for the Attorney General (or a designee) to obtain information related to alleged false claims.