This transcript has been auto generated
00;00;00;00 - 00;00;32;23
Jonathan Porter
Welcome to another episode of Husch Blackwell’s False Claims Act Insights podcast. I’m your host, Jonathan Porter. We deal with the federal False Claims Act a lot on this podcast. Those are claims involving federal dollars investigated by the federal authorities. But state False Claims Act is becoming a bigger and bigger issue. For years, state FCA was really focused on state Medicaid fraud, where the state would investigate health care issues in tandem with the feds, and there were both state and federal dollars at play.
00;00;32;23 - 00;01;06;26
Jonathan Porter
And that’s still very much happens. But we’re seeing more action in other state led FCA investigation into other types of fraud. And businesses should take note of this state FCA shift because it could have major ramifications. So for anyone doing business with state or local governments like state contractors, colleges, construction companies, real estate or housing businesses grant administrators, this episode is for you because we’re talking all things state FCA enforcement today on the podcast.
00;01;06;28 - 00;01;28;16
Jonathan Porter
Joining me to talk about state, FCA enforcement are two of my Husch Blackwell partners, Rebecca Furdek and Todd Gee. Regular listeners will recognize them both from past episodes. Rebecca from our April Fools episode last year, where we talked about the very real story of the DOJ attorney who put on a fake mustache to lead an undercover FBI agent to sell an under seal qui tam. Rebecca,
00;01;28;17 - 00;01;56;26
Jonathan Porter
we got really good feedback on that one. People will remember Todd’s episode last year about working with DOJ, which had the benefit of Todd recording that right after he left DOJ to join this firm. Again, another fan favorite episode. So Rebecca practices in our firm’s Milwaukee office, and Todd is in Washington, DC, and they joined forces late last year to write about this super important topic and to sound the alarm for the rise of state FCA enforcement.
00;01;56;27 - 00;02;11;02
Jonathan Porter
So who better to tell our listeners about State False Claims Act than Rebecca and Todd? So Rebecca and Todd, thank you for joining the podcast today and telling our listeners about how states are using the False Claims Act in new and important ways.
00;02;11;08 - 00;02;12;18
Rebecca Furdek
Thanks so much for having us on.
00;02;12;24 - 00;02;31;08
Todd Gee
Yeah, really looking forward to it, Jonathan.
Jonathan Porter
All right. So like I said, at the open, we typically talk about the federal False Claims Act in this podcast. Rebecca, why don't you get us started by telling our listeners about how state FCA statutes work? Are they all the same? Do they cover different things? What do we need to know about state FCA statutes?
00;02;31;10 - 00;02;51;24
Rebecca Furdek
You bet. Happy to do so. As you said. Yeah. Typically when we all hear false claims Act, we immediately think of the federal statute. However, while that law should get a lot of attention, many states and even some major municipalities have their own false Claims Act laws. And because nothing is simple, these state laws, none of them are the same.
00;02;51;25 - 00;03;31;27
Rebecca Furdek
There are differences among the states, as well as between individual states and the federal False Claims Act. So, for example, like the federal law, many states fcas, but not all of them include a whistleblower provision. And some states have even higher financial incentives than the federal law for whistleblowers. So an example is California. You know, unlike the federal FCA, where a whistleblower can receive 25 to 30% in cases where the government does not intervene in California, if the government doesn't intervene, they can obtain up to 50% as another example, while the federal FCA does not permit suits for false claims to state governments.
00;03;31;29 - 00;03;54;08
Rebecca Furdek
Several states have laws that do permit suits for claims made to political subdivisions. And another big one is taxes. Unlike the federal False Claims Act, several states include claims for false statements in connection with tax claims. So that enables those states to try to recover tax losses. And I think we'll get into that a little bit more later on this show.
00;03;54;10 - 00;04;18;23
Rebecca Furdek
As you introduced many state False Claims Act or health care focused where some states like Texas, only permitting recovery of damages in connection with Medicaid. And these health care focus laws are kind of incentivized by the federal government, to an extent, because the Social Security Act permits these states that meet certain criteria to qualify for an increased share of any damages related to Medicaid.
