California Attorney General Rob Bonta, in partnership with the Department of Justice, announced two settlements with providers for Medi-Cal (California’s Medicaid program), following allegations under state and federal false claims acts that the providers submitted fraudulent claims to the government from 2014 through 2016. Consequently, Dignity Health, Twin Cities Community Hospital, and Sierra Vista Regional Medical Center agreed to pay a total of $22.5 million to resolve the investigation. The settlement also resolved a whistleblower complaint against the providers, and the whistleblower will receive $3.9 million for his role in uncovering the alleged fraud.

The alleged fraud arose out of a 2014 Affordable Care Act (ACA) expansion to provide health care coverage to a population of low-income adults. Under the expansion, the government provided more funds to the providers than it anticipated that the providers would need to support the program in its initial stages. The providers were required to return surplus funds to the state of California if they did not spend at least 85% of the funds to support increased coverage for this population. The government alleged that Dignity, Twin Cities, and Sierra Vista submitted receipts for incurred expenses in excess of the amounts authorized under the ACA and/or duplicative services already rendered (i.e., overbilling) in efforts to avoid returning the unspent public funds.

The investigations into and settlements with the health care providers highlight two growing risks for businesses that contract with federal and state governments.

1. A recent uptick in state false claims prosecutions, suggesting that state attorneys general are expanding their toolbox and exercising authority via powerful state false claims statutes, which not only penalize alleged wrongdoers, but also often provide punitive or treble damages to the states.
2. An increasing threat to government contractors. With the potential for substantial rewards, whistleblowers are increasingly incentivized to come forward with information often not available to regulators to substantiate potentially damaging claims against a business.

Why This Matters

Whether concerning tax fraud, securities fraud, cybersecurity misrepresentations, or other types of misconduct, we expect a new wave of state false claims cases, potentially spurred by whistleblower action, to surface over the next few years.

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Troutman Pepper State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
	Clay Friedman – Co-leader Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
	Stephen Piepgrass Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
	Michael Yaghi Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Avi Schick A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
	Ketan Bhirud As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
	Natalia Jacobo Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
	Namrata Kang Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
	Susan Nikdel Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
	Whitney Shephard Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
	Trey Smith Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
	Daniel Waltz An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
	Stephanie Kozol Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.

 

Troutman Pepper Consumer Financial Services Team

	Stefanie Jackman Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.
	Chris Carlson Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
	Caleb Rosenberg Caleb is an associate in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small businesses in the credit and alternative finance products industry.