In an important court ruling today, New York State Supreme Court Justice James d’Auguste denied a motion by JP Morgan Chase & Co. to throw out a whistleblower suit that could force it to pay millions of dollars to New York.

When JP Morgan Chase & Co. ignored legal deadlines to transfer tens of millions dollars worth of “abandoned” property to the state of New York, it was required by state law to pay ten percent annual interest on the late payments.

However, according to a whistleblower, JP Morgan used false and fraudulent forms and improperly avoided paying interest on its late payments. The whistleblower brought suit under the New York False Claims Act, a powerful law that, uniquely, lets whistleblowers sue a corporation for defrauding New York State or New York local governments. Under the New York False Claims Act, a whistleblower sues on behalf of the defrauded governments, and may be eligible for a reward up to 30% of the recovery. The False Claims Act requires liable defendants to pay treble damages, civil penalties, and attorneys fees.

In ruling that the whistleblower’s case could go forward, Justice d’Auguste rejected JP Morgan’s argument that the state’s Abandoned Property Law—which states that any company failing to deliver abandoned property to New York State on time “shall” pay interest—did not, in fact, require the bank to pay interest because the New York State Comptroller has the option to refrain from collecting these payments. Justice d’Auguste also rejected JP Morgan’s argument that it’s alleged fraud was inherently not “material” to New York State because the New York State Comptroller had, in fact, waived JP Morgan’s obligation to pay interest on the late payments.

This ruling shows that a defendant that knowingly submits a false claim, or that, as in this case, uses false records to avoid paying the state money, may be held liable for fraud even if the government decides to pay the claim at issue or not collect the money that it is owed. While paying a false claim – or waiving a debt that was avoided through false records – may be evidence that the falsity was not “material” to the government, this is not necessarily the case. It is, as in the decision issued today, an issue to be subject to discovery and litigated.

Click here for an article on the decision.

Click here for the Court’s decision.