Time to arm citizens to combat government fraud

Evergreen Freedom Foundation ^ | 12-21-04 | Shawn Newman & Jason Mercier

[truth49]

When it comes to fighting government fraud, Washington state lacks a key weapon: a state False Claims law. The federal government, thirteen states and many local jurisdictions (including Washington, D.C. and San Francisco) have adopted False Claims laws. These measures allow anyone with unique knowledge and evidence of fraud against government to act as a "private attorney general" and sue the wrongdoer on behalf of the government. These citizen fraud fighters, however, are first required to petition the government attorneys to take action before filing suit. If that government doesn't take action, the citizen then is empowered to act on the government's behalf.

One major incentive for such citizen involvement is the fact that federal law provides for a share of the damages for the citizen fraud fighter, payment of attorney's fees and protection from retaliation. A Washington State False Claims Act should include similar provisions.

Despite past legislative efforts and support from State Auditor Brian Sonntag, Washington state does not have a False Claims Act. Considering revelations from recent investigations by the State Auditor's Office, taxpayers should be asking their legislators why:

• The Department of Social and Health Services (DSHS) obstructed the state auditor's review of Washington's $6.1 billion annual Medicaid budget causing the auditor to "disclaim" the entire audit. This means the auditor cannot verify what DSHS is doing with the $6.1 billion in Medicaid funding.

• The State Liquor Control Board could not account for $421 million in sales and paid nearly $1 million to a vendor who submitted false billing records.

• The Department of Transportation mismanaged nearly $30 million in reimbursements to the developer of the Tacoma Narrows Bridge project. Costs were not adequately verified or reviewed to ensure they met contract terms.

• The Department of Labor and Industries (L&I) could not account for $5.8 million in employer workers' compensation premiums that did not get deposited in state accounts.

• L&I failed to report $261,000 in lost equipment as required by law, including laptop computers and digital cameras.

The lack of a state False Claims law to fight for government accountability enables abuses like these to go unpunished.

There is also troubling news out of the Office of Financial Management (OFM). According to OFM, Washington is having a hard time finding affordable fraud insurance. OFM blames the state's numerous and troubling audit findings for causing a doubling of the state's Employee Dishonesty Blanket Bond insurance premium and a 400 percent increase in the deductible for fiscal year 2004-05.

In a letter sent to state agencies, OFM wrote, ". . . because of the state's claims history and the number of audit findings relating to inadequate internal controls, it was not easy to find carriers willing to provide coverage. We were able to obtain coverage but at a cost. Premium has doubled and the deductible has increased from $100,000 to $500,000."

As evident from the numerous repeat audit findings over the past few years against various state agencies, there does not appear to be enough incentive currently for the legislature or agencies to address fraud. Perhaps citizen fraud fighters with the ability to collect a bounty for evidence of wrongdoing will help encourage state officials to exercise better accountability over state programs.

While it is nice to have faith that those who contract with or claim government benefits will be honest, the reality, as Ben Franklin noted long ago, is "There is no kind of dishonesty into which otherwise good people more easily and frequently fall than that of defrauding the government." A state False Claims Act will help promote government accountability by empowering and rewarding citizens to blow the whistle on government fraud and abuse.

Shawn Newman is an Olympia-based attorney who frequently pursues government accountability cases. Jason Mercier is a budget analyst for the Evergreen Freedom Foundation, a non-partisan, public policy watchdog organization, focused on advancing individual liberty, a free-market economy, and limited and responsible government.