00;04;18;25 - 00;04;37;23
Rebecca Furdek
And I believe there's 23 states that currently take advantage of this and qualify for that. Share. So these are just a few of the differences. There are many more. But the big takeaway is that it's just really important to be up to speed on each of the applicable state laws that might apply where you do business. Given that there's so much variety.
00;04;37;26 - 00;04;56;04
Jonathan Porter
Thanks, Rebecca. Yeah, that’s the important thing to know at this stage is they’re varied. So there’s a bunch of states that have different types of false claims act statutes. And every state is sort of changing them. And sometimes they're changing them year to year. I think different states are realizing that by incentivizing whistleblowers, they can recover more funds for the government.
00;04;56;04 - 00;05;15;25
Jonathan Porter
So you are seeing, I think, a little bit of a trend of people of state legislatures using the False Claims Act in New and different ways. And that’s why I think the article that you guys wrote, and this episode is so timely because it's becoming a bigger and bigger deal. So let’s talk about some examples so that our listeners know how these varied statutes might apply.
00;05;15;25 - 00;05;43;06
Jonathan Porter
And one example you two wrote about was a July 2025 settlement with the Massachusetts Attorney General’s office over allegations that contractors made false claims while renovating an airport. And I guess this airport renovation involved state funds. And that led to Massachusetts FCA liability. And so, Todd, why don’t you walk us through what happened in that settlement and how the Massachusetts law created this liability for this airport work?
00;05;43;08 - 00;06;11;29
Todd Gee
Thanks, Jonathan. You know, this Massachusetts case is a great example of a lot of the different ways that a business can have liability under state False Claims Act statute. You know, and particularly it’s a great example of a category of state contractor that really need to be focused on state false Claims Act liability. And that’s construction companies road paving companies that do business with state governments, especially on projects that are a mix of funds that are, say, federal funds, state funds, local funds.
00;06;11;29 - 00;06;47;29
Todd Gee
There’s a lot of liability. And that’s what happened here in the Massachusetts case. There was a regional airport in the western part of the state that was trying to rehabilitate its runway using a mix of federal, state and local funds and two companies that were based in other states outside of Massachusetts. A engineering company and a construction company were hired to do the runway project, and to receive the funds, they had to submit claims along the way to the federal government, state government and local entities about sort of what they were doing, the bills they’ve done, the projects they completed, and the stages it was in.
00;06;48;01 - 00;07;12;29
Todd Gee
And the state attorney general ultimately alleged that the two companies purposely skipped a significant step in the construction process. Basically, they didn’t build sort of a trench between the asphalt and the concrete part of the runway that was supposed to be called for in the approved design plans. And the companies allegedly did this to maximize the amount of payments under the contract scale.
00;07;13;02 - 00;07;49;23
Todd Gee
So this construction defect ultimately led to water infiltration, crumbling, heaving on the runway that caused problems for airplanes. Airport personnel required a whole bunch of subsequent repairs, need for continued maintenance. There was even a National Guard fighter wing that operated out of the airport that had to relocate for a little while. So the state alleged that these two companies violated the Massachusetts False Claims Act because they falsely claimed they completed their work, which enabled them to be paid with state and local funds for this committed work they were supposed to do.
00;07;49;25 - 00;08;17;10
Todd Gee
And so ultimately, the state settlement here was for $3 million from these companies. And it’s also a good example of a couple other ways that these can interact with other entities. So first off, the the actual investigation began as a referral from the U.S. Attorney’s office in Massachusetts. So if you’re a business that thinks, well, we’re receiving some federal funds, but it’s not enough of a risk that the feds are going to investigate us.
00;08;17;13 - 00;08;45;20
Todd Gee
You need to be aware, like in this Massachusetts case, the feds may not investigate you. They may refer you to the state for a state False Claims Act investigation. And ultimately here, the state did the investigation, got its 3 million. And then the federal government then jumped in and also got another almost $1.5 million in settlement under the federal False Claims Act for the false claims involved with the federal funds in the project.
