Monday, August 3, 2015

Most Effective Tool to Combat Fraud

Praising Whistleblowers  on the 237th Anniversary of America's First Whistleblower Law


August 3, 2015 — In a recent statement, Senator Chuck Grassley marked the 237th anniversary of the first whistleblower law with praise for the False Claims Act (FCA) and the whistleblowers (also called “relators”) who have made it so successful. 


As explained by the Department of Justice, which is charged with investigating whistleblower complaints under the FCA,  

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, transportation and research grants, agricultural supports, school lunches and disaster assistance.
   
Under the False Claims Act, whistleblowers with knowledge of fraud, waste, or abuse affecting the public fisc may file a lawsuit on behalf of the United States; may litigate the action; and may share in the funds recovered for the United States. 

The FCA may not be the oldest whistleblower law, but it is the most successful: False Claims Act cases have returned almost $23 billion to the federal fisc since 2009, and in 2014 alone, almost $6 billion was recovered by the government under the Act. As noted by Senator Grassley, this success is in large part attributable to whistleblowers who have been empowered to come forward, protected from retaliation, and rewarded for their assistance thanks to the amendments he authored in 1986 and 2009. With this in mind, Senator Grassley urged his colleagues to strengthen, not weaken, relators’ rights, and to “stay vigilant” on behalf of whistleblowers.

Report Fraud Against the Government


If you have knowledge of fraud being committed against the government and you are ready to blow the whistle, contact us by email, or call our attorneys at 800-226-9880 to learn how we can help you through the process. 

Waters & Kraus is a national plaintiffs' firm that seeks to right the wrongs done to honest, hardworking people, including taxpayers who foot the bill for fraud against the government. This article was contributed by Caitlyn Silhan one of the qui tam attorneys in the firm’s Dallas office. 

Friday, July 31, 2015

District Court Sides With Relator for a Higher Reward

Individuals who file a false claims act case (“relators”) are statutorily entitled to a percentage of the reward. The statute provides a range between 15% and 30% depending on the depth of contribution by the relator. And, generally, the sole entity authorized to make the determination of whether the reward will be closer to 15% or 30% is the government.  Relators are permitted to challenge the decision of the government, and that is just what Peggy Ryan, Max Weathersby and Gursheel S. Dhillon did.

Background


The relators came forward and filed a qui tam case under seal to report Endo Pharmaceuticals for violations of the False Claims Act in the promotion of the drug Lidoderm.  The government engaged in a lengthy investigation initiated by the filing of the case. After concluding its investigation, the government settled the matter for $171.9 million. In determining the amount owed to the relators for bringing forth the case, the government offered the relators a 19% relator’s share. The relators requested a 24% share. After the government refused to increase the 19% offer, the relators filed a motion with the Pennsylvania District Court to obtain a higher percentage than that offered by the government.

The Result


Based on the significant contribution the relators brought, the Court agreed with the relators and granted them a 24% share. The government argued that the size of the settlement warrants a smaller relator’s share. The Court disagreed with the government citing to the language of the False Claims Act, which emphasizes the relator’s contribution to the prosecution as a measure of the reward. The District Court noted in its decision, “[a]n examination of the record exhibits that Ryan provided not only the spark for the investigation, but that she nurtured the flame at the darkest times when the possibility of a favorable outcome seemed most remote.” The Court noted that the relator provided the government access to defendant’s corporate walls, and enabled the government’s investigatory team to uncover evidence, which would have otherwise been unobtainable. She wore a wire for over three years, and successfully procured direct evidence of an organizational strategy to market Lidoderm for off-label uses in violation of the False Claims Act. The Court emphasized that the relator spent hundreds of hours supporting the government in its investigation, and that she was indispensable to the investigation in its decision to grant relator’s request of 24% of the share. This reward amounts to$33.6 million to the relator.

Contact Waters & Kraus to Report Misconduct by a Government Contractor


While Waters & Kraus is not handling this particular False Claims Act case, we are representing whistleblowers in similar lawsuits. If you have comparable claims against a different government contractor, contact us by email, or call our qui tam attorneys at 800-226-9880 to learn more about our practice and how we can work together to notify the government about fraudulent abuses by government contractors. This article was contributed by Louisa Kirakosian one of the qui tam attorneys in the firm’s Los Angeles office.

Monday, July 20, 2015

The Federal False Claims Act Explained

What is the Federal False Claims Act?


