Can a Relator Amend or Supplement Her Complaint

December 29, 2015 – Filing a complaint expeditiously for a whistleblower and her lawyer is a top priority for experienced qui tam attorneys.  As we previously discussed in the article titled, Reporting Fraud by Filing a Qui Tam Case, timeliness is of the essence to meet the first to file rule. And if the whistleblower’s case has jurisdictional defects, it has to be dismissed and completely filed anew in the proper court. This process puts the whistleblower at risk of losing claims to her case. However, recent events have coalesced to dissolve the jurisdictional hurdle to a relator's action.

Precedent Setting Opinion Clears the Way to Cure Jurisdictional Defects

The Dec. 16, 2015 opinion by Judge Bruce Selya of the Court of Appeals for the First Circuit of Rhode Island opens the door for a relator to amend and supplement her existing complaint. Judge Selya relied on several earlier rulings, including Federal Rule of Civil Procedure 15(d), the opinion in ConnectU vs. Zuckerberg, and the Supreme Court's May 26, 2015 ruling in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter.

Under Fed. R. Civ. Pr. 15(d), Judge Selya opined that a relator can supplement her complaint to remedy jurisdictional defects, instead of being required to file an entirely new case. The judge explained that "the Rule helps courts and litigants avoid pointless formality." Additionally, "supplementation of pleadings is encouraged 'when doing so will promote the economic and speedy disposition of the entire controversy between the parties.'" 

Judge Selya, also relied on the ruling in the ConnectU vs. Zuckerberg case, which holds that jurisdictional defects in an original complaint may be solved by amending the complaint, except when jurisdiction is based on diversity. And then the judge referenced the Supreme Court's decision in U.S. ex rel. Carter, that more clearly defines the word "pending," and which states that only pending qui tam cases may bar later qui tam cases. By combing the sum of theses previous rulings, a whistleblower is able to maintain her claim and overcome the first to file bar. 

Why is this Ruling Important?

Judge Selya's opinion is important because, a whistleblower who must file an entirely new case in such a situation will often lose her claims due to the statute of limitations expiring, protests from other relators competing for first-to-file, and public disclosure challenges. However, this decision will not only save time in the courts, it will help the whistleblower save valuable resources while allowing her to continue to hold onto her claims. Now that a whistleblower has the ability to amend or supplement her existing complaint, she and her attorney can focus more energy on the facts of her case and routing out fraud.

Waters & Kraus Can Help You Report False Claims Fraud

At Waters & Kraus, LLP, our lawyers are well versed in the application of the False Claims Act. If you are aware of a company or individual engaging in unlawful conduct to purposefully increase the claims paid for with public funds, there are remedies recognized by many states as well as the federal government. Please contact us.

False Claims Act Recoveries 2015 Year in Review

DOJ Reports $3.583 Billion in False Claims Act Recoveries for 2015

December 11, 2015 – The results are in. The U.S. Department of Justice (DOJ) has released its statistics on the False Claims Act (FCA) recoveries for fiscal year 2015 in a recent announcement. Though total recoveries for qui tam cases are down from 2014's record high, 2015 stands out as a winning year for whistleblowers in qui tam cases in which the government has declined to intervene.  Total recoveries remain over $3.5 billion for the fourth year in a row.

The False Claims Act empowers whistleblowers who uncover fraudulent practices in public programs to file a lawsuit on the government’s behalf. Whistleblowers, also referred to as “relators,” are rewarded with a portion of the government’s recovery, and may also recover any damages resulting from retaliation against them. As the statistics in the 2015 report show, the False Claims Act continues to be the most effective tool used to uncover and prosecute fraud against the government.

Of note, in 2015 the total dollar value of whistleblower awards for cases in which the government declined to intervene has surpassed the total whistleblower awards in cases where the government has taken over litigation. This is a first time event, and is evidence that whistleblowers and their attorneys are both willing and able to successfully litigate and resolve False Claims Act cases even where the government steps aside.

