Colorado’s second-highest court clarified last month that the state law imposing penalties on a “person” for fraudulent conduct does not apply to municipalities that are accused of fraud.
Palmer Lake Trustee Roger Moseley and Martha Brodzik sued the town under the Colorado False Claims Act. They alleged Palmer Lake made false claims to obtain at least $1.3 million in federal and state funding for specific projects, then diverted the money for improper purposes.
The 2022 False Claims Act renders a “person” liable for civil penalties if they knowingly make a false claim to the government. Attorney General Phil Weiser testified at the time that there was a “massive investment of federal money to address the pandemic,” posing a risk of “fraudsters taking funds, not quite doing what they said (and) hoping to get away with it.”
The law defined a person to mean an individual, corporation, partnership, association, or “other nongovernmental legal entity.”
Palmer Lake moved to dismiss the false claims lawsuit by arguing that it did not qualify as a person subject to liability. In an October 2025 order, District Court Judge Gregory R. Werner agreed.
“Notably, this definition explicitly excludes governmental entities,” he wrote. “Had the legislature intended to include political subdivisions, such as a municipality, in the definition of ‘person,’ it could have done so explicitly. It did not.”
On appeal, the plaintiffs argued that Colorado law has treated...
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