The Effectiveness of State False Claims Acts in Protecting State Transportation Funding

Abstract

For more than 150 years, the Federal False Claims Act (“FCA”) has served to prevent false claims for federal government funds. In recent years, a number of state legislatures have enacted state false claims acts (“State FCAs”) modeled after the Federal FCA, to prevent false claims for state government funds. This paper provides practical legal guidance for state transportation officials as well as state attorneys general regarding the use of false claims acts to protect public funds for transportation and highway contracting, and to recover funds paid to false claimants by transportation agencies such as state departments of transportation (“State DOTs”). Because State DOTs often contract for work using federal grant funds, it is not always a straightforward matter to determine whether a false claim on a State DOT project is a violation of the Federal FCA, a State FCA, or both. A series of appellate decisions in the mid-2000s called into question whether the Federal FCA was applicable to federal transportation funds in the hands of State DOTs. If the Federal FCA did not apply to federally funded State DOT projects, then there could have been substantially less protection against false claims made to State DOTs in states without a State FCA. Although some State FCAs existed dating back to 1987, the number of State FCAs increased significantly after Congress acted in 2006 to encourage state legislatures to enact State FCAs. In 2009, Congress amended the Federal FCA to clarify that the Federal FCA is applicable to federal transportation funds in the hands of State DOTs or other federal grant recipients. As a result, there are now often at least two statutes (the Federal FCA and a State FCA or local government false claims ordinance) that can be used to protect or recover transportation funds that are the object of a false claim. This paper discusses the considerations involved in using one or more FCAs to protect or recover State DOT funds.