July 20, 2015  The False Claims Act (31 U.S.C. §§ 3729–3733, also called the "Lincoln Law") is a federal law that imposes liability on persons and companies who defraud governmental programs. It is one of the federal government's primary tools used to combat fraud. Importantly, the Act has qui tam provisions, which allow a private citizen to sue an individual or company that is committing fraud against the government. The Act provides for up to treble damages and also provides awards of 15 to 30 percent of recovery for those bringing cases.

To Whom Does the Act Apply?


The False Claims Act applies to fraud involving any federally funded contract or program, with the exception of tax fraud. There have been actions brought against Department of Defense contractors, healthcare providers, and pharmaceutical companies. It is impossible to list all of the fraud schemes that have been prosecuted under the False Claims Act, however, the following list gives a general idea of the scope of the frauds prosecuted to date:  

  • Billing for goods and services not delivered or rendered
  • Double billing
  • Upcoding bills by using a different billing code that is for a more expensive treatment
  • Illegal marketing of prescription drugs and devices
  • Kickbacks provided in exchange for the referral of beneficiaries of a federally funded healthcare program such as Medicare, Medicaid, or TRICARE
  • Billing for non-FDA approved drugs or devices
  • Obtaining a contract through kickbacks or bribes
  • Shifting expenses from one fixed-price contract to another
  • Providing inferior products to the government
  • Defective testing of products
  • Billing for tests not performed

History of the Act


Over 150 years ago, the False Claims Act was passed into law. During the Civil War, the Union army relied heavily on private contractors for necessities like uniforms, shoes, guns, gunpowder, and horses. Unfortunately, seeing an opportunity to get rich quickly, some of these contractors often cut corners. “Soldiers complained about shoddy uniforms that would dissolve in rain. They would get horses that were withered, that were weak and in some cases blind." said Mark Greenbaum, an attorney who studies the Civil War era. Some contractors even mixed sawdust with gunpowder.

Unfortunately, all of the government’s resources were being put towards the war effort, and they did not have enough inspectors to ferret out the fraud. So Congress created a law where it would provide an incentive for individuals to turn in companies and individuals who were defrauding the government. In return for providing this information, the government agreed to give whistleblowers a portion of any fine it collected based on their allegations. This is what was known as the False Claims Act.

After the Civil War ended, the law was weakened and mostly forgotten until the 1980’s, when stories about military spending, including $400 hammers and $600 toilet seats, began to surface. During this time, the False Claims Act got whistleblowers in the defense industry to come forward, and eventually it worked well in ferreting out fraud in the pharmaceutical and healthcare industries. 

Importance of Whistleblowers Today


The False Claims Act is alive and well today. In the current economic climate, with a large federal deficit, it is more important than ever that the government find and fight against fraud. However, the False Claims Act is useless without whistleblowers. The government needs the help of everyday men and women to assist in uncovering and prosecuting fraud. If you have knowledge of fraudulent activity or violations governed by the federal False Claims Act, it is important to report it. If you have knowledge of such fraud occurring, and choose to report it, the attorneys at Waters and Kraus, LLP can assist you in every step of the way. Please contact us by email or call our qui tam attorneys at 800.226.9880 to learn more about our practice and how we can work together to notify the government about fraud. 

Friday, July 17, 2015

Privilege and FCPA Investigations

Texas Supreme Court Weighs in, with Relevant Implications for Whistleblowers


July 17, 2015 — In addition to the more common forms of retaliation – e.g., changes in employment status – whistleblowers are also increasingly subject to counterclaims and lawsuits for conduct related to blowing the whistle. Some, for instance, have been accused of libel and trade libel for providing information to the government. While several defenses to this claim may exist in the whistleblower context, the Supreme Court of Texas has clarified the difference between two: absolute and conditional privilege.

In 2007, the Department of Justice (“DOJ”) formally notified Shell that it was investigating the company’s potential violations of the Foreign Corrupt Practices Act (“FCPA”). The company agreed to cooperate with the government’s investigation, and identified several persons of interest, including an employee named Robert Writt. The company also conducted an internal investigation, and concluded that Writt was aware of the FCPA violations. The company provided its findings to DOJ. Shell terminated Writt, and Writt sued the company for wrongful termination and defamation in Texas court. While Writt’s actions were pending in Texas, Shell was formally charged with violating the FCPA’s anti-bribery, record-keeping, and internal-control provisions in the course of doing business in Nigeria. The company entered into a deferred prosecution agreement with the DOJ, and settled the allegations brought by the Securities and Exchange Commission.

