On April 9, 2007, New York enacted Article XIII of the State Finance Law. See N.Y. State Finance Law, sections 187–194 (hereinafter referred to as “Article XIII”). The purposes of Article XIII include the prevention and deterrence of frauds against the state and local governments, and the recovery of funds or property fraudulently obtained. Article XIII empowers the Attorney General of the State of New York to investigate and initiate civil enforcement actions against parties who, among other things, knowingly present false or fraudulent demands for payments or property to the state or a local government. Additionally, Article XIII empowers local governments to investigate and initiate civil enforcement actions on their own behalf. It also allows private individuals to file qui tam enforcement actions on behalf of the state or a local government, and then prosecute these actions on their own if the state or local government declines to intervene in the action.

The Attorney General adopts the emergency rule to enforce the newly enacted Article XIII, as a matter of necessity, because time is of the essence for the Office of the Attorney General to begin and continue investigations to prevent and deter frauds against the state and local governments and to recover funds and property fraudulently obtained. The rule will also allow for the orderly processing and handling of civil enforcement actions and qui tam enforcement actions that have been and that may be filed pursuant to Article XIII. The need for the emergency rule will exist until such rule is adopted on a permanent basis.

Indeed, in the absence of the rule, a procedural vacuum exists that is contrary to the public interest. Guidelines or procedures currently do not exist that specify the manner in which the Office of the Attorney General can investigate violations of Article XIII. Additionally, government plaintiffs and qui tam plaintiffs currently empowered to investigate and prosecute violations of Article XIII cannot effectively and efficiently exercise that power without the attached rule. This jeopardizes the public interest in the immediate prevention and deterrence of frauds against the state and local governments, and the recovery of funds or property fraudulently obtained. This also jeopardizes the health and general welfare of the public in connection with fraud related to public health and welfare programs.

Furthermore, in the absence of the rule, there are no procedures to ensure that the Attorney General is made aware of civil enforcement actions filed by local governments, even though such actions may affect an interest of the state or interfere with or duplicate ongoing investigations or enforcement actions being undertaken by the Attorney General or other state agencies. Without such consultation these actions may likewise interfere with or duplicate ongoing investigations being conducted by the Attorney General or other state agencies.

Finally, in the absence of the rule, insufficient procedures exist for processing qui tam actions, including, but not limited to, critical procedures regarding how qui tam plaintiffs shall proceed when the government declines to intervene or supersede in a qui tam action.

Thus, compliance with the normal procedural requirements for notice and public comment would be contrary to the public interest.

(1) If the qui tam plaintiff elects to proceed with the action, the qui tam plaintiff shall so advise the court, the state, and applicable local governments, and cause the complaint to be unsealed. After the complaint is unsealed, the qui tam plaintiff shall serve the complaint on any defendant pursuant to the provisions of the civil practice law and rules and other applicable law.

(2) If the qui tam plaintiff elects not to proceed with the action, the qui tam plaintiff shall either: (i) voluntarily discontinue the action, without an order and without unsealing the action, by filing with the court a notice of discontinuance and serving a copy of this notice on the Attorney General, who may in the Attorney General's discretion make an in camera motion to unseal the complaint; or (ii) seek to voluntarily discontinue the action by order of court by making an in camera motion to unseal the complaint and dismiss the action.

1. Statutory authority: Section 194 of the State Finance Law gives the Attorney General of the State of New York power to adopt such rules and regulations as is necessary to effectuate the purposes of Article XIII of the State Finance Law. See N.Y. State Finance Law, sections 187-194 (hereinafter referred to as “Article XIII”).

2. Legislative objectives: These rules and regulations are in accordance with the public policy objectives the Legislature sought to advance by passing Article XIII, which include the prevention and deterrence of fraud against the state and local governments, and the recovery of funds or property fraudulently obtained. The investigative procedures authorized by the rules and regulations (hereinafter referred to as “the rule”) will empower the Attorney General to investigate frauds that constitute a violation of Article XIII, and thereby facilitate his or her ability to bring civil enforcement actions and other actions against parties that commit such violations. Also, the rule provides for the orderly process and handling of civil enforcement actions and qui tam actions.

3. Needs and benefits: The rule is needed to effect the purposes of Article XIII: the prevention and deterrence of frauds against the state and local governments, and the recovery of funds or property obtained through false or fraudulent conduct. It will establish how the Attorney General can begin and continue investigations of potential violations of Article XIII. It will also allow for the orderly processing and handling of civil enforcement actions and qui tam enforcement actions that have been and that may be filed.

In the absence of the rule, a procedural vacuum exists that is contrary to the public interest. Guidelines or procedures currently do not exist that specify the manner in which the Attorney General can investigate violations of Article XIII. Government plaintiffs and qui tam plaintiffs currently empowered to investigate and prosecute violations of Article XIII cannot effectively and efficiently exercise that power without the rules promulgated herein. This jeopardizes the public interest in the immediate prevention and deterrence of frauds against the state and local governments, and the recovery of funds or property fraudulently obtained. This also jeopardizes the health and general welfare of the public in connection with fraud related to public health and welfare programs. In fact, qui tam cases have already been served on the Attorney General alleging Medicaid fraud that may have harmed patients.

Furthermore, there are no procedures to ensure that the Attorney General is made aware of civil enforcement actions filed by local governments, even though such actions may affect an interest of the state or interfere with or duplicate ongoing investigations or enforcement actions being undertaken by the Attorney General or other state agencies. Without such consultation these actions may likewise interfere with or duplicate ongoing investigations being conducted by the Attorney General or other state agencies.

