Whistleblowers could bring in money for Kansas. Why did lawmakers say no?

So here is a question for the powers that be in Topeka. If you could reduce the amount of fraud against the state and its municipalities, recover tens of millions of dollars a year in the process and better protect the health and welfare of all Kansans, would you do it? It seems like a no-brainer by any account. Especially these days, with Kansas — like most states and municipalities around the country — at the brink of all it can muster.

Which makes the recent demise of House Bill 2682 a real head-scratcher. This was proposed legislation that would have amended the state’s False Claims Act, originally enacted in 2009, to include a so-called “qui tam” provision. It would have allowed for whistleblowers to serve as private attorneys general and sue those committing fraud against the government, rewarding the whistleblowers with up to 30% of any money recovered. The bill did not even make it out of committee.

This kind of whistleblower provision is in the federal False Claims Act on which the Kansas statute is modeled. It has been in place since the federal law was enacted more than 150 years ago to go after war profiteers trying to dupe the Union Army during the Civil War. The provisions to empower and reward whistleblowers have only gotten stronger since then. For very good reason. The government recovers billions of dollars under the statute every year, largely from actions originated by whistleblowers.

This whistleblower success story is not just at the federal level. It has been replicated in the more than 30 states that have adopted some form of qui tam provision over the past two decades. And it likely is why then-Kansas Attorney General Stephen Six supported a whistleblower provision when the state statute was first enacted in 2009. With the failure of the new amendment, Kansas remains one of the few states to shut whistleblowers out of their False Claims Act enforcement regimes. The big question for Kansas is why.

There is no record of what stopped the Legislature from moving forward this time around. But among the proffered reasons for the state’s earlier rejection are a supposed risk of baseless suits, a burden on the government to wade through them and the small percentage of whistleblower actions that result in any recovery for the government. Some in the business community would certainly have had their say too, no doubt circling the wagons to exclude any kind of qui tam provision.

Nothing new here. Just a reprise of the arguments regularly raised against encouraging and rewarding whistleblowers. None of them holds up. We know that from the experience of Washington D.C., and the dozens of states that have followed suit. Qui tam provisions work. They lead to stronger fraud enforcement, more fraud recoveries and a government better able to safeguard the health and safety of those within its charge, particularly the most vulnerable among us.

Look no further than the federal experience. Especially since 1986, when the False Claims Act was amended to increase the protections and financial incentives for whistleblowers bringing suit. The federal government has recovered more than $62 billion, with roughly three-quarters of that ($45 billion) coming from cases filed by whistleblowers.

The Securities and Exchange Commission has seen similar results since it implemented its whistleblower rewards program in 2012 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The program has led to thousands of whistleblower tips a year and has reenergized what had been an agency asleep at the switch, having snoozed through some of the worst financial frauds of our time. In June, the SEC passed the half-billion dollar mark in rewards to whistleblowers for exposing what has amounted to several billion dollars in securities fraud in the past few years alone.

What has gone down in Kansas is a very different story. The state has brought only a smattering of False Claims Act cases since enacting the statute, all of them very small, with recoveries in the hundreds of thousands of dollars or less. Notably, what appears to be the largest recovery ($922,000) was actually from a tagalong to a federal action brought by a whistleblower. This is all a very far cry from the billions in federal recoveries and the tens, and in some cases, hundreds of millions of dollars in state recoveries driven by those states with active qui tam regimes.

Which brings us back to Kansas’ missed opportunity in failing to approve the qui tam bill (or even vote on it). Clearly, Kansas appreciates the importance of whistleblowers and the critical role they play in supplementing the government’s limited resources to combat fraud. In fact, there is a special callout for help to whistleblowers on the state attorney general’s website promoting the State’s False Claims Act.

So there must be something else at play. Maybe it is as simple as big business playing its heavy hand. Or perhaps it is a more deep-rooted aversion to what some may see as a bounty system rewarding individuals for turning on their peers. Whatever is keeping Kansas at bay, lawmakers should see through it and recognize what a qui tam provision could do for the state and its people. With the $1.2 billion deficit it is facing and the coronavirus still very much raging, Kansas — like every state in this great union — could use all the help it can get.

Gordon Schnell is an attorney with the New York law firm Constantine Cannon, specializing in the representation of whistleblowers. He coauthored this with his colleague Max Voldman. They recently secured a landmark $57 million whistleblower settlement for the federal government and New York against one of the largest home health care companies in the country.