Many businesses are familiar with allegations concerning false claims made to the government in exchange for money or property. For example, in August 2025, CVS agreed to pay $12.25 million to resolve allegations that it overcharged the Medicaid program in Massachusetts compared to the general public. Also in August, the government sued a property management company in Minnesota for approximately $800,000, plus civil penalties, costs and fees, relating to representations made in 2021 and 2022 in connection with a COVID-19-era assistance program to assist with rent and utility expenses for low-income households. In July 2025, three New England construction companies settled with the government for over $3 million to resolve allegations of false claims in connection with an airport renovation project.
Many would presume that these are federal False Claims Act (FCA) cases. The FCA has long been a powerful tool for federal government enforcement targeting industries from construction to healthcare, generating more than $78 billion in settlements and judgments in just the last 40 years. Underlying these staggering recoveries are often suits initially brought by whistleblowers, called "qui tam relators," who file the claims on behalf of the government and can obtain a portion of the ultimate settlement and judgment. In fact, $2.4 billion of the $2.9 billion in FCA settlements and judgments last year stemmed from qui tam actions. However, each of the above examples were actually violations of often-overlooked state—not federal—false claims act statutes, many of which also include a qui tam whistleblower provision.
While the federal FCA appropriately gets a lot of attention from contractors, educational institutions and other businesses that receive federal benefits, the risk posed by state FCAs for similar businesses and entities dealing with state and local governments is underappreciated. For example, New York has recovered more than $4 billion under its state FCA since 2011, California has recovered more than $3 billion since 2000, and Minnesota has recovered $60 million since 2010. Motivated by a desire to supplement tight state budgets and reduce fraud, state legislatures across the nation are establishing or expanding state FCAs to more closely mirror the federal FCA, and state attorneys general and private qui tam relators are newly focused on the use of these state laws to replicate the success of the U.S. Department of Justice and federal relators. Additionally, just as the federal FCA is being used by the Trump administration to implement policy priorities, Democratic and Republican state attorneys general may use—and in some cases already have used—their state FCAs to pursue policy priorities across the political spectrum.
Businesses, institutions and individuals that contract with state governments or receive state funds need to familiarize themselves with the increasing liability presented by state FCA enforcement and, as similar parties do at the federal level, ensure they have the procedures in place to reduce the risk of a state lawsuit alleging false or fraudulent claims.
Establishment and Expansion of State FCA Statutes
Many states are incentivized to establish FCAs to help uncover Medicaid fraud. The Social Security Act (SSA) permits a state with an FCA that meets certain criteria to qualify for an increased share of any damages recovered through claims involving state Medicaid programs. The Office of Inspector General for the U.S. Department of Health and Human Services (HHS-OIG) has approved 23 state FCAs for such an increased share of Medicaid recoveries.
However, while some states like Texas have a state FCA that only permits recovery of damages in connection with Medicaid spending, many states and the District of Columbia have broad statutes like the federal FCA, permitting recovery for false statements in connection with the expenditure of any type of state funds. Additionally, several major municipalities and local governments have their own FCAs, including Chicago, New York City and Philadelphia.
These state and municipal FCAs continue to evolve. For example, in 2022, Colorado expanded its state FCA—which previously only permitted suits for Medicaid fraud—to permit the state and relators to file suit in connection with all types of frauds on the state and political subdivisions, including counties, cities and towns, school districts, highway and transportation authorities, and housing agencies.
Unique Features of State FCA Statutes
Some state and local FCAs have unique features that expand liability for businesses and entities compared to the risks posed by the federal FCA. The federal FCA, for example, does not permit suits for false claims to state governments, but as discussed above, Colorado and several other states have statutes permitting suits for claims made to political subdivisions.
Additionally, some states have significantly expanded the definition of a false claim compared to the federal FCA. Perhaps most notably, while the federal FCA does not permit claims for tax fraud, Illinois, New York, Rhode Island, the District of Columbia and other states permit suits under their state FCAs for false statements in some tax claims. These states have sought to recover tax losses in a variety of situations. For example, in 2024, the District of Columbia used a suit under its FCA to obtain a $40 million settlement with an individual who allegedly made false statements concerning his residency in order to avoid paying higher taxes. In 2021, the New York attorney general reached a $1.5 million state FCA settlement with sports merchandise retailer Fanatics and its affiliates for knowingly under-collecting sales tax on online sales.
Other states have protections for retaliation against relator whistleblowers that are broader than those under the federal FCA. For example, the Colorado FCA permits an employee, contractor or agent to bring a suit if they are “intimidated, sued, defamed, blacklisted, or in any other manner retaliated against” for certain “lawful acts” that are defined within the statute—such as conducting an investigation, meeting with counsel or initiating a suit—whereas the federal FCA leaves courts to interpret which “lawful acts” give rise to retaliation actions.