Some of the other highlights extrapolated from the Civil Division's Fraud Statistics report include: 

• 632: Fewest FCA cases filed since 2010
  
• $1.9 billion: Healthcare fraud cases continued to lead FCA recoveries in 2015
  
• $1.1 billion: Government contracts recoveries also remained high
  
• Relator’s share awards have increased in declined cases
  
• Best year ever for relator recoveries in declined qui tam cases, and first year to exceeded relator recoveries in cases where the government intervened
  
• More recoveries obtained from declined qui tam cases than all previous years combined (2015: $1.149 billion; 1987-2014: $1.006 billion)
  
• Total recoveries down 38% from 2014, but still remain over $3.5 billion for the fourth consecutive year

Contact Waters & Kraus to Report False Claims Act Violations

At Waters & Kraus, LLP, our lawyers are well versed in the application of the False Claims Act. If you are aware of a company or individual engaging in unlawful conduct to purposefully increase the claims paid for with public funds, there are remedies recognized by the government. Please contact us to report violators defrauding the government. 

The False Claims Act Takes Over Canada? Maybe

December 3, 2015 – The United States’ neighbor to the north, Canada, has commenced steps to adopt a law similar to the False Claims Act to protect government contracts and promulgate a culture of protections for those individuals willing to come forward and report fraud. A commission comprised of individuals from the Quebec government recommends reform against companies and individuals who commit fraud and protection for whistleblowers who come forward. The commission was charged with investigating the bidding and awarding of government contracts in the construction sector, and found that organized crime had infiltrated the industry. In an almost 2,000 page report, the commission recommended:

• Creation of an independent authority to oversee public contracts.
• Better protection for whistleblowers.
• Requirement that construction companies report acts of intimidation or violence.
• Increased penalties for construction companies that break the law, up to and including cancelling their license under Quebec's building authority, la Régie du bâtiment du Québec.
• Increased penalties for people who make use of so-called "strawman" schemes.

During the course of its investigation, the commission heard from over 291 witnesses, most of whom blew the whistle on illegal activities. By placing an emphasis on whistleblower protections, the commission intends to support and foster an environment where individuals can come forward when they see wrong doing. Of the many false claims act statutes enacted throughout the United States, the commission recommended enacting a law similar to New York State's False Claims Act. This is definitely a step forward in eliminating and reducing corruption. 

Contact Waters & Kraus to Report False Claims and Medicare Fraud

At Waters & Kraus, LLP, our lawyers are well versed in the application of the False Claims Act. If you are aware of a company or individual engaging in unlawful conduct to purposefully increase the claims paid for with public funds, there are remedies recognized by many states as well as the federal government. Please contact us. 

This article was contributed by Louisa Kirakosian, a qui tam attorney at Waters & Kraus, 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.

Newly Interpreted Whistleblower Protections Explained

November 23, 2015 – On August 4th, the Securities and Exchange Commission issued an interpretive rule to clarify that the Commission’s whistleblower rules protect whistleblowers who report potential securities violations within the company, as well as those who report directly to the Commission, from retaliation.

The SEC’s whistleblower rules incentivize whistleblowers to bring original information about securities law violations to the Commission, and offer eligible whistleblowers an award for doing so.  The rules also protect whistleblowers from employment retaliation based on the whistleblower’s “disclosures that are required or protected” under the laws, rules, or regulations subject to the SEC’s jurisdiction. On August 4th, the Commission clarified that for purposes of the retaliation protections under the whistleblower rules, the whistleblower need not report suspected securities law violations to the Commission; instead, they apply as follows:

1. To employees of publicly-traded companies that provide information to a federal regulatory or law enforcement agency, Congress, or to certain higher-ups within the company; or who assists in a proceeding concerning securities fraud; or                                                                               
2. To individuals who provide information to the Commission directly pursuant to the Commission’s whistleblower rules. 

