When state gets cheated, it now pays to speak up

Under a new "false claims" law that takes effect next year, whistleblowers get to share in the recouped funds.

By JAMES ELI SHIFFER, Star Tribune

Last update: May 27, 2009 - 9:43 PM

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People with inside knowledge about fraud perpetrated against the state of Minnesota have a new incentive to speak up: cash.

Under a new law establishing a "false claims" civil action, whistleblowers who help the state get money back from unscrupulous contractors are entitled to a 15 to 30 percent cut. Lawmakers hope that the measure will reduce fraud and increase badly needed revenue without raising taxes.

"It's the recovery of stolen taxpayer dollars," said Sen. Ron Latz, who championed the bill along with fellow St. Louis Park DFLer Rep. Steve Simon. "If other states' experiences are comparable, we could be looking at tens of millions of dollars."

The federal False Claims Act has been on the books since the Civil War, when it was used to stop war profiteers from defrauding the government. More recently, that law has targeted drug companies, health care providers and others who have skimmed millions from immense federal entitlement programs such as Medicare and Medicaid.

Two dozen states have adopted their own versions of the federal law. But a similar bill went nowhere in the past three legislative sessions in Minnesota.

The potential benefit from false claims actions became clear last year, when the U.S. Department of Justice announced that two Minneapolis pharmacists, Neil Thompson and Dan Bieurance, had secretly sued their employer, Walgreens, alleging the pharmacy giant was overcharging Medicaid. The case led to a settlement in which Walgreens pledged to obey the law and pay the government $9.9 million, of which Thompson and Bieurance stood to gain $483,000.

In January, Thompson was a special guest at the announcement by Latz, Simon and other DFLers that they would try to pass a state false claims act, potentially increasing Minnesota's share of such settlements. The bill faced resistance from an unusual direction -- Attorney General Lori Swanson, who was concerned about how much the additional litigation might cost her lawyers. Lawmakers satisfied that concern in part by taking $2 million in unspent funds from the attorney general's budget and dedicating it to whistleblower litigation, Latz said.

Thompson and other bill supporters expressed frustration that the final bill didn't go further. Among their concerns: The effective date is not until July 2010, it's not retroactive and there's a 45-day grace period for repaying misappropriated money. Still, the law is more far-reaching in one respect: Some states restrict their laws only to Medicaid fraud. Minnesota's law applies to all state and local contracts and spending.

"I'm very happy that it got passed finally," said Brian Wojtalewicz, a lawyer in Appleton, Minn., who specializes in whistleblower cases and helped push the bill. "It was such a struggle."