In its defense to Writt’s defamation charge, Shell argued that its statements to the DOJ about Writt’s knowledge of and role in the FCPA violations were absolutely privileged – and therefore not actionable defamation – as they were made as part of a quasi-judicial proceeding. Writt, on the other hand, argued that the statements were only subject to conditional privilege, which may be waived where the statements do not concern the public interest or the public interest does not require the communication of the statement to a public officer. The Supreme Court of Texas agreed with Shell, noting that witnesses are “absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding or as part of a judicial proceeding.” Because Shell was a potential target of a government investigation, the information it provided to the government was absolutely privileged.

These privileges, as clarified by the court in the Writt case, have important implications for whistleblowers: as far as Texas law is concerned, individuals who report allegedly defamatory statements to the government in connection with a False Claims Act or SEC Whistleblower case enjoy conditional privilege with respect to those statements. Absent abuse of the privilege by making false statements with malice or knowledge of their falsity, for instance, these statements will be protected. In contrast, individuals that are the target of a government investigation – including whistleblowers in some cases – have an absolute privilege from defamation claims even when the alleged defamatory statements were made in connection with, but in advance of, a potential judicial proceeding. This means they enjoy immunity from defamation suits, even if the formal proceeding never takes place.

While whistleblowers should remain vigilant and their counsel should continue to ensure that their clients’ conduct comports with the law, they should also know that when they step forward to blow the whistle in the public interest, tried and true defenses are available for the counterclaims that defendants bring against them.

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Caitlyn Silhan is an attorney at Waters & Kraus, LLP in the Dallas office. She represents whistleblowers in False Claims Act and SEC whistleblower actions, focusing her practice on federal and international law.

Thursday, July 9, 2015

Why Do Qui Tam Cases Take So Long To Resolve?

July 9, 2015 — If you have been speaking to various qui tam attorneys to determine which attorney you would like to represent you, then you may have heard them quote a rather long average of time for case resolution. This article will address the various reasons why qui tam cases on average take longer to resolve than most lawsuits.

The government needs time to investigate


To commence a lawsuit, your attorney will first provide a disclosure statement prior to filing the complaint under seal in federal court. These two steps are vital and essential to all qui tam cases. Most statutes then permit an initial 60 days for the case to remain under seal while the government attorneys investigate. If your case has merit, then 60 days is not enough time for the government to complete its investigation. It is very common for the government to seek an additional 6 month extension of the seal, and then additional seal extensions typically in 6 month increments until it has determined whether it will intervene.


Depending on the jurisdiction where the case is filed and the judge to whom the case is filed, the case may remain under seal for years while the government conducts its investigation. On average, Assistant U.S. Attorneys have estimated that they have between 30-50 cases that they are investigating contemporaneously to litigating at least one or two cases. This is a very heavy case load. This is one of the reasons why qui tam cases take a long time to resolve.

Qui Tam cases get a slow start to litigation


After the government makes a decision about intervention, the case may branch off into several various outcomes. If the government's investigation resulted in findings that your case is meritorious, the government may attempt to settle the case or litigate the case if it is unable to come to a settlement agreement with the defendant. The government may also elect to decline intervention at the time citing that it does not have the resources to litigate the case. Without government intervention, you and your attorneys can evaluate whether the case is one that ought to be litigated, in which case, it may take even longer to resolve the case as most defendants will at least attempt to get the Court to dismiss the case when the government has not intervened. Because all qui tam cases are filed under seal, they get a slow start to litigation. Consequently, qui tam cases take 5-7 years, on average to resolve. It is important to keep this in mind when filing a qui tam case.

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Louisa Kirakosian is an attorney at Waters, Kraus & Paul, in the firm’s Los Angeles office. She represents whistleblowers who have uncovered fraud against the government in the pharmaceutical, Medicare/Medicaid, and government contracting industries.

Monday, June 29, 2015

Guardrail Manufacturer to Pay $663 Million in Judgment and Penalties in False Claims Act Case

June 29, 2015 — Trinity Industries, a Texas based company, manufactures guardrails for installation on roadways across the United States. Pursuant to a contract with the National Highway Traffic Safety Administration (“NHTSA”), Trinity was commissioned to design, manufacture, and install guardrails on interstate networks throughout several states.

