The State of California became the first state to adopt a False Claims Act, California Gov. Code 12650, and the Act is modeled after the federal False Claims Act statutes. California added features to the Act that make it the toughest law of its kind in the nation. Not one case in California filed under the Act has gone to trial in 16 years. Of the hundreds of cases filed in that time period, all have settled before trial.
The Act applies, in part, to "any person or entity knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim".
This is the essence of the Citizens Against Corporate Crime v. Lennar claim filed in Sacramento Superior Court on behalf of the People of California.
The California FCA statute allows private persons or parties to file lawsuits under the Act. Such persons or parties are known as Qui Tam plaintiffs, and are also referred to as Relators. Relators share in the proceeds of a recovery under the Act. Upon the filing of a claim under the statute, Relators vest an interest in the case, and Relators earn a percentage of the proceeds derived from successful prosecution or settlement of the case. The exact percentage varies with the level of involvement of The State of California in the case, and Relator interests in an FCA case can range from 30% to 50% of the case.
California False Claims Act lawsuits are filed under seal. Upon the filing of an FCA lawsuit, the State of California has the right to join in the lawsuit, a process known as intervention. The State may elect to intervene immediately, defer an intervention decision, or not intervene at all. The lawsuit may proceed regardless of the State's decision. Many cases proceed to a successful conclusion without intervention by the State of California.
Billions of dollars are recovered under the False Claims Act statutes every year. Among the powerful features that the Act includes are treble damages, substantial penalties, and a recovery of all legal fees, costs, and expenses incurred in prosecution of a claim.
A unique feature of the California False Claims Act is that it is not necessary to prove intent to defraud. Even an inadvertent submission of a false record or statement results in liability in the full amount of the claim and is also subject to treble damages, penalties and a legal fee and cost recovery. Thus, defendants face huge risks and difficult choices when confronted with allegations filed under the Act.
The above being said however, there was nothing "inadvertent" about Lennar's submissions to the California Public Employees Retirement System - CalPERS. Documents indicate a cynical and calculated effort to knowingly defraud 1.8 million members of the pension system out of nearly one billion dollars.
The Act is designed specifically to recover these funds, and a lot more. CalPERS and the State of California are one and the same for the purposes of the Act. A plaintiff in FCA litigation has an overwhelming advantage.
We also have the advantage of a look-back on events, we have key documents proving the fraud, and we have the benefit of extensive research into Lennar's business practices across the country at the same time the company was swindling CalPERS. The facts in cases coast to coast have an uncanny resemblance, and often involve the same exact fraudulent conduct. This conduct includes the use of false appraisals and fabricated cash flows designed to obtain money under false and fraudulent pretenses. This is criminal, and Lennar Corporation and its executives should be held accountable.