California State Whistleblower Programs

The State of California offers several programs whistleblowers can use to report misconduct, recover damages for employer retaliation, and earn a cash award. While the California False Claims Act (CFCA) and California Insurance Fraud Prevention Act (CIFPA) whistleblower programs largely mirror federal whistleblower programs, they contain certain unique pieces worth discussing here.

CFCA Program

Individuals with information regarding the fraud, waste, or abuse of California state government funds or property, including Medi-Cal program or subcontractor funds, may be eligible to collect a cash whistleblower award by bringing a qui tam lawsuit on behalf of the State of California.

• Award amount: Up to 50% of total government recovery.
• Knowledge: Original source information, though some exceptions apply.
• Time Limits: First to file bar. 6 years of violation or 3 years of time violation should have been discovered. No longer than 10 years.
• Anonymity: Filed under seal. Identity released late in investigation or at time of legal proceeding.
• Other: Whistleblower may proceed with private prosecution should state decline to intervene (award is raised to between 25% and 50%).

Enacted in 1987, the California False Claims Act (CFCA)¹ is one of the oldest state False Claims Acts. The CFCA is similar to the federal FCA, offering whistleblower protections and large cash awards to individuals who report misconduct involving the misuse of government funds or property. But there are a few distinct differences.

First, the CFCA whistleblower program applies only to cases involving California state government programs or property, including political subdivisions such as counties and cities. Under the CFCA, a false claim is “any knowingly false or fraudulent request or demand, whether under a contract or otherwise, for money, property, or services” provided by the State of California or local government.

Examples of CFCA violations include (but are not limited to):

• Benefitting from inadvertent submission of a false claim, discovering the claim is false, and then failing to disclose the false claim within a reasonable time.
• Knowingly buying public property from one who cannot lawfully sell the property
• Knowingly concealing or decreasing a financial obligation to the state or local government
• Knowingly making a false statement material to a false claim
• Knowingly presenting false or fraudulent claims to a government entity for payment

Second, the CFCA whistleblower program offers a significantly higher cash award than the federal FCA.

If the state chooses to intervene, the qui tam relator receives between 15% and 33% of the total recovery. If the state does not intervene, the whistleblower is eligible to collect between 25% and 50% of the total recovery. Award amounts may vary for current or former employees of state government or local government entity.

Under the CFCA, total recovery amounts are dependent on losses suffered, the cost of litigation, and the number of false claims. Total recovery in CFCA cases typically amounts to:

• Triple the amount of damages that the CFCA violations caused the state,
• Costs of litigation, plus
• Penalties of $5,500 to $11,000 for each false claim.

Many California whistleblowers with information regarding false claims may be eligible to file qui tam lawsuits under both the federal FCA and the CFCA. For example, Medi-Cal is a joint federal and California state healthcare program. Information suggesting false claims have been submitted to the Medi-Cal program may apply to both federal and state whistleblower programs.

One final difference from the federal FCA is that a whistleblower may file a claim using information that may be publicly accessible. The general rule is that the information regarding the alleged false claims must be “original source” information, meaning not available to the general public through the media, court documents, or other source. However, 2012 amendments to the CFCA allow the California government to override this requirement in certain situations, such as when only part of the relevant, material information is available to the public or when the information became publicly accessible after the whistleblower disclosed the information to the state.

CIFPA Program

Interested persons with information regarding the fraud, waste, or abuse of private insurance funds may be eligible to collect a cash whistleblower award under the California Insurance Fraud Prevention Act (CIFPA).

• Award amount: Up to 50% of the total recovery.
• Knowledge: Original source information. Publicly available information eligible for lesser award.
• Time Limits: Claims must be filed within three years of discovery of the facts constituting the
• grounds for the action.
• Anonymity: Filed under seal. Identity released late in investigation or at time of legal proceeding.
• Other: Whistleblower may proceed with private prosecution should the state decline to intervene (award is raised to between 40% and 50%).

Only two U.S. states have meaningful insurance fraud whistleblower programs: California and Illinois. Under the California Insurance Fraud Prevention Act,[20] individuals or companies with knowledge of fraud against a private insurance company (healthcare, property, auto, worker’s comp, and other types of insurance) may bring a qui tam lawsuit on behalf of the state and collect a portion of the recovery.

The CIFPA does not require proof that an insurer paid a fraudulent claim. Only that misconduct led to a fraudulent claim. Examples of CIFPA violations include (but are not limited to):

• Billing insurance providers for services not provided
• Conspiring to commit insurance fraud
• Double billing insurance companies
• Making misrepresentations or false statements to collect or deny insurance benefits or worker’s compensation
• Paying illegal kickbacks to insurance companies for client referrals
• Presenting false claims to a private insurance company
• Underreporting employee numbers

Like the CFCA, the CIFPA whistleblower program offers a significantly higher cash award than the federal FCA. If the local District Attorney or California Insurance Commissioner chooses to intervene in the qui tam case, the whistleblower receives between 30% and 40% of the total recovery from settlement or verdict. If the state does not intervene, the whistleblower is eligible to collect between 40% and 50% of the total recovery.

Under the CIFPA, total recovery amounts are dependent on losses suffered and the number of false or fraudulent claims. Penalties for CIFPA violations include:

• Triple the amount of damages to policyholders, insurance company, and/or state, plus
• Civil penalties of between $5,000 and $10,000 per violation

To be eligible for the full whistleblower award amount under the CIFPA, the qui tam relator’s information must be “original source,” meaning not available to the general public through the media, court documents, or other source. However, whistleblowers with publicly available information may still be eligible to earn a cash award of up to 10% to the total recovery from settlement or verdict.

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Footnotes:

1. Cal. Gov’t Code Ann. §§ 12650-12655.