Some states provide higher incentives to file suit than the federal FCA, potentially generating more exposure to liability for businesses operating in those states. For example, in California, qui tam relators can generally obtain between 15% to 33% of the recovered damages if the state intervenes after the filing of the quit tam suit, and up to 50% if the state declines to intervene, compared to 15% to 25% generally available with intervention and 25% to 30% without intervention under the federal FCA.
Source of State False Claims Act Cases
Enforcement actions involving state FCA claims originate from sources that are often far more complicated than one state attorney general filing a state FCA action. Instead, it is not uncommon to see global settlements based on investigations stemming from multiple state attorneys general offices, coordination between federal and state enforcement agencies using federal and state laws to bring cases, a municipality bringing its own action, a relator filing a qui tam suit, or some combination thereof.
For example, in the July 2025 case concerning construction fraud at an airport, the Massachusetts Attorney General announced a settlement with three construction companies to resolve state FCA allegations. The investigation revealed that two of the companies (one of which was later acquired by the third defendant) purposefully skipped a significant step in the construction process that caused defects on the runway. The ultimate resolution involved the Massachusetts Attorney General’s office, the U.S. Department of Justice, the U.S. Department of Defense and the U.S. Department of Transportation, with $3.1 million paid to Massachusetts for the state FCA allegations and $1.37 million paid to the federal government to resolve federal FCA allegations.
Multi-state and state and federal cooperation is particularly common in the healthcare sector, where the National Association of Attorneys General (NAAG) runs the National Association of Medicaid Fraud Control Units (NAMFCU), which regularly coordinates to combat Medicaid fraud and publishes a list of multi-state recoveries. These cases can be staggering in complexity. For example, in 2022, a Georgia-based nursing facility’s owners and operator agreed to pay $11.2 million to 23 states and the federal government in connection with four whistleblower lawsuits filed in two states, with support from a NAMFCU team that included representatives from five separate state attorneys general.
Potential State False Claims Act Enforcement Trends
Looking forward, it is likely that state FCA enforcement will continue to increase—with a few potential trends on the horizon. First, more states are expected to pass legislation creating or broadening state FCAs. Connecticut made changes to its FCA to make it applicable beyond health care fraud, and in 2024 it became the most recent state to qualify for HHS-OIG’s certification. This summer, Pennsylvania’s House of Representatives passed a bill that would create a state FCA that includes a qui tam provision. California’s Attorney General is encouraging the state legislature to expand California’s FCA to permit claims based on tax fraud.
A second trend in state FCA enforcement may be the use of state laws to further policy priorities, similar to how the Trump administration has signaled its intent to use the federal FCA to challenge “illegal DEI” practices among contractors and federal funds recipients. Republican state attorneys general may seek opportunities to collaborate with the administration through state FCA cases, including to challenge DEI practices among businesses and educational institutions receiving state funds. Conversely, Democratic state attorneys general have expressly stated their intent to strengthen state-level enforcement to fill in perceived gaps in enforcement by the current administration, and they may use state FCAs to further this goal in areas like environmental protection, labor and affirmative action. The Massachusetts Attorney General, for example, has used the state’s FCA in the past to recover $1.65 million from a power company that made false statements about the percentage of its power coming from renewable energy, $900,000 from a construction company that failed to pay prevailing wages on a public construction project, and $1.9 million from the builders of a minor league baseball stadium that misrepresented the amount of work allocated to women and minority-owned businesses.
Finally, multi-state and federal/state FCA cooperation is expected to grow. Given that healthcare fraud is already the leading area of federal FCA enforcement and states investigating Medicaid fraud will often face similar fact patterns, it is likely that states will continue to combine forces with each other and the federal government to pursue healthcare recoveries. Additionally, multi-state litigation brought by state attorneys general against the federal government has sharply accelerated in recent years, and to the extent such efforts result in these offices collaborating more frequently overall, businesses in a variety of sectors can expect more multi-state FCA enforcement actions as well.
Recommendations for Entities Operating in States with False Claims Acts
To reduce the risk of being sued under a state FCA by a state attorney general or a relator, government contractors or other businesses and institutions that receive state funds and benefits should:
- Conduct a review of compliance programs designed to prevent false or fraudulent claims for payment being made to state and local agencies
- Review your own reporting processes, including ensuring that employees, subcontractors and other individuals are aware of and comfortable using these channels in the event of perceived noncompliance, and that supervisors do not retaliate for reporting
- Ensure you have a plan to quickly respond in the event you learn of an FCA action or investigation, as timely cooperation and voluntary disclosure can often be helpful in mitigating the consequences of an enforcement action
- Stay apprised of policy priorities and enforcement actions in each state in which your organization operates, and consider how these may align with your own business activities.
While the federal FCA deserves attention, state FCA litigation is an area of increasing liability that businesses across industries—and their legal counsel—need to closely monitor as well.