Alabama False Claims Act Legislation – Cause for Concern for Businesses in Alabama?

Alabama State Senator Arthur Orr introduced a bill last week that would establish a State False Claims Act, which would authorize private parties to file actions on behalf of the State as qui tam plaintiffs. Similar to the Federal False Claims Act (FCA), the damages against a business found to have defrauded the State under the proposed Alabama legislation would be trebled. Therefore, the private plaintiff, if the Attorney General chooses not to intervene, could receive as much as 30% of the recovered amount.

Senator Orr is the chair of the Senate General Fund Budget Committee, and the bill has been assigned to his committee. Although it is too early to know the bill’s chance for success, the fact that the bill was filed by a member of the Senate leadership and assigned to the committee that he chairs is cause for some attention.

The Office of Inspector General determines whether states have false claims acts that qualify for a federal financial incentive under the Social Security Act. Those states deemed to have qualifying laws receive a 10% increase in their share of any amounts recovered under such laws. To qualify for the financial incentive, a state’s false claims act must:

  • Establish liability to the state for false claims, as described in the FCA, with respect to Medicaid spending;
  • Contain provisions that are at least as effective in rewarding and facilitating qui tam actions as those described in the FCA;
  • Contain a requirement for filing an action under seal for 60 days with review by the State Attorney General; and
  • Contain a civil penalty that is not less than the amount of the civil penalty authorized under the FCA.

Under current Alabama law, prosecutors may bring criminal actions when there has been fraud or abuse against the Alabama Medicaid Program, but there is no similar civil action. It seems likely that Senator Orr’s primary purpose in filing this bill is to permit Alabama to recover the 10% bonus recovery paid by the federal government to states with qualify false claims acts. However, it appears that if this bill was passed, it would permit qui tam lawsuits against any entity that does business with the State, making this bill a concern for any company that does business with the State.


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