by Frederick E. Hedberg and William A. Stoll
After a public hearing held on March 6, House Bill No. 6826, An Act Concerning Liability for False and Fraudulent Claims, was voted out of committee by a wide margin, and then added to the House Calendar on March 28. This bill expands the scope of Connecticut’s current False Claims Act by eliminating the limitation that it only applies to state-administered health and human services programs. It would expand potential liability and penalties under the act to allow both private citizens and the attorney general to bring False Claims Act allegations in any context, including construction projects involving state funds.
Several trade organizations, including the Connecticut Construction Industries Association, the Associated General Contractors of Connecticut, the Associated Builders and Contractors Connecticut and the Connecticut Subcontractors Association and American Council of Engineering Companies of Connecticut, presented testimony opposing the bill. The attorney general testified in support of the bill based on his concerns about fraudulent spending of the state’s CARES Acts funds and the FBI’s investigation of the state’s school construction program. Many versions of the act pertaining to construction have been proposed and rejected over the years including, notably, a bill introduced last year, Senate Bill No. 426, with identical revisions to H.B. No. 6826, tabled for the Senate Calendar.
New England states Massachusetts, Vermont, and Rhode Island all currently have False Claims Acts that may apply to state funds used in any context, whereas Maine, New Hampshire, and presently Connecticut limit their False Claims Acts to state funds used in the healthcare sphere. In its present form, the act largely mirrors those of Massachusetts, Vermont, and Rhode Island, and examining recent applications in the construction context may provide guidance into how the act might be applied in Connecticut.
After establishing a False Claims Division in 2015 to investigate the use of public funds, the Massachusetts Attorney General’s Office has aggressively used the act in the construction context. Recently, in December 2022, it reported that a joint venture company in charge of constructing a baseball stadium in Worcester settled alleged False Claims Act violations for $1.9 million relating to false statements submitted in the bidding process. More recently, in late March, the same office filed suit against a construction company for prevailing wage violations, alleging that the company submitted fraudulent payroll forms on public projects and underpaid workers.
If the act is adopted in its present form, mirroring Massachusetts’ version, it could be applied to all phases of a construction project. This may be concerning, considering that claims may be brought by private citizens and the standard of proof is a preponderance of the evidence (rather than the higher clear and convincing evidence typically applied to civil fraud claims). Such a law could unfairly penalize contractors, causing them to incur significant costs to defend claims that may be subjective (but not fraudulent), risk losing prequalification status, or face suspension or debarment, any of which could jeopardize their businesses.
Frederick E. Hedberg is partner, and William A. Stoll is associate, in Robinson & Cole’s Construction Group.