In June of 2022, Colorado Governor Jared Polis signed into law House Bill 22-1119, informally known as the Colorado False Claims Act (the “CFCA”). The CFCA is modeled after the federal False Claims Act and imposes liability relevant to contractors for false claims to the state or local government related to:
- Claims for payment from the government;
- Statements material to a false or fraudulent claim;
- Delivery of only a portion of government property or money that should be fully delivered to the government; and
- Knowingly falsely documenting receipt of property used by or to be used by the government.
Construction professionals must become familiar with and understand the requirements, penalties, and potential carveout to attempt to avoid liability. The penalties under the CFCA can add up, as a single project can contain multiple claims or parts of a transaction.
The CFCA:
- Allows a private person (in the name of the government) and/or the Colorado Attorney General to bring a civil action against one who has made a false claim
- Imposes the following penalties for violation:
- Between $11,800 and $23,600 (adjusted for inflation) per violation; plus
- Actual damages incurred by the State, which may be multiplied by three (treble damages); plus
- Attorney fees and costs for the investigation and prosecution of the false claim.
- Provides that penalties may be reduced if the person who made the false claim provides information to the investigators within 30 days after first learning of the potential violation and cooperates in the investigation.
- Allows for whistleblowers to receive robust protections and payments by authorizing them to recover up to 30% of the total recovery by the government.
We, and many industry professionals, trust that a robust government compliance program within a contractor’s organization may help reduce the potential liabilities associated with CFCA. It is certainly a good start to begin educating and managing up-front compliance with the CFCA and to run point when a potential CFCA violation is identified. But an in-house government compliance program is not a surefire way to avoid investigation, avoid liability, or necessarily significantly reduce damages as the reduction afforded is only a reduction to one category of damages.
Most of a construction professional’s risk related to the CFCA surrounds request for payment and receipt of payment from the government. A contractor’s best bet to avoid running afoul of the CFCA would be to understand the CFCA and require close attention to detail and accuracy in your company’s accounting and invoicing for state and local government projects. Like the federal False Claims Act, untangling from a false claim investigation and prosecution is typically costly, time consuming, and risky. An ounce of prevention is worth a pound of cure.
