On June 7, 2022, Governor Jared Polis signed into law the Colorado False Claims Act (CFCA) at Colo. Rev. Stat. Ann. § 24-31-101 et seq. The CFCA is largely based on the Federal False Claims Act (FCA), but is not an exact replica. Per Colorado Attorney General Phil Weiser, whose office will be tasked with enforcing the CFCA, the new law provides "increased enforcement mechanisms to provide new and more robust avenues to target criminal actors who seek to illegally divert government funds."
The timing of the CFCA passage is significant. Since the beginning of the COVID-19 pandemic, state and local governments received large infusions of federal stimulus and recovery funding. In the government's eyes, where there is an increase in available public money, there is a heightened risk of criminal or fraudulent conduct which the State of Colorado could combat with the CFCA. Companies and persons operating in Colorado should be aware of the new law and understand its key differences from its federal counterpart, three of which we discuss below.
The State's Toolbox Expands For Fraud Prevention
The CFCA's definition of a "claim" is similar to the FCA's, but adds two exclusions. The CFCA excludes requests or demands for money or property the state or a political subdivision has paid to: (i) an individual as part of a government assistance program in an amount less than $10,000 in a calendar year; and (ii) a person under the "Colorado Medical Assistance Act," articles 4, 5, and 6 of title 25.5. Colo. Rev. Stat. § 24-31-1202(c)(iii)-(iv). However, the latter type of government payments still are covered by Colorado's Medicaid False Claims Act (CMFCA). Passed in 2010, the CMFCA allows private individuals who know about Medicaid fraud to bring a private qui tam case against a person or entity for submitting or causing the submission of false claims to the State. Colo. Rev. Stat. Ann. § 25.5-4-305.
Beware! If allegations involve Medicare and Medicaid claims, a person or company may be liable under each of the FCA, CFCA, and the CMFCA, making it important to understand the nuances among these three statutory regimes. However, the varying types of claims remediable under each statute also will require a great deal of coordination among the government agencies tasked with enforcing these acts. A skilled attorney can help navigate these complex statutory regimes and seamlessly manage multiple government agencies' involvement.
A Private Right of Action For Retaliation is Broader Under the CFCA
Another notable difference between the CFCA and FCA are the retaliation provisions. Both the FCA and CFCA provide individuals a private right of action for retaliation; however, the CFCA's grounds for such an action are broader than as provided under the FCA. Specifically, the CFCA provides that "an employee, contractor, or agent is entitled to all relief necessary to make that individual whole if the individual is discharged, demoted, suspended, threatened, harassed, intimidated, sued, defamed, blacklisted, or in any other manner retaliated against or discriminated against in the terms and conditions of the individual's employment, contract, business, or profession by the defendant or by any other person because of lawful acts done by the individual or associated others in furtherance of an action brought pursuant to this section or in furtherance of an effort to stop any violation, or what the individual reasonably believes to be a violation, of section 24–31–1203." (emphasizing substantive differences between CFCA and FCA).
On its face, the retaliation provisions would seem to open the flood gate for retaliation suits in Colorado. However, unlike the FCA, the CFCA defines "lawful acts" to include (but are not limited to):
- Conducting or assisting with an investigation for, initiation of, testimony for, or assistance in an action filed or to be filed pursuant to this section, or conducting or assisting with an investigation when there is a reasonable belief of a potential violation of this section;
- Meeting with potential or retained counsel or agents or representatives of the state about the matter that is the subject of an action filed or to be filed pursuant to this section;
- Providing the individual's counsel or agents or representatives of the state with confidential information; or
- Filing an action pursuant to this action.
The inclusion of a "lawful acts" definition in the CFCA helps clarify a gap that has existed under the FCA – namely, which, if any, actions a relator alleges are protected under the law. For the federal statute, what is (and is not) a lawful act is defined by case law. The CFCA instead has codified a set of protected actions, albeit a non-exhaustive set, for which a relator may not be retaliated against. This list will, of course, be subject to judicial interpretation. Until interpretive law is better developed, employers should consult this list, as well as federal law, when drafting separation agreements and considering the scope of releases.
The Attorney General Is Incentivized to Investigate and Prosecute CFCA Claims
Lastly, the CFCA created the "False Claims Recovery Cash Fund." All proceeds obtained by the state from a CFCA action must be transferred to this fund. The Colorado Attorney General is statutorily entitled to keep a portion of proceeds from CFCA cases for use by the Department of Law for costs associated with carrying out its duties, and the Attorney General can decide if any amount should be deposited into funds attributable to a political subdivision. See Colo. Rev. Stat. Ann § 24-31-1209.
The creation of this fund likely will incentivize the Attorney General's office to enforce these CFCA actions. In fact, at legislative hearings, those who supported this bill emphasized that this section of the Attorney General's office will become self-sustaining while also funding other needs within the Government.
If recoveries from federal actions are any indication, the potential recoveries from CFCA actions are likely to be significant. For example, in 2021, the United States' Justice Department obtained more than $5.6 billion in settlements and judgments from civil cases involving fraud and false clams—$5 billion of which related to matters that involved the health care industry—and settlements and judgments since 1986 now total more than $70 billion.
The CFCA is set to take effect on August 10, 2022, assuming no referendum petition is filed. See HB 22-1119. If a referendum petition is filed, as allowed under the Colorado Constitution, the CFCA would not become effective unless it is approved by the people during the November 2022 general election. See House Bill 22-1119 Section 6. Foley will continue to monitor and provide any updates regarding this new law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