00;08;45;22 - 00;09;13;12
Todd Gee
And the case also has another interesting tip to it, which is there was a third defendant company that settled as part of the lawsuit that it had acquired one of the companies that had done the earlier paving work. And so it’s a great lesson that if you are doing a merger or an acquisition, your business wants to be sure to do really good due diligence.
00;09;13;14 - 00;09;38;22
Todd Gee
If there’s another company you may be buying or merging with that’s done past state or local work, because you may be buying successor liability under state False Claims Act statute. So it’s a good tip there for mergers and acquisitions.
Jonathan Porter
Thanks, Todd. Yeah. So acquiring someone else’s FCA liability, we could do a whole episode on that. That’s a really interesting topic to me because I think there’s a lot of offshoots there
00;09;38;22 - 00;09;57;25
Jonathan Porter
the DOJ thinks about. But I’m glad you called that out for our listeners, because it is a really important topic in general, though, like what I’m hearing from Massachusetts, this is very much a core FCA thing. It was involving state dollars, the government not getting something that they paid for, and that's done knowingly by the contractor. That makes sense.
00;09;57;26 - 00;10;16;21
Jonathan Porter
That’s core FCA stuff. And so that’s very much tracking with what I think our listeners have learned about the federal False Claims Act is when you're dealing with government dollars and you're knowingly not giving the government something that they're providing, it goes back to the Civil War and why the the FCA was created the first place. So that's excellent, Todd, I appreciate you explaining that settlement to us.
00;10;16;21 - 00;10;38;08
Jonathan Porter
So another example that you two wrote about dealt with Minnesota and a state funded program Minnesota had for low income housing expenses. Rebecca, you know, Minnesota fraud has been in the news a lot lately. So tell us about that Minnesota settlement and how Minnesota’s False Claims Act law could be used going forward.
00;10;38;10 - 00;11;15;09
Rebecca Furdek
You bet. It sure has been in the news a lot lately in that Minnesota case that we wrote about very recently, the Minnesota AG sued a property management company and its affiliates that own and operate several rental properties throughout the state. And they’re the AG allege that the companies violated the Minnesota false claims Act by submitting over a quarter million dollars worth of false and fraudulent claims to the State Housing Finance Agency, and this was done in connection with the rental Assistance Program back in 2021 that was assisting some tenants during the COVID 19 pandemic.
00;11;15;12 - 00;11;41;28
Rebecca Furdek
And there the Minnesota State False Claims Act allows for treble damages. So the AG is seeking three times the amount ultimately collected. So over three quarters of $1 million, in addition to civil penalties costs and fees. So we’ll see how that develops. But to back up, the Minnesota False Claims Act has been around for about 15 years, and it broadly will punish individuals or entities that submit false or fraudulent claims.
00;11;42;00 - 00;12;10;20
Rebecca Furdek
And it’s not one of the laws that are only Medicaid specific. So it’s a little more broad. And as I mentioned, it provides for tribal damages and as well as penalties of about 27,000 for every single false claim. So going forward, the law could be continued to apply where a business or individual has falsified information on an application or a document submitted to the government to qualify for state grants or any government money or property.
00;12;10;26 - 00;12;33;12
Rebecca Furdek
So if you look at the Minnesota daycare issue currently in the news, the focus at this time appears to be more on allegations of federal fraud. However, to the extent that there are specific state level funds that issue and support a child care or other services, there may be a state level False Claims Act allegation brought either by a whistleblower or the AG’s office.
00;12;33;14 - 00;12;35;14
Rebecca Furdek
So we'll stay tuned on that one.
00;12;35;16 - 00;12;56;13
Jonathan Porter
Yeah. For anyone following the news and thinking that Minnesota is a place for tourist fraudsters to go and open up shop and get government funds, just know there is the state False Claims Act that could apply. And so people should know that’s a thing. If you’re a legitimate business in Minnesota, you should also know that there are these mechanisms for Minnesota recover funds if you are doing something that’s improper.