Finally, there presently does not exist sufficient procedures for processing qui tam actions, including but not limited to critical procedures for how qui tam plaintiffs shall proceed when the government declines to intervene or supersede in a qui tam action. Such procedures are absent even though qui tam actions have already been filed, and more qui tam actions may be filed at any time.

The benefits derived from the rule are that:

(A) The Attorney General can investigate any person for having engaged in conduct amounting to a violation of Article XIII with the same or similar long-standing, familiar and effective powers, procedures and devices that the Attorney General may use to investigate fraud under section 352 of the General Business Law. Furthermore, the rule modifies those powers, procedures and devices set forth in section 352(2) and (4) to address the specific circumstances of an investigation of a violation of Article XIII. Specifically, it ensures that the Attorney General's powers to investigate granted therein do not terminate by reason of a local government, or any person, including a qui tam plaintiff, filing a complaint. Likewise, the rule specifies that the Attorney General may use section 2308(b) of the civil practice law and rules, or other applicable law, to compel compliance with an investigation. The rule thus enhances the Attorney General's ability to investigate and bring enforcement actions under Article XIII.

(B) The Attorney General will be notified of local government enforcement actions, and consulted with prior to a local government filing an action related to the Medicaid program, so that he or she can protect the state's interest in local enforcement actions and notify other state agencies if necessary. This will protect the state's interest in litigation initiated by local governments, avoid duplicative actions and investigations, and allow for the cooperation and the sharing of resources by the state and local governments.

(C) Qui tam actions will be orderly handled and processed. If the government decides not to intervene in a qui tam action, the rule establishes a time period and procedures for the qui tam plaintiff to either proceed or discontinue the action.

Together, these benefits will enhance the ability of the state and local governments and qui tam plaintiffs to bring enforcement actions, recover funds and property fraudulently obtained, and prevent and deter other frauds.

4. Costs: There are de minimus costs to the rule.

5. Local government mandates: A local government filing an action under section 190(1) of the State Finance Law shall provide the Attorney General with a copy of the complaint on or about the date such complaint is filed. A local government shall consult with the Attorney General prior to filing any action related to the Medicaid program.

6. Paperwork: There are no additional reporting requirements or paperwork requirements as a result of this rule.

7. Duplication: The rule will not duplicate any existing state or federal law.

8. Alternatives: There were alternative proposals considered, including, but not limited to, requiring local governments to notify the Attorney General prior to filing any civil enforcement action, and requiring qui tam actions to be filed in specific venues. Those were rejected as unnecessary and overly burdensome on both local governments and qui tam plaintiffs. Consideration was also given to issuing no regulations, but this would have been contrary to the public interest.

9. Federal standards: The rule does not exceed any minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: Compliance with this rule could be achieved immediately upon effect of the adoption of this rule.

1. Effect of rule: By virtue of its subject matter, the rule will have no impact on small businesses. The rule applies to every local government, as defined in section 188(4) of the State Finance Law, which chooses to file a civil enforcement action pursuant to section 190(1) of the State Finance Law. Accordingly, the rule may apply to every county, city, town, village, school district, board of cooperative educational services, local public benefit corporation or other municipal corporation or political subdivision of the state.

2. Compliance requirements: A local government filing an action under section 190(1) of the State Finance Law is required to provide the Attorney General with a copy of the complaint on or about the date such complaint is filed. Additionally, a local government is required to consult with the Attorney General prior to filing any action under section 190(1) that is related to the Medicaid program. Local governments will not need to employ any professional services in order to comply with the rule.

3. Compliance costs: The rule imposes de minimis costs on local governments.

4. Feasibility of compliance: Due to the de minimis impact of the rule, all local governments should easily be able to comply.

5. Minimizing adverse impact: By virtue of its subject matter, the rule will not have a significant adverse impact on local governments. There were alternative proposals considered, including, but not limited to, requiring local governments to notify the Attorney General prior to filing any civil enforcement action. Such proposals were rejected as unnecessary and overly burdensome on local governments.

6. Economic and technological feasibility: Due to the de minimis impact of the rule, local governments will have no difficulty meeting technological requirements, if any.

7. Local government participation: In order to ensure that local governments have an opportunity to participate in the rule making process, a copy of the proposed rules has been sent to the Executive Director of the New York Association of Counties. A copy of the proposed rules will also be posted on the web site of the Attorney General of the State of New York.

1. Types and estimated numbers of rural areas: The rule applies uniformly throughout the state, including all rural areas. Executive Law, Article 19-F Rural Affairs Act, Section 481(7) defines a rural area as a county with a population of less than 200,000. New York currently has 44 counties that would constitute rural areas. The rule applies to such counties as well as other local governments within them.

2. Compliance requirements: A local government filing an action under section 190(1) of the False Claims Act is required to provide the Attorney General with a copy of a complaint on or about the date of filing a cause of action under section 190(1) of the State Finance Law. Additionally, a local government is required to consult with the Attorney General prior to filing any action under section 190(1) that is related to the Medicaid program. Local governments will not need to employ any professional services in order to comply with the rule.

3. Compliance costs: The rule imposes de minimus costs on local governments.

4. Minimizing adverse impact: The rule will not have an adverse impact on local governments in rural areas, since it only imposes de minimus costs on local governments. There were alternative proposals considered, including, but not limited to, requiring local governments to notify the Attorney General prior to filing any civil enforcement action. Such proposals were rejected as unnecessary and overly burdensome on local governments.

5. Rural area participation: In order to ensure that local governments in rural areas have an opportunity to participate in the rule making process, a copy of the proposed rules will be sent to the Executive Director of the New York Association of Counties. A copy of the proposed rules will also be posted on the web site of the Attorney General of the State of New York.