Trinity Unilaterally Alters the Contract and Provides the Government a Substandard Product


In 2012, Josh Harman brought a lawsuit on behalf of the United States against the company under the False Claims Act (“FCA”). Harman is a former competitor of Trinity’s, who settled claims with the company that he infringed on its patents. In the FCA suit, Harman alleged that Trinity submitted plans for its guardrail system, the ET-Plus, to the NHTSA, where they were approved for manufacture and installation. After Trinity’s plans were approved, the company determined it could save millions of dollars by “shaving off” a small part of the guardrail. Trinity never submitted these new plans to NHTSA for a safety evaluation and decided unilaterally to install the altered version on its own. When a contractor sells or provides the government with a product that is different from what is promised, it becomes a breach of contract. Unfortunately, the redesigned guardrail systems appear to be less capable of absorbing an impact and actually tend to penetrate the vehicle, resulting in severe injuries and, in some circumstances, death of the driver or passengers.

In October 2014, a jury found the company liable for defrauding the government and awarded $175 million in damages, which was then trebled as allowed under the False Claims Act, to total $525 million. This month, a judge ordered Trinity to pay additional civil penalties of $138 million, equaling $8,250 for each 16,771 false certifications made by Trinity to the government to obtain payment for the defective guardrails. An additional $19 million in lawyers’ fees and expenses was awarded to Mr. Harman’s legal team. Judge Gilstrap of the United States District Court wrote that the plaintiffs had “introduced substantial evidence [that Trinity] made the decision to modify the ET-Plus, conceal such modifications, and falsely certify that the ET-Plus units had been accepted” by the government.

Mr. Harman was awarded 30% of the award, or about $199 million. This share was awarded because, as the judge wrote, “the U.S. government opted not to participate in the trial of this case and left the full burden” on Mr. Harman. In a phone interview, Mr. Harman stated that his goal in this case was not to make money, but for Trinity’s ET-Plus system to be recalled. In this interview, he stated “people are dying.”

After the jury verdict last year, dozens of states banned the ET-Plus guardrail system, and Trinity temporarily halted sales of the guardrails. In addition, at least 14 lawsuits have been filed blaming the guardrails for causing injuries in crashes and five deaths.

Contact Waters & Kraus to Report Misconduct by a Government Contractor


While Waters & Kraus is not handling this particular False Claims Act case, we are representing whistleblowers in similar lawsuits. If you have comparable claims against a different government contractor, contact us by email, or call our qui tam attorneys at 800-226-9880 to learn more about our practice and how we can work together to notify the government about fraudulent abuses by government contractors. Anne Izzo and Paul Lawrence, two of the firm’s qui tam attorneys, protect tipsters throughout the whistleblower lawsuit process.

Monday, June 22, 2015

Hospice Fraud

June 22, 2015 — Hospices provide important end-of-life palliative care and support services to patients and their families. Most hospice patients are covered by Medicare, which covers hospice for beneficiaries with six months or fewer to live. Medicare beneficiaries who elect to receive hospice care agree to forgo curative, life-prolonging treatment, deciding instead to receive comfort care.

Modern hospice care came to North America in 1971, and Medicare has covered this kind of end-of-life palliative care since 1983. Initially, most hospices in the United States were grass-roots, not-for-profit entities; now, however, large for-profit companies own a huge share of the hospice industry.

Unfortunately for hospice patients, their families, and tax payers, in some cases these companies put profits over the care and comfort of their patients. Indeed, since 2006, the U.S. government has pursued more than a dozen large hospice companies for committing fraud, accusing them of billing for services that they did not actually provide to their patients and admitting patients who were not terminally ill.

More than Money at Risk


Both kinds of fraud result in the hospice company making money for something it shouldn’t be paid for, but their implications for hospice beneficiaries are even more troubling. In some cases, the evidence shows that hospices are not providing the care that their terminally-ill patients need and deserve. In other cases, patients who are not actually terminally ill are signed up for hospice – that means that the patients and their families are told that they have 6 months or fewer to live, even when that isn't the case, and that they have agreed to give up life-prolonging or curative treatment.

Hospice is undoubtedly an important and noble benefit, and most hospice providers give much needed comfort and support to patients at the end of their lives. When bad actors commit fraud, waste, or abuse, though, it is at the expense of some of the most vulnerable among us.