00;12;56;13 - 00;13;20;09
Jonathan Porter
So Rebecca, thanks for calling out that example. Let’s do one last example that interests me in particular, because I think this really could boom in future years. And that’s state FCA laws premised on tax issues. Todd, The District of Columbia, it’s got its own FCA that led to a huge settlement in 2020 for over someone misreporting their residency to avoid DC taxes.
00;13;20;12 - 00;13;49;16
Jonathan Porter
Tell us about that and how tax issues come up in state FCA in general.
Todd Gee
Well, I agree, Jonathan. This is definitely an area that could really grow in future years as, states and try to increase revenue. As Rebecca mentioned, there are some states and the District of Columbia where their state False Claims Act statute enables suits for tax evasion, whether it’s income taxes, sales taxes, property taxes, corporate profits, other kinds of taxes.
00;13;49;18 - 00;14;27;25
Todd Gee
And here is really interesting case that actually began with a whistleblower lawsuit under the DC False Claims Act statute. And then the DC attorney general picked it up and launched an independent investigation. And the DC AG, they’re actually a local official here in DC who’s elected by the residents of the city and alleged in a lawsuit under the local DC False Claims Act, which allows claims for tax evasion, that a wealthy Bitcoin investor falsely claimed that he lived in other states in order to avoid paying almost $25 million in DC income taxes.
00;14;27;27 - 00;14;53;04
Todd Gee
And DC AG’s lawsuit had some really eye catching details like that. Instead of living in these other states, the wealthy investor was allegedly renovating and living in a 7000 square foot penthouse in Georgetown and docking multiple yachts in the Washington Harbor. I can tell you, as a DC resident, a 7000 square foot penthouse in Georgetown is not cheap.
00;14;53;06 - 00;15;24;16
Todd Gee
According to the DC AG, as part of this tax avoidance scheme, the individual also involved a software company that he founded and led. For example, company employees allegedly knowingly reported false address information for him on his W-2 forms when company employees actually knew that he was living in DC instead of elsewhere. The wealthy individual and his company ultimately settled the case with DC for $40 million.
00;15;24;22 - 00;15;49;19
Todd Gee
So it’s a great example of how wealthy individual in states that and the District of Columbia that have false Claims Act statutes that allow claims for tax evasion. You can really be on the hook just as an individual for a lot of money for tax evasion. And, you know, in these states that allow these kinds of false claims, it’s not just about wealthy individuals.
00;15;49;21 - 00;16;24;07
Todd Gee
Companies need to focus on this. For example, in New York, where tax evasions permitted under the State False Claims Act statute in 2021, the sports merchandise company fanatics settled with the New York State Attorney general for over $1.5 million for allegedly under collecting on sales tax on online sales. And that’s another great example that case began with a whistleblower filing a suit under the New York State False Claims Act statute, and then the New York attorney general picked it up.
00;16;24;07 - 00;16;46;13
Todd Gee
So these kinds of tax evasion cases could really begin in a variety of ways and involve a lot of money in those states that permit these kind of claims.
Jonathan Porter
Thanks, Todd. Yes, I have a theory that tax FCA is going to boom in coming years. It just makes too much sense for governments to go after people who are evading taxes through FCA mechanisms.
00;16;46;13 - 00;17;10;16
Jonathan Porter
I think you’re going to see more states adopt that specific type of state law in order to go after them. And it’s really interesting when you have a whistleblower provision on top of that, where people now can go and point out things like fanatics under collecting sales tax, I think you're going to just see more of that. I know that our tax group, Bob Romashko, who listeners may remember from our tariffs episode earlier in the year, he's done a bunch of those cases.
00;17;10;16 - 00;17;25;26
Jonathan Porter
They’re really interesting. I’m glad we have tax folks at the firm because I can’t do my own taxes. So I'm happy that Husch has this excellent tax group. And so if you have those issues, if you're worried about those issues, reach out to one of us. We can connect you with with Bob. And because these cases really are coming.
