California False Claims Act

Fight fraud against the state and share in the recovery

Whistleblower statutes generally allow a whistleblower to report useful information to the government or file a qui tam lawsuit in court. Qui tam means that the lawsuit is filed on the government’s behalf—usually to recover government funds that were fraudulently obtained by the company the whistleblower works for (such as a defense contractor overbilling the government for supplies). Typically, if the government recovers money due to the whistleblower’s information, the whistleblower receives a share of the recovery.

Fraud Under the California False Claims Act

California has its own whistleblower statute which is similar to the federal one, the Federal False Claims Act. The California False Claims Act (CFCA) makes it unlawful to defraud the public by knowingly:

  1. Submitting a false or fraudulent claim for payment (such as an invoice) to the government of the state of California or to the government of any of California’s political subdivisions (such as a county or city)
  2. Misappropriating public property
  3. Deceptively avoiding an obligation to pay the State of California (such as deceptively avoiding to pay a fine) or deceptively failing to return funds to the State of California (such as an accidental overpayment received from the government)


The CFCA says that the fraud must be committed “knowingly” — what does that mean?

The legal definition of “knowingly” includes three different types of “knowledge:”

  1. Acting purposely
  2. Acting with reckless disregard of the truth
  3. Acting with willful ignorance of the truth

Acting purposefully would include a government contractor who falsely certified that the job was done when he knew it was only 80 percent finished. Acting with reckless disregard of willful ignorance is often referred to as “burying your head in the sand.”

Courts have held that if a company’s own records show that the information they submitted to the government was false, the company recklessly disregarded or was willfully ignorant of the truth, since the company should have known what its own records said.

Penalties Under the California False Claims Act

If a person or company violates the CFCA, they must pay up to three times the amount (treble damages) of money they defrauded or misappropriated from the government. On top of that, the person or company violating the CFCA will have to pay up to $11,000 for each violation.

Contact us for a free consultation

If you have information about a company or individual defrauding the California government, speak privately with our whistleblower attorneys to understand your options and the protections available to you under the California False Claims Act. Find out if legal action is right for you.

Call (800) 254-9493 or fill out the form for a free, confidential consultation.


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California Whistleblower Protection

California law protects whistleblowers from retaliation by their employers. The 2012 legislation signed by Jerry Brown expanded this protection to also shield whistleblowers from retaliation by anyone acting on behalf of their employers (such as a third-party contractor).

Employers are not allowed to:

  • Adopt any policy which forbids employees from being whistleblowers
  • Retaliate against an employee for being a whistleblower
  • Retaliate against an employee for refusing to break the law yourself

Retaliation includes not only termination, but also refusing to promote, refusing to provide a raise, or relocating an employee to an unfavorable geographic region, all due to whistleblowing. Denying benefits or subjecting an employee to any detrimental conditions can also be considered retaliation.

California Whistleblower Retaliation Damage Awards

A whistleblower may be entitled to the following damages for retaliation by an employer:

  • Whistleblowers who were fired may be entitled to reinstatement and back wages.
  • If a whistleblower lost a promotion or raise due to whistleblowing activity, he or she may be entitled to the additional salary they would have earned had they received the promotion or raise.
  • Regardless of the form the retaliation took, a whistleblower may be entitled to a civil penalty levied upon his or her employer of up to $10,000 per violation.

Government Intervention in California Qui Tam Lawsuits

The CFCA grants the government an opportunity to intervene in a qui tam lawsuit once it is filed. “Intervene” means that the government may enter the lawsuit and take primary responsibility for prosecuting the case.

If the government decides to intervene and wins an award or settlement, the whistleblower is entitled to share between 15 and 33 percent of the recovery. If the government declines to intervene and the whistleblower wins the lawsuit without them, the whistleblower is entitled to between 25 and 50 percent of the funds recovered.

California False Claims Act Amendments

Governor Brown signed legislation in 2012 expanding the CFCA. The Federal False Claims Act requires states that wish to pursue Medicaid fraud to pass whistleblower statutes that are at least as strong as the Federal False Claims Act.

The 2012 amendments do three main things:

  1. Extend the CFCA to include subcontractors
    Anyone who submits a false or fraudulent claim to a general contractor who is working for the state of California is liable for violating the CFCA.
  2. Allow the Attorney General to override the “public disclosure bar”
    The public disclosure bar is part of the CFCA that says that if the information that the whistleblower knows has been publicly disclosed (such as in a newspaper or government report), then the whistleblower is not allowed to bring a qui tam lawsuit. However, if the Attorney General feels that the whistleblower has been helpful in other ways, the 2012 amendments allow the Attorney General to override the public disclosure bar and allow the whistleblower’s qui tam lawsuit to continue.
  3. Expand the “original source exception”
    There is an original source exception to the public disclosure bar. Even if information about a company’s fraud has been publicly disclosed, a whistleblower may now file a qui tam lawsuit if the whistleblower has important additional information that is “independent of, and materially adds to, the publicly disclosed allegations.” So, if a newspaper prints an article about a company’s fraud, but an employee at the company knows via their job that the fraud goes deeper than the newspaper realized, then the employee can still file a lawsuit under the CFCA.

