The federal False Claims Act (FCA) was enacted more than a hundred years ago. It’s been updated, amended, and expanded ever since, but it only applies to fraud against the federal government. In North Carolina, fraud against the state government is governed under the North Carolina False Claims Act (NCFCA) passed in 2009.
The North Carolina False Claims Act gets called a lot of things, including the NC Whistleblower Protection Act, and the NC Whistleblower Act. These all refer to the North Carolina False Claims Act – Chapter 1, Article 51. In many ways, the act is a reconstituted version of the federal law, so if you’ve read or learned anything about the FCA, the NCFCA will feel very familiar.
What should you know about NC whistleblower law?
It is important to understand that knowledge or evidence of fraud against the government can be an opportunity as well as a responsibility. The North Carolina False Claims Act operates, for most whistleblowers, very similar to the federal False Claims Act.
That means you get many similar whistleblower protections, and also that you may qualify for significant compensation for your role in bringing fraud to light – and hopefully to an end. Let’s review a few ways in which the NCFCA differs from its federal counterpart.
How is the North Carolina False Claims Act different from the federal False Claims Act?
While the North Carolina False Claims Act may be heavily patterned after the federal False Claims Act, there are some differences that a whistleblower would be wise to know.
The North Carolina False Claims Act only has jurisdiction over state funds
The first obvious difference is the victim – the state. Whereas the FCA involves and protects federal funds, the NCFCA seeks to do the same with state funds. It’s worth noting, however, that many state programs such as Medicaid and disaster relief also involve federal funds. In some cases, a whistleblower may have claims under both acts. It is important to consider eligibility because of another difference between the NCFCA and the FCA…
The North Carolina False Claims Act limits state employees’ ability to file claims under the law
Specifically, the NCFCA doesn’t allow state employees to be false claim relators if they gained their information through their job with the state. In other words, if you’re employed by the state of North Carolina and you observe the fraudulent use of state funds, you have to report it through your job.
This seems counterintuitive, as state employees may be the most privy to fraud involving state (as opposed to federal) funds. However, according to the law, they would have to report their findings through channels specified by their position, even though those very channels might be compromised or acting unethically.
In contrast, while federal courts have ruled inconsistently both in favor of and against federal employee whistleblowers in different cases, the FCA has no rule excluding federal employees from filing qui tam claims.
How does the North Carolina False Claims Act work with the federal False Claims Act?
One of the apparent intentions of the North Carolina False Claims Act is that it works in concert with the federal law to root out fraud. If both the federal and state false claim law has been violated, the federal and state governments will jointly decide if and how to divide any collection.
It is vital to understand that many programs may involve both state and federal funds, and therefore fraud may violate both state and federal FCA laws. When you consult with a Carolina whistleblowers attorney, we can help you unravel and understand the depth and application of your qui tam claim.
Spotting fraud: What exactly does the North Carolina False Claims Act forbid?
The so-called North Carolina whistleblower statute (actually the NCFCA) is North Carolina general statutes section 1-607. This statute makes it unlawful to:
- Knowingly present (or cause presentation of) a false claim for payment or approval
- Examples: filing a time sheet billing the state for hours not worked; requesting payment for a service or material not provided; etc.
- Knowingly make, use (or cause the making or use of) a false record or statement material to a false claim
- Examples: submitting a bill for services not provided to a government contractor for payment by the government; certifying that work was performed according to contract when it was not
- Conspiring to commit a violation of any subsections of this act
- Example: colluding with other bidders for a government contract in order to obtain a contract or increase the government’s cost unfairly; any conspiracy to defraud the government
- Having government property or funds and failing to deliver them in their entirety
- Examples: delivering 990lbs of material for every 1,000lbs of material the government purchased; paying subcontractors less than agreed in the government contract and keeping the money
- Falsifying receipts or falsely certifying receipts
- Examples: certifying that a provider completed work on a government contract when work was not complete; certifying that the government received property, but in fact taking that property (fell off a truck)
If you’re not sure what you’re witnessing is fraud, we can help you determine whether or not you have a whistleblower case.