00;17;25;26 - 00;17;45;16
Jonathan Porter
So Todd, thanks for explaining that one to us. Let’s move now to where things are going in state FCA enforcement. In the article, you two identified a number of trends along with some new state FCA laws that some states have passed. So, Rebecca, walk us through some of the trends in state FCA enforcement our listeners should know about.
00;17;45;18 - 00;17;49;24
Jonathan Porter
And then we’ll ask Todd to close us out with some some tips. So Rebecca, let’s start with you.
00;17;49;26 - 00;18;14;20
Rebecca Furdek
Sounds like a deal. First, you know, we believe that state FCA enforcement will generally increase as more states pass legislation. The either first create or broaden their respective laws, such as in the tax area that you just identified, and completely agree that that's probably an area that we're going to see more growth as. Just a couple examples, both Connecticut and Colorado recently expanded their laws to be broadened beyond just health care fraud.
00;18;14;23 - 00;18;45;05
Rebecca Furdek
And California, I believe, is currently still considering an expansion to include tax fraud claims. And the Pennsylvania legislature recently addressed a bill that would first create a state FCA. The second trend, I believe, will see state AGS use their state false claims acts to further policy priorities, similar to how, on the federal level, the Trump administration recently stated its intent to use the federal false claims Act to challenge illegal DNI practices.
00;18;45;07 - 00;19;23;13
Rebecca Furdek
So we might see Republican state AGS collaborate with the federal government on the DE&I front and on the Democrat side, several state AGS are publicly already committed to filling in what they perceive as gaps in federal enforcement. So a state FCA enforcement is just one tool in their toolbox to achieve that. So, for example, another Massachusetts example, with environment being a major policy priority, the Massachusetts AG recovered over 1.5 million from a power company that made false statements in connection with how much of its power was coming from renewable energy sources, and a final trend.
00;19;23;13 - 00;19;46;00
Rebecca Furdek
We expect to see both increased federal and state FCA cooperation, as well as more cooperation among the states and multi-state actions. So as listeners of this podcast know, you know, health care fraud is a huge area for federal enforcement. And so a state FCA enforcement grows generally, we’ll see more collaboration with the federal regulators to investigate Medicaid fraud.
00;19;46;02 - 00;20;11;26
Rebecca Furdek
And regarding multi-state cooperation, we are seeing a lot more multi-state litigation brought by state AGs against the federal government. And so we sense that that may incentivize more collaboration overall. So suffice to say, there’s a lot to watch as we enter 2026, both among individual states in their FCA laws as they evolve, as well as the interplay between state and federal governments.
00;20;11;28 - 00;20;28;28
Jonathan Porter
Thanks, Rebecca. Yeah, I think you’re spot on. And I think states are going to pass more FCA laws because it just makes a lot of sense for super states. And I think you’re gonna see more active AGs on the state level that are going to use their False Claims Act to go after things that they don’t agree with.
00;20;28;29 - 00;20;59;08
Jonathan Porter
As justice is becoming more and more politicized and polarized, I think you’re going to see AGs that disagree with the federal attorney general try to use their own False Claims Act for different purposes. We call that out in the DEI. So that we did earlier in the Trump administration, talking about how there are state laws that have a very different definition of what DEI is and how it would be very interesting if you have state AGs going after companies, contractors for how they're using DEI on the one side, and then a federal FCA for people go the other way.
00;20;59;11 - 00;21;17;01
Jonathan Porter
My opinion is false claims actors for knowing fraud. And at some point you can't have just two sets of law enforcement entities going after people for just a disagreement on policy. But that’s my opinion. What an interesting spot right now. But Rebecca, I’m appreciative that you called out where we're heading here because it's a super interesting spot to me.
00;21;17;03 - 00;21;46;07
Jonathan Porter
So, Todd, why don't you close this out with some tips our listeners should know about doing business in states with varying FCA laws. If this enforcement is on the upswing, I think we think what it is. How should our listeners get ahead of enforcement issues?
