Ohio is one of the few states in the country that does not have a state “false claims” law modeled after the federal “qui tam” law. A long-overdue clean-up of all the state pensions may be coming if Wall Street vendors to the public pensions can finally be prosecuted under state law for fraud.
Last week, State Reps. Jeffrey A. Crossman (D-Parma) and Paula Hicks-Hudson announced the introduction of an anti-corruption legislative package including the “Ohio False Claims Act” and a strengthened debarment statute that would require a ban of vendors who are caught committing fraud in their dealings with the State of Ohio. The Ohio False Claim Act is modeled after a federal statute that has been successful in recovering millions of dollars every year at the federal level. Ohio is one of the few states in the country that does not have a state law modeled after the federal government’s “qui tam” law.
“Ohio is potentially letting criminals get away with millions of dollars of ill-gotten taxpayer dollars by failing to adopt these long-needed and commonsense reforms,” said Rep. Crossman. “There is no reason why we shouldn’t adopt techniques like this to catch and punish fraud.”
The timing of Crossman and Hicks-Hudson’s anti-corruption package couldn’t have been better.
Earlier this year, a forensic investigation of the $90 billion-plus State Teachers Retirement System of Ohio commissioned by the Ohio Retired Teachers Association and performed by my firm, concluded that the state teachers’ pension had long abandoned transparency; legislative oversight of the pension had utterly failed; Wall Street had been permitted to pocket lavish fees without scrutiny; investment costs and performance may have been misrepresented; and failure to monitor conflicts may have undermined the integrity of the investment process, as billions that could have been used to pay retirement benefits promised to teachers had been squandered.
Within days of the forensic report’s release, two STRS Ohio board members issued statements supporting its conclusions. NBC News, Bloomberg and local media reported on the investigation. A few month later, the State Auditor announced that the forensic investigation provided a “reasonable basis” for his office to launch a Special Audit. Most recently, a complaint was filed with the Ohio Division of Securities which is being reviewed at this time.
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Based upon the strong initial reaction to the STRS Ohio forensic investigation, a large group of participants in the Ohio Public Employees Retirement System asked me to create a OPERS GoFundMe project to fund a forensic investigation of their even larger $115 billion state pension.
Ohio’s 5 state pensions hold collectively approximately $250 billion in assets and represent the largest pools of public monies in the state. If you’re looking for the greatest potential fraud in connection with state contracts, look no farther.
The Ohio False Claims Act would:
- Set out civil penalties for violators;
- Allow for a person to bring civil action against the violator(s) on behalf of the State and of that individual;
- Allow for the State to intervene in civil actions brought by individuals on the State’s behalf;
- Set out guidelines for awarding proceeds from successful civil actions to the individual bringing that action;
- Set out remunerations for employees who are subjected to retribution by their employer for participation in the civil action.
“These two anti-corruption bills are ways to further protect taxpayer dollars,” said Rep. Hicks-Hudson. “Currently, there are not strong measures to hold state vendors accountable for their actions and prevent wrongdoers from continuing to do business with the State. These bills will correct that.”
The Debarment of State Vendors legislation would bar a vendor from consideration for contract awards upon a finding based upon a reasonable belief that the vendor has done any of the following:
- Attempted to influence a public employee to breach ethical conduct standards or to influence a contract award;
- Colluded to restrain competition by any means;
- Been convicted under state or federal antitrust laws;
- Been convicted under state or federal corruption laws, including a criminal offense related to bribery.
Democrats have introduced several other anti-corruption measures in addition to these pieces of legislation, including the Ohio Anti-Corruption Act, which would require dark money groups to identify their contributors and disclose their spending, and the Public Corruption Repayment Act, which would require legislators to reimburse the state for compensation received between the time they were indicted for a felony involving public corruption and their conviction.
The Ohio False Claims Act and the Debarment of State Vendors legislation currently await bill numbers and assignment to a House committee.
Marc Dann, former Attorney General of Ohio says of the proposal, “I have been trying to pass a state false claims law since I started in the Ohio legislature in 2003. I think the reason Ohio hasn’t enacted a false claims law is because in our pay-to-play governmental culture, having whistleblowers and smart lawyers looking critically at the conduct of state contractors would not only put those contractor at risk but shine an unfavorable light upon public officials who have been benefitting from campaign contributions from Wall Street and the health care industry.”