Washington, D.C. November 15, 2017. Senator Charles Grassley (R-IA) has put forth two amendments to the Tax Cuts and Jobs Bill that are important to whistleblowers.

The major amendment addresses an issue that has been the subject of previous posts, defining the term “collected proceeds” in I.R.C. section 7623(b).  The IRS and Department of Justice have taken the position whistleblowers who report criminal tax frauds, such as the numerous crimes committed by the largest Swiss banks, cannot obtain a whistleblower reward. They have argued that whistleblower rewards should not be paid on any criminal fines. Continue Reading Proposed Grassley Amendment Important for Whistleblowers

Today’s Washington Post, Metro section, leads with a story by Rosalind Helderman called "Democrats try to curb Cuccinelli’s powers." The story reports on an effort by some Virginia Commonwealth Senators to change state law so that the state Attorney General must get court approval before issuing a "civil investigative demand" (CID). The proposal is an obvious response to concerns that Virginia’s current Attorney General, Ken Cuccinelli, is abusing the power to issue CIDs by focusing on a global warming scientist.

Mr. Cuccinelli’s office issued a statement suggesting that the proposed limit on CIDs could lessen Virginia’s share of recoveries for false claims actions. The article mentions an increased share for states "when they win fraud cases." This may be a reference to the Grassley Amendment to the Deficit Reduction Act. Under the Grassley Amendment, states that have their own "Little FCA" Acts that meet federal standards will get a bigger share of federal recoveries from fraud claims in their states. Virginia’s law already meets these standards. (Maryland does not; read here about why.) The federal government is still working to get states to adopt their own Little FCAs, and has not excluded any state for limits on CIDs. For Mr. Cuccinelli to use the Grassley Amendment to deflect criticism of, or limits on, his use of CIDs is a misuse of the FCA.

"My general opinion is that this is what happens when political hacks in both parties step into the FCA arena — good law gets hacked up," says Patrick Burns of Taxpayers Against Fraud. "The Civil Division at DoJ has never engaged in partisan politics or open-ended witch hunts, and what Cucineill is doing here feels very much like that."

I previously reported on how the Maryland Senate watered down its "Little FCA" bill so that lawsuits would not cost so much for the contractors who actually commit fraud against the State of Maryland. The amended version of SB 279 does not permit a court to require fraudsters to pay compensatory damages, and it prohibits whistleblowers from pursuing qui tam lawsuits unless the Maryland Attorney General chooses to intervene. It also makes the award of attorney fees discretionary. Now the Maryland House has concurred in the amended Senate bill.  While the new bill is better than having no False Claims Act (FCA), it is not good enough to give Maryland the millions of dollars it would receive from federal FCA cases if it had a full strength "Little FCA."

The House did beat back two amendments that would have either decimated or limited the Little FCA.  One, by Delage Shank, would have the State police fraud by contractors by hiring yet another contractor to audit the other contractors — and would have erased all the qui tam provisions.  Another, by Delegate Tarrant, would have allowed whistleblower lawsuits only for those frauds committed after October 1, 2010 — allowing fraudsters another six months to commit fraud without fear of this new liability. This Maryland web page will soon have links to the roll call votes so Maryland citizens can see if their delegates voted for this weak protection, or for no protection at all.

Perhaps now will be a good time to ask Maryland’s legislators to plan for passage next year of a bill that will actually qualify Maryland for the millions it is missing if it had a whistleblower law strong enough to qualify for the federal Grassley Amendment.