California Whistleblower Settlements

The State of California has recovered over $1 billion under the CFCA. The following is a list of companies sued under the California False Claims Act, along with a brief description of the allegations, and how much they paid to settle the lawsuit:

Bank of America: $300 Million

The alleged violation of the CFCA was that Bank of America had defrauded the state’s pension funds, CalPERS and CalSTRS, by misrepresenting the strength of its mortgage-backed securities (in omitting information about the underlying mortgages and the bank’s lack of due diligence in weeding out poor quality loans).

Eli Lilly: $112 Million

The allegations were that Eli Lilly had aggressively marketed its drug Zyprexa for unapproved uses, costing Medi-Cal millions of dollars paying for these unapproved off-label uses. The whistleblowers received 18 percent of the recovery in the Eli Lilly settlement.

Hanson Building Materials: $42.2 Million

The allegations in the complaint were that Hanson had cheated the California government out of tens of millions of dollars over a ten year period by: (a) taking and selling two million cubic yards of sand from state lands that Hanson was not supposed to be dredging on, and (b) understating the price and quantity of sand they dredged from lands they were allowed to be on in order to pay the government less money for the sand.

K12 Inc.: $2.5 Million

The allegations in the complaint were that K12 and its affiliated charter schools submitted inflated student attendance numbers in order to collect more state funding from the California Department of Education than they were entitled to.

Los Angeles Department of Water & Power: $160 Million

The allegations were that the power company had inflated the electric bills of its government customers since as early as 1998. The whistleblowers received up to 19 percent of the recovery.

Sandoz, Inc: $75 Million

The allegations were that Sandoz fraudulently inflated the price of its drugs when reporting them to a pricing-database used by the government. The whistleblower was Ven-A-Care, a competitor of Sandoz. Ven-A-Care stated that it came forward because it accurately priced its own drugs but was disturbed by what some of its competitors were doing.

Schering-Plough: $21.3 Million

The allegations were that Schering-Plough reported falsely inflated prices for Albuterol and other inhalers, causing Medi-Cal to overpay for the inhalers.

Tyco International et al.: $60 Million

The allegations were that Tyco and other manufacturers provided substandard parts for the state’s water supply system and some of those parts contained amounts of lead that exceeded industry standards.

Quest Diagnostics: $241 Million

The complaint alleged that Quest Diagnostics charged the government up to 6 times more for a blood test of someone on Medi-Cal than it charged non-Medi-Cal customers. The whistleblower was a competitor of Quest Diagnostics—Hunter Laboratories—that said that unlike its competitors, it elected not to overbill Medi-Cal, but knew that its competitors were doing so. The whistleblower received 29 percent of the recovery.

California Insurance Fraud Protection (CIFPA)

California is one of only two states that have an insurance fraud qui tam statute. The California Insurance Fraud Prevention Act allows a whistleblower to file a qui tam lawsuit against a person or company that they reasonably believe to be committing insurance fraud.

CIFPA makes it unlawful to:

  • Present a false or fraudulent claim to an insurance company
  • Submit a false or fraudulent statement in an attempt to obtain money from an insurance company

Penalties for CIFPA violations are up to three times the amount of the insurance fraud, plus a civil penalty of up to $10,000 for each fraudulent claim submitted.

If the California District Attorney or Insurance Commissioner intervenes in the qui tam lawsuit and achieves a settlement or award, the whistleblower is entitled to between 30 and 40 percent of the recovery. If the District Attorney and Insurance Commissioner decline to intervene and the whistleblower wins on their own, the whistleblower is entitled to 40 to 50 percent of the recovery.

Our Whistleblower Experience

Gibbs Law Group’ whistleblower lawyers have more than two decades of experience prosecuting fraud. Our attorneys have successfully litigated against some of the largest companies in the United States, and we have recovered more than a billion dollars on our clients’ behalf. We have fought some of the most complex cases brought under federal and state laws nationwide, and our attorneys have been recognized with numerous awards and honors for their accomplishments, including Top 100 Super Lawyers in Northern California and The Best Lawyers in America and rated AV Preeminent (among the highest class of attorneys for professional ethics and legal skills).

We proudly hold memberships in Taxpayers Against Fraud, a public interest organization dedicated to combating fraud against the government and protecting public resources. Our firm supports the nonprofit’s educational initiatives and efforts to advance public and government support for qui tam whistleblower cases.

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