Virginia enacts state whistleblower law

July 15, 2002 — Beginning next January, private individuals may blow the whistle on fraud against the state of Virginia and claim a reward.

The Virginia General Assembly enacted in April a law known as the "Virginia Fraud Against Taxpayers Act," which is modeled after the federal False Claim Act. The state statute allows private individuals to sue companies or individuals who are defrauding the state and recover funds on the state's behalf.

Whistleblowers will be entitled to 15 percent to 25 percent of the amount recovered as a result of their "qui tam" lawsuits, if the state joins the case. If the state doesn't join, the whistleblower's share would range from 25 percent to 30 percent.

Liable companies or individuals would have to pay $5,000 to $10,000 for each false claims plus three times the state's losses. The state law reduces that amount to two times the state's damages if the liable person or company reports the false claims to the state within 30 days after learning of the fraud.

The amount of time that the lawsuit remains "under seal" (not publicly available) under the state law is longer than under the federal statute. The new state law sets a seal period of 120 days while the government investigates the allegations. Federal statute allows 60 days, although in practice, the seal is routinely extended by the courts to give the government more time to complete its investigation.

The law goes into effect Jan. 1, 2003.