Puerto Rico Establishes its own False Claims Act

On July 23, 2018, the Governor of Puerto Rico, The Honorable Ricardo Rosselló, signed House Bill 1627 into law, which establishes Puerto Rico’s version of the federal False Claims Act.  Puerto Rico’s new law is called “The Fraudulent Claims to Programs, Contracts, and Services of the Government of Puerto Rico Act.”  This is a significant development for Puerto Rico.  The act creates a civil recovery method when false claims are submitted to the government of Puerto Rico.  It also allows for a statutory reward for whistleblowers and allows for the recovery of costs and attorneys’ fees for those who file successful qui tam suits under the act.

Governor Rosselló’s press release specifically touts the measure as a method to prevent Medicaid fraud and secure federal healthcare funds for Puerto Rico.  The law creates a Medicaid Fraud Control Unit at the Puerto Rico Department of Justice.  Further, it outlines the duties of the new Fraud Unit as well as the required structure of the unit.  The unit will be headed by a director, be comprised of a team of experienced lawyers, and have assigned auditors to monitor and review records.

Due to the fact that Congress conditioned 1.2 billion dollars for Puerto Rico’s Medicaid program on the territory taking affirmative steps to create a Medicaid Fraud Control Unit, the enactment of the law grants Puerto Rico additional federal funds to be used for healthcare. Governor Rosselló commented that this additional money will benefit the over 600,000 Puerto Rican Medicaid beneficiaries.

Significantly, the new law is not limited to Medicaid fraud; it also applies to other types of claims made to and contracts entered into by the Puerto Rican government.  While Chapter Three of the law specifically considers Medicaid fraud, Chapter Four provides for “fraudulent claims” generally.  The law is more expansive under Chapter Four, and it applies to any false or fraudulent claim made to any government program.

The broad drafting of the law is especially noteworthy given the fact that Puerto Rico is still actively recovering from Hurricanes Irma and Maria. The scale and scope of the catastrophe in Puerto Rico after Hurricane Maria was unprecedented.  Experts have estimated that recovery efforts will total in excess of $95 billion dollars.  The government of Puerto Rico is currently entering into contracts with third parties for the repair, restoration, and recreation of various critical infrastructures such as Puerto Rico’s electrical power grid and wastewater system.   Having a mechanism through which the territory can recover from individuals or corporations who knowingly defraud the government allows Puerto Rico to protect itself from bad actors seeking to take advantage of recovery efforts.

Under the law, the Relator or Whistleblower is entitled to receive no less than fifteen percent (15%) but not more than twenty-five percent (25%) of the proceeds of the action or settlement of the claim when the Puerto Rican government elects to intervene.  In instances where Puerto Rico declines to intervene, the Relator is entitled to no less than twenty-five percent (25%) and no more than thirty percent (30%) of the recovery.  The law also provides for a limited recovery of a fixed ten percent (10%) for those individuals who file a complaint based on information was easily accessible to the public.

The law further states that when the Government and/or Relator prevail, the court may impose additional costs on the defendant for reasonable litigation expenses and attorneys’ fees.  The compensation provisions of the law are a signal that Puerto Rico is actively encouraging its residents with knowledge of fraud to come forward.

The Fraudulent Claims to Programs, Contracts, and Services of the Government of Puerto Rico Act also considers jurisdiction for future complaints.  It states that the Court of First Instance, Superior Court of San Juan will be the primary and exclusive forum for filing causes of action under the act.  It will be interesting to watch the implementation of this law.

According to the Puerto Rican Office of Legislative Services, as of July 31, 2018, there has not yet been a formal English translation of the law.  The office stated that it will be approximately 5-6 months before an official English translation is made publically available.  In order to read the full text of the law, for purposes of this article, we used an online translation program and consulted a native Puerto Rican who is fluent in Spanish.