Todd Gee
Well, I think there’s a couple key ways to do that. I mean, first is that businesses need to be aware of where they’re engaging in activities where there's a state or local False Claims Act statute that they could be subject to liability under.
00;21;46;10 - 00;22;12;26
Todd Gee
The last thing you want to do is get sued under one of those statutes, and not even know that you were facing that liability in the first place. Number two is in mergers and acquisitions. As I mentioned earlier, you want to do due diligence to make sure that you’re not merging or buying another business that has done past state or local work that you may be on the hook for in the future.
00;22;12;26 - 00;22;39;04
Todd Gee
So you want to make sure that you're aware of that and taking that into account during M&A practices. Another thing you want to do is make sure that you have a good compliance program that is regularly updated in a way that’s designed to prevent false claims for payment from state and local agencies. A lot of attention is done over compliance programs where there is federal payments at issue.
00;22;39;06 - 00;23;11;16
Todd Gee
But you also really want to make sure if you are a company doing business with state and local governments, that your compliance program is also designed to pick up those kinds of false claims. And another thing you want to do is make sure that your company reporting processes are clear and made adequate to where employees, subcontractors and others feel comfortable using those kinds of channels to report potential false claims.
00;23;11;18 - 00;23;44;28
Todd Gee
And that supervisors know not to retaliate when those kinds of reports are made. If you have good reporting channels, it might help prevent your company from getting sued by a relator under a state False Claims Act in the first place, because they’ll use the reporting channels instead of suing, and it will also give your company an opportunity to benefit from being able to voluntarily self report misconduct that it’s identified for its reporting channels.
00;23;44;28 - 00;24;03;23
Todd Gee
So if an employee reports that they think a false claim was made, the company can then go to the state attorney general and say, we think we did this. We want to fix it, and you’re going to be in a much better position then if it got the attention of the state attorney general in a different way.
Jonathan Porter
Thanks Todd. Those are excellent points.
00;24;03;26 - 00;24;25;17
Jonathan Porter
Like I said, the False Claims Act, both state and federal, is for knowing fraud. It’s for people who do something knowingly wrong. And so having a good internal reporting mechanism where people can voice something to high up authorities and say, I think we're doing something wrong. I think that's the most basic, easy slam dunk of a compliance structure that can keep you out of false Claims Act trouble.
00;24;25;17 - 00;24;41;01
Jonathan Porter
So I’m glad that you ended by suggesting that to our listeners and Todd. Rebecca, this is a super interesting conversation, and I’m thrilled that you too wrote this article, which we’ll link to in the show notes. But I’m grateful that you were willing to come on the podcast and share wisdom with our listeners. Thank you both for coming on.
00;24;41;06 - 00;24;41;22
Todd Gee
Thanks for having us.
00;24;41;22 - 00;24;42;22
Rebecca Furdek
Thank you.
00;24;42;24 - 00;25;06;19
Jonathan Porter
To close, I want to tout our firm’s ability to help in this area. So one of the things that’s critical is having a firm that knows how to deal with state attorneys general. It’s a very different process than dealing with the federal Justice Department. And so our firm has a state AG group that is really active. We’ve got a lot of really talented people who know how to work with state AGs.
00;25;06;21 - 00;25;27;02
Jonathan Porter
Our firm knows a lot of really good stages for the podcast. You'll remember that our second guest on this episode was Catherine Hanaway, who's now attorney general of Missouri. And so we've got this excellent group that is ready to help when these situations arise, they will arise. And so we're happy to be here and help those who are having state FCA problems.
00;25;27;10 - 00;25;45;19
Jonathan Porter
Rebecca and Todd and I and a bunch of other people have really good chops at dealing with state edges when it comes to state FCA enforcement, and geography is just natural for dealing with a lot of different states. And so I’m thrilled to practice here at horseshoe with such great people, smart folks who have the right connections and knowledge as state FCA issues come up.
00;25;45;19 - 00;25;57;11
Jonathan Porter
So if you got one of these issues, reach out to one of us. We’re happy to steer you in the right direction. But to our listeners, thanks for listening and we’ll see you next time.