Using the False Claims Act and State Equivalents to Protect Privacy and American Jobs

Readers of this blog know that the False Claims Act and its state equivalents are powerful tools for fighting fraud on the government and, in turn, on taxpayers.  One of the reasons these laws are so powerful is that they cover a wide-range of frauds.  Although health care fraud is likely the most well-known wrong addressed through whistleblower litigation under the Acts, they cover a myriad of different subject matters as demonstrated by a recently settled case out of New York.  While the case is largely about government contracting fraud, it touches on issues two of the most important business issues of recent decades: the outsourcing of American jobs and data privacy.  Our False Claims Act law firm is encouraged to continue to see the power these laws give to ordinary people to tackle extraordinary issues (and, often, win!).

Settlement Filed in Case Against Government Contractor Who Sent Data and Jobs Overseas

Last month, the New York State Attorney General’s Office issued a press release announcing a $3.1 million settlement in a case accusing Focused Technology Imaging Services, LLC (“FTIS”) and two of its leaders of unlawfully outsourcing government-funded work to India.  FTIS, a business located near Albany, entered into a $3.45 million agreementflag2 to digitize and index some 22 million fingerprint cards.  FTIS also agreed to create a searchable database of the print cards for the New York State Division of Criminal Justice Services (“DCJS”) and the non-profit New York State Industries for the Disabled (“NYSID”) in the 2008-2009 timeframe.  The fingerprint cards were used by a range of individuals from state employees to prisoners and arrestees and contained information including Social Security number, the reason for taking the fingerprint, the fingerprint itself, and other important personal information.

Given the highly personal and confidential nature of the information, the contract required FTIS perform all the work in Albany using employees who had passed a criminal background check and it specifically prohibited any subcontracting of the work.  However, according to the government and as admitted as part of the settlement, FTIS and its owner solicited and used a business in Mumbai, India to index more than 16 million of the 22 million cards indexed between October 2008 and September 2009.  This arrangement included uploading the cards to be accessed by the Indian company’s employees.  FTIS also allegedly produced false records to conceal the arrangement.  In addition to violating the outsourcing and privacy-related rules, the arrangement resulted in less than half of all labor hours being performed by individuals with disabilities.  This violated FTIS’s participation in the state’s “Preferred Source Program” which awarded no-bid contracts to organizations that agree to have individuals with disabilities perform a majority of the contract’s labor hours.  With the outsourcing in place, only about 31% of work hours were performed by qualified individuals.  The Indian company, which was paid over $82,000 and performed about 37.5% of the contract duties, does not appear to have known the subcontract was illegal and it cooperated with the investigation.

Pursuant to the settlement, FTIS and two of its leaders will admit that the outsourcing arrangement violated the New York False Claims Act and pay $3.1 million in fees, penalties, and costs.  FTIS will also pay for an independent monitor and have qualified individuals perform 69% of work on certain new preferred source contracts.  The New York AG’s office calls the settlement “a first-of-its-kind agreement…concerning a government contractor illegally shipping jobs overseas” and says the settlement “sends a clear message [that] if you are a government contractor and you illegally ship jobs overseas, you will be held accountable.”  Other officials commented that the settlement demonstrates a commitment to protecting the privacy of sensitive records and the presence of employment opportunities for individuals with disabilities.

The False Claims Act and Similar State Statutes

The False Claims Act is a tool for fighting companies and individuals who defraud government programs.  As the FTIS case demonstrates, these frauds not only divert money from important programs, they have far-reaching effects that impact countless lives.  The Act contains a critical qui tam provision which allows private citizens to bring a case on the government’s behalf.  When a whistleblower case is brought, the government either elects to intervene and take over the prosecution or allows the whistleblower to remain in charge.  Either way, whistleblowers are entitled to protection from retribution and earn a substantial reward if the case leads to a recovery of money (e.g., via settlement or verdict).  While the False Claims Act is about fraud on the federal system, many states have similar laws that apply at the state level such as that used in the FTIS case.

A Law Firm for Government Fraud Whistleblowers

If you have witnessed government contract fraud, Medicare fraud, or another fraud on the federal or a state government, please call our office to learn how you can make a real difference.  Our government contract fraud attorney understands the law and would be proud to partner with you to fight fraud and protect the American people.

See Related Blog Posts:

False Claims Act Attorney Examines Federal Student Aid Fraud and Other Forms of Higher Education Fraud

Government Fraud Case Study: The Violation of “Buy American” Clauses in Government Contracts

(Image by Stuart Seeger)