Whether it’s at the national level or here in California, fighting fraud should be bipartisan – especially in these difficult budget times. At the federal level, Democrats and Republicans have joined together to fight against contractors and others who knowingly falsify records to bilk the government and taxpayers out of millions of dollars. But in the state legislature, I am saddened to report that most of my Republican colleagues do not seem willing to go after cheating government contractors, even when they are intentionally ripping off taxpayers.
This is no exaggeration. Recently, Congressman Howard Berman (D-CA) and Senator Charles Grassley (R-OH) joined together to improve the effectiveness of the federal False Claims Act so that it would clearly cover false claims involving subcontractors and others being paid indirectly by taxpayer funds. Their bill was signed into law, passing overwhelming by a 92 – 4 vote in the US Senate and 367 – 59 in the US House.
As a former staffmember to Howard Berman and someone quite familiar with the billions of dollars this act has recovered in public funds, I have authored a state bill, AB 1196, that would expand the state law by bringing it into conformance with the strengthened federal law through amendments virtually identical to what was passed in the Congress. My bill passed the Assembly with only three Republican votes, and so far no Republicans in the Senate have agreed to support the measure – but I remain hopeful.
Meanwhile, during the tortured state budget negotiations, many of my friends who voted against my bill were among the loudest voices in demanding aggressive anti-fraud measures in social service programs like In-Home Supportive Services. I don’t understand why they can’t muster the same fervor for going after big white-collar government contractors, and other firms that score lucrative government contracts, whose taxpayer rip-offs dwarf the meager amounts possibly scammed by a few near-minimum wage caregivers. The legitimate contractors benefit when the bad actors are brought to justice.
The false claims law is an effective tool that was first used by President Lincoln to encourage private citizens to expose schemes by government contractors and vendors to cheat taxpayers. If the tip turns out to be true, the person who reported the graft can share in a percentage of the court-awarded damages.
At the federal level, more than $21 billion has been recovered since the law was updated in 1986, and California’s law has led to recovery of over $1 billion in the past decade. The largest federal suit was against Merck drug company for failure to pay drug rebates under Medicare. Brought forward by two private citizens, the suit recovered $341 million for taxpayers. The people who reported the violations earned $46 and $24 million respectively when the cases were completed.
In addition to recovering millions lost to Medi-Cal health care provider fraud, California has used the law to pursue others who knowingly cheat the government. In one recent case, a tugboat captain blew the whistle on a mining company that stole two million cubic yards of sand from state lands in San Francisco and Suisun bays and cheated the state out of millions in royalties. The state recouped $42 million, and the tugboat captain got $10 million for tipping off state officials.
The false claims law is a classic market mechanism that Democrats and Republicans in Congress realize is the perfect way to help fight fraud because it does not create or rely on government bureaucracy. Strengthening our state law along the same lines as Congress recently has done to cover all government monies, including payments to subcontractors and funds of CalPERS, CalSTRS and the UC system, simply makes sense. Furthermore, these changes will allow California to take advantage of federal incentives that lets the state keep an extra 10% of monies recovered in Medicaid fraud cases by having a state law at least as strict as the federal statute.
Why is it that conservative Congressman Dan Lungren can herald the updated federal law and vote for it, but that most Republican state representatives cannot? Have term limits and the 2/3 vote requirement for passing a budget so polarized the legislature that we cannot join together when it comes to combating fraud? I don’t know the answer to this question, but I can’t help but think that it is also the root cause of much of our chronic budget stalemate.
As partisan as things are in Washington, congressional Republicans and Democrats came together to support strengthening the government’s ability to protect taxpayers against fraud. It is my sincere hope that we here in Sacramento will do the same to protect Californians against unscrupulous government contractors by passing AB 1196.