EXHIBIT B
CERTAIN FEDERAL AND STATE LAWS

I. FRAUD AND ABUSE LAWS

A. Federal Laws

False Claims Act (31 USC §§3729-3733)

The False Claims Act ("FCA") provides in pertinent part, that:

Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval; (2) knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government . . . or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . .

For purposes of this section, the terms "knowing and "knowingly" mean that a person, with respect to information (1) has actual knowledge of the information, (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information and no proof of specific intent to defraud is required (31 U.S.C. §3729)

The False Claims Act imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. An example may be a physician who submits a bill to Medicaid for medical services she knows she has not provided. The False Claims Act also imposes liability on an individual who knowingly submits a false record in order to obtain payment from the government. An example may be a government contractor who submits records that he knows (or should know) are false and that falsely indicate compliance with certain contractual or regulatory requirements. The third area of liability includes those instances in which someone may obtain money from the federal government to which he may not be entitled, and they uses false statements or records in order to retain the money. An example may be a hospital that obtains interim payments from Medicaid throughout the year, and then knowingly files a false cost report at the end of the year in order to avoid making a refund to the Medicaid program.

The FCA provides that private parties may bring a lawsuit on behalf of the United States. Such person, known as "qui tam relators," may share in a percentage of the proceeds from an FCA action or settlement. A qui tam relator, when the Government has intervened in the lawsuit, may receive at least 15 percent but not more than 25 percent of the proceeds of the FCA action depending upon the extent to which the relator substantially contributed to the prosecution of the action. When the Government does not intervene, the relator may receive an amount that the court decides is reasonable and shall be not less than 25 percent and not more than 30 percent.

Administrative Remedies for False Claims (31 USC Chapter 38, §§3801-3812)

This statute allows for administrative recoveries by federal agencies. If a person submits a claim that the person knows is false or contains false information, or omits material information, then the agency receiving the claim may impose a penalty of up to $5,000 for each claim, plus an amount equal to twice the amount of the claim.

B. New York State Laws

NY False Claims Act (State Finance Law, §§187-194)

The NYS False Claims Act is similar to the federal False Claims Act. It imposes penalties and fines on individuals and entities that file false or fraudulent claims for payment from any state or local government, including health care programs such as Medicaid. The penalty for filing a false claim is $6,000-$12,000 per claim and the recoverable damages are between two and three times the value of the amount falsely received. In addition, the party that files the false claim may have to pay the government's legal fees.

Private individuals may file lawsuits in state court on behalf of state or local government parties. If, as a result of the lawsuit, the party that files a false claim is required to make payments back to the government, the person who initiated the case may recover 25-30% of the proceeds if the government did not participate in the lawsuit, or 15-25% if the government did participate.

Social Services Law §145-b False Statements

It is a violation of this law to knowingly obtain or attempt to obtain payment for items or services furnished under any Social Services program, including Medicaid, by use of a false statement, deliberate concealment, or other fraudulent scheme or device. The State, the local Social Services district, and the Department of Health may recover amounts incorrectly paid and impose fines and penalties.

Social Services Law §145-c Sanctions

The law provides for sanctions to be imposed on a person who applies for or receives public assistance, including Medicaid, by intentionally making a false or misleading statement.

Social Services Law §145 Penalties

Any person who submits false statements or deliberately conceals material information in order to receive public assistance, including Medicaid, is guilty of a misdemeanor.

Social Services Law §366-b Penalties for Fraudulent Practices

Any person who obtains or attempts to obtain, for himself or others, medical assistance by means of a false statement, concealment of material facts, impersonation or other fraudulent means is guilty of a misdemeanor.

Any person who, with intent to defraud, presents for payment any false or fraudulent claim for furnishing services, knowingly submits false information to obtain greater Medicaid compensation, or knowingly submits false information in order to obtain authorization to provide items or services is guilty of a misdemeanor.

Penal Law Article 155, Larceny

The crime of larceny is committed by a person who, with intent to deprive another of his property, obtains, takes or withholds the property by means of trick, embezzlement, false pretense, false promise, including a scheme to defraud, or other similar behavior. Larceny has been changed in some Medicaid fraud cases.

Penal Law Article 175, False Written Statements

This law establishes criminal penalties for falsifying business records and offering false instruments to a government agency.

Penal Law Article 176, Insurance Fraud

This law establishes criminal penalties for insurance fraud, including false claims to Medicaid and other health insurers.

Penal Law 177, Health Care Fraud

This law establishes criminal penalties for fraudulent claims for health insurance payment, including Medicaid.

II. WHISTLEBLOWER PROTECTION LAWS

Federal False Claims Act (31 U.S.C. §3730(h)

The FCA provides protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as a result of their furtherance of an action under the FCA. Remedies include reinstatement with comparable seniority as the qui tam relator would have had but for the discrimination, two times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney's fees.

NY False Claims Act (State Finance Law §191)

The False Claim Act also provides protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as was result of their furtherance of an action under the Act. Remedies include reinstatement with comparable seniority as the qui tam relator would have had but for the discrimination, two times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney's fees.

New York Labor Law §740

An employer may not take any retaliatory action against and employee if the employee discloses information about the employer's policies, practices or activities to a regulatory, law enforcement or other similar agency or public official. Protected disclosures are those that assert that the employer is in violation of a law that creates a substantial and specific danger to the public health and safety or which constitutes health care fraud under Penal Law §177 (knowingly filing, with intent to defraud, a claim for payment that intentionally has false information or omissions). The employee's disclosure is protected only if the employee first brought up the matter with a supervisor and gave the employer a reasonable opportunity to correct the alleged violation. If an employer takes a retaliatory action against the employee, the employee may sue in state court for reinstatement to the same, or an equivalent position, any lost back wages and benefits and attorney's fees. If the employer is a health provider and the court finds that the employer's retaliatory action was in bad faith, it may impose a civil penalty of $10,000 on the employer.

New York Labor Law § 741

A health care employer may not take any retaliatory action against an employee if the employee discloses certain information about the employer's policies, practices or activities to a regulatory, law enforcement or other similar agency or public official. Protected disclosures are those that assert that, in good faith, the employee believes constitute improper quality of patient care. The employer's disclosure is protected only if the employee first brought up the matter with a supervisor and gave the employer a reasonable opportunity to correct the alleged violation, unless the danger is imminent to the public or patient and the employee believes in good faith that reporting to a supervisor would not result in corrective action. If an employer takes a retaliatory action against the employee, the employee may sue in state court for reinstatement to the same, or an equivalent position, any lost back wages and benefits and attorneys' fees. If the employer is a health provider and the court finds that the employer's retaliator action was in bad faith, it may impose a civil penalty of $10,000 on the employer.