Within days of gaveling in the 2022 Colorado legislative session, a coalition of state leaders introduced a bill to create the Colorado False Claims Act (the “CFCA”). The brainchild of Attorney General Phil Weiser, the CFCA represents Colorado’s commitment to protecting public funds and pursuing those who wrongfully appropriate taxpayer dollars. As the bill makes its way through the legislature, and with high chances of the CFCA becoming law, businesses would do well to familiarize themselves with the bill’s private right of action and steep penalties, both of which promise a new wave of enforcement suits.
The CFCA mirrors the federal False Claims Act in many respects. In particular, the CFCA targets those who:
- submit a false bill to a state or local government;
- falsify records relating to a false claim;
- maintain custody over money recovered from a false claim;
- falsify a receipt for governmental property;
- purchase public property which was not lawfully for sale; or
- falsify a record regarding an obligation owed to the state or local government.
But the CFCA is not notable just because it cracks down on people and businesses that lie or mislead in order to receive payments from the government—indeed, such conduct is already unlawful. Rather, the CFCA’s most impactful features promise to be its novel enforcement scheme, extensive penalties and the inclusion of local (i.e., city and county) level claims.
The CFCA provides three new avenues to target those who wrongfully seek government funds. First, the Colorado attorney general has broad authority to investigate and enforce the CFCA. Second, local prosecutors such as county attorneys and district attorneys can initiate an investigation involving city or county level violations, and, should the Colorado Attorney General’s Office decline to prosecute the violation, enforce the CFCA themselves. Third, and perhaps most onerous, the CFCA authorizes and incentivizes private suits by individuals who come across unlawful conduct. Depending on how much the whistleblower contributes towards a judgment, that person may be entitled to up to 30% of the total proceeds recovered. And such a recovery will not be slight.
Coupled with this invigorated enforcement scheme, the CFCA imposes the same penalties as the federal False Claims Act, which is currently not less than $11,803 and not more than $23,607, as adjusted for inflation, for each violation. Because penalties are instituted for each false claim, complex and sustained transactions threaten penalties in the hundreds of thousands, if not millions, of dollars. And those penalties are just the beginning, as violators are further liable for triple the damages that the state or local governments sustain, along with the attorneys’ fees and costs associated with prosecuting the violation.
Notably, claims for payment under the Colorado Medical Assistance Act (Medicaid) are expressly excluded from the CFCA. The Colorado Medicaid False Claims Act, which largely tracks the federal False Claims Act, has been in place for over a decade, and the CFCA drafters wisely avoided an unnecessary duplication of efforts in this regard.
Should it become law, the CFCA would create a new litigation risk for government contractors and any others who make claims for payment to state and local governments. The federal False Claims Act resulted in over $2.2 billion in damages recovered by the federal government in 2020 alone, and direct experience has shown that the whistleblower and attorney-fee provisions in bills like this create cottage industries of lawyers eager to bring suit and extract treble damage awards. Last decade alone, New Jersey recovered $147 million under a similar bill, and New York State recently secured $105 million in a single settlement. As the bill moves through the legislature, it is crucial that businesses review and refine their internal compliance processes to match the Colorado False Claims Act’s impending demands.
The attorneys at Brownstein Hyatt Farber Schreck have extensive experience litigating highly complicated False Claims Act cases across various industries and include former high-level government officials with direct experience dealing with investigations and enforcement actions.
This document is intended to provide you with general information regarding the Colorado False Claims Act. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.