What are the penalties for violating the North Carolina False Claims Act?
Similar to the federal FCA, the North Carolina False Claims Act punishes violations with a fine and treble (triple) damages. Specifically, the NCFCA imposes a fine of between $5,500 and $11,000 and treble damages for each violation of the law.
For example, if a construction contractor knowingly defrauded the state of North Carolina of $1,000 on a bill submitted weekly over the course of a year, there would be 52 violations of $1,000 each. According to the law, the damages would be $1,000 times 52 weeks, times three – treble damages – for a total of $156,000 in damages. Plus, the court could level a fine of between $5,500 and $11,000 for each of the 52 infractions.
Ergo, the contractor in this case could be liable for between $286,000 and $572,000 in fines, plus $156,000 in damages. For perspective, that means that a contractor who knowingly perpetrated this fraud could conceivably pay a minimum of $442,000 for committing $52,000 in fraud.
However, most False Claims Act violations are resolved before trial. Additionally, the North Carolina False Claims Act gives the court the power to reduce and limit the penalties for violations if certain requirements are met. The reductions, and the qualifying requirements, are as follows:
- Courts can reduce the damages to not less than two times the amount of damages sustained by the state due to the person’s actions
- Courts may choose to assess no civil penalty
In order to qualify for reduced penalties, the defendant must meet the following requirements established by the statute:
- The person who commits the violation furnishes state officials responsible for investigating false claims with all of their knowledge and information regarding the violations within 30 days of the date the person first obtains the information.
- The person cooperates completely with the state investigation of the violation.
- The person was 1) not subject to criminal prosecution, or civil or administrative action with respect to the violation, and 2) did not have actual knowledge of the existence of an investigation at the time they furnished the state with information regarding the violation.
In effect, “honesty is the best policy,” as the risk of serious fines and damage awards can be greatly lessened if the violator comes clean immediately. For many, however, the choice is to continue trying to evade detection. That’s where you come in.
Are there any exceptions to the fraud I can report under the North Carolina False Claims Act?
There is a notable exception to whistleblower law in North Carolina, though it also somewhat mirrors federal law. The law does not cover claims, records, or statements under North Carolina General Statutes, Chapter 105. That chapter deals with taxes. Ergo, tax fraud is not covered under the NCFCA statute. If you are aware of fraud against the IRS, you may have a federal False Claims Act case.
What can a whistleblower receive under the North Carolina False Claims Act?
The amount a whistleblower can potentially receive as an award for filing a qui tam claim depends on a few case-specific factors. According to section 610:
- If the state pursues the case successfully, the relator (whistleblower) can receive 15-25% of the proceeds of the action or settlement of the claim. The amount varies based on the extent to which the qui tam relator contributed to the prosecution of the action.
- If the court finds a successful case to be based primarily on information other than that supplied by the qui tam relators, it may award a sum it considers appropriate not to exceed 10% of the proceeds of the action or settlement of the claim.
- If the state chooses not to pursue the action, and the qui tam claim succeeds, the relator can receive between 25-30% of the proceeds of the action or settlement of the claim.
- If the claim succeeds, the qui tam plaintiff (whistleblower) can also receive an amount for “reasonable expenses” that the court believes were necessary, plus reasonable attorney’s fees and costs. These may all be awarded against the defendant.
Can a whistleblower be barred from compensation under the North Carolina False Claims Act?
Yes, there are circumstances under which a qui tam relator can be awarded reduced compensation or entirely barred from recovery. First and foremost, if the government is already aware of the fraud, or if a qui tam claim has already been filed, your claim is highly unlikely to succeed.
If the court finds that the whistleblower planned and initiated the fraud on which the case was brought, it is at the court’s discretion to reduce the proceeds given to the plaintiff as a result of the action.
Additionally, if the qui tam relator is convicted of criminal conduct arising from their role in the fraud, they will be dismissed from the action and receive no compensation therefrom. This dismissal does not end the case, as the state may choose to proceed on its own.
This underlines why a whistleblower should consult with a whistleblower attorney. A whistleblower lawyer can help you untangle the situation and fight to protect your best interests, including advising you on your possible outcomes.
Where can I file my North Carolina False Claims Act qui tam action?
The North Carolina law allows cases to be filed “in any county in which a claim originated, or in which any statement or record was made, or acts done, or services or property rendered in connection with any act constituting part of the violation…”
Does the North Carolina False Claims Act protect whistleblowers?
There are provisions in the North Carolina False Claims Act that protect the whistleblower in specific ways. These include initial anonymity and protection from retaliation.
Your identity is hidden for a time in an NCFCA claim
The NCFCA is similar to the FCA in that it allows for cases to be filed under seal, meaning the defendant will not be notified of the claim until after an investigation has occurred. In North Carolina, the seal can last for 120 days or more, depending on the state’s involvement and whether or not it files for extensions.
Actions taken while the case is under seal are done “in camera” – which is legalese for “in private.” While the law allows us to protect a whistleblower’s identity initially, your case may eventually proceed to a point that it is no longer sealed or private, at which time your identity may be revealed.
Retaliation is forbidden under the NCFCA
The law protects a whistleblower who is discharged, demoted, suspended, threatened, harassed, or otherwise suffers discrimination as a result of lawful actions taken under this statute.
You can’t legally be fired (among other things) for blowing the whistle in a qui tam action under the North Carolina False Claims Act. If you suffer retaliation, the law states that you should be made whole. For example, you may be reinstated with the same seniority status you had before. Additionally, you could be entitled to two times the amount of back pay, interest on that back pay, and compensation for any special damages you suffered as a result of the discrimination.
NOTE: You generally have three years to file action seeking relief from discrimination.
What is the statute of limitations for the North Carolina False Claims Act?
Whistleblowers have a finite period during which they may file a claim to fight fraud against the state. The deadline to make a claim is generally the latter of:
- Six years from the date on which the violation was committed
- Three years from when facts material to the claim should have been known by the appropriate state official
How do I file a qui tam claim under the North Carolina False Claims Act?
Your first step should be to consult with a whistleblower lawyer. We know the steps to take to properly file your claim, safeguard your rights, and fight to protect your claim for compensation.
If you’re aware of or have evidence of fraud being committed against the state of North Carolina, don’t hesitate to call us at 1-888-292-8852 for a free and confidential evaluation of your circumstances. There’s no obligation whatsoever. If you prefer, you can use our secure chat feature or contact form.
Get the help that an attorney consultation can bring. We’ve helped plenty of whistleblowers and we may be able to help you.
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For standards of inclusion for awards listed, visit bestlawyers.com, thenationaltriallawyers.org, superlawyers.com, farrin.com/business-nc-power-list, and millondollaradvocates.com. National Trial Lawyers Top 100 designation is for 2022. Regarding the Million Dollar Advocates Forum, we do not represent that similar results will be achieved in your case. Each case is different and must be evaluated separately. Firm award is for the Law Offices of James Scott Farrin. Attorney awards are for attorneys with the Law Offices of James Scott Farrin.
Contact the Carolina
If you’re wondering if it’s a good idea to speak with a whistleblower lawyer about what you know, let us set the record straight.
- Corporate ethics hotlines can be risky and may lead to termination. If you’ve already done this, call us immediately.
- Your coworkers could be aware of the fraud – or complicit in it – and you should not talk to them about it.
- The first claim to be filed under the False Claims Act can proceed – if you’re not first, you’re at a serious disadvantage and may get nothing (another reason not to speak to your coworkers about it).
- A confidential discussion costs you a few minutes, but could save you time, stress, and money.
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