In other words, whistleblowers must report directly to the Commission in order to be eligible for an award, and these whistleblowers are also protected from retaliation by the Commission’s whistleblower rules. Whistleblowers who only report violations internally are not eligible for an award based on the Commission’s recovery in an action related to the whistleblower’s complaint, but are nevertheless protected from retaliation by their publicly-traded employer.

Waters & Kraus has experience representing whistleblowers in SEC violations cases. If you know of fraudulent or deceptive practices in violation of the securities law taking place, contact us or call our qui tam attorneys at 800.226.9880 to learn more about our practice and how we can work together to report fraudulent abuses.

This article was contributed by Caitlyn Silhan one of the qui tam attorneys in the firm’s Dallas office.

Department of Justice to Pursue Medicare Fraud Case Against SavaSeniorCare

Federal Government Joins False Claims Act Lawsuits Alleging National Skilled Nursing Chain Routinely Over-Treated Patients to Increase Revenue from Medicare Payments

November 5, 2015 — The U.S. Department of Justice (DOJ) announced last week that it has intervened in three whistleblower lawsuits alleging SavaSeniorCare LLC and its related entities have violated the False Claims Act. SavaSeniorCare operates approximately 200 skilled nursing facilities (SNFs) in 23 states nationwide.

The government’s complaint alleges that SavaSeniorCare knowingly and routinely submitted false claims to Medicare for rehabilitation therapy services that were not medically reasonable and necessary. Specifically, the government alleges that the company:

• Pressured its skilled nursing facilities to meet unrealistic financial goals;
• Over-treated and provided unskilled services to Medicare patients;
• Targeted the highest Medicare reimbursement rates to significantly increase revenues;
• Delayed the discharge of patients who were medically ready to be released.

The three whistleblower cases against Sava are captioned:

• United States ex rel. Hayward v. SavaSeniorCare, LLC, et al., No. 3:11-0821 (M.D. Tenn.); 
• United States ex rel. Scott v. SavaSeniorCare Administrative Services, LLC, 3:15-0404 (M.D. Tenn.); and 
• United States ex rel. Kukoyi v. Sava Senior Care, L.L.C., et al., No. 3:15-1102 (M.D. Tenn.).

False Claims Act Lawsuits Target Medicare Fraud

Medicare fraud not only cheats the federal government, it risks the health and well-being of our most vulnerable citizens. Waters & Kraus represents whistleblowers in False Claims Act lawsuits nationwide who have uncovered fraud in the healthcare industry, and we are proud to represent Terrence Scott in the case referenced above. 

If you have information about Medicare fraud, contact us by email or call our qui tam attorneys at 800.226.9880 to learn more about our practice and find out how we can work together to notify the government about Medicare fraud.

United States Settles With South Carolina Hospital for $72.4 Million After $237 Million Judgment

October 22, 2015 — On October 4, 2005, whistleblower Dr. Michael K. Drakeford, an orthopedic surgeon, filed a False Claims Act lawsuit against Tuomey Healthcare System for violations of the Stark Laws on behalf of the United States. The government intervened and took over the action.

The case alleged that Tuomey violated the Stark Law, which prohibits health care providers from billing Medicare for certain services that have been referred by physicians with whom the hospital has an improper financial relationship. Although there are exceptions to the rule, the law requires that any payments that a hospital makes to a referring physician be at fair market value for the physician’s actual services, and not take into account the volume or value of the physician’s referrals to the hospital.

Hospital was Warned that Contracts for Kickbacks Risky 

The United States alleged that Tuomey unlawfully entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey. In exchange, the hospital paid the doctors compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. Billing for services improperly procured is considered Medicare Fraud. The United States even had evidence that Tuomey’s own attorneys warned Tuomey that the physician contracts were “risky” and raised “red flags.”

Why Did the Government Settle for Less?

The case went to trial on May 8, 2013, and the trial court entered a judgment under the False Claims Act in favor of the United States for $237 million. The Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015. So why did the United States settle for far less than the judgment?

It is difficult to ascertain this information from the public record, but it is likely due to the defendant’s ability to pay. By entering into a settlement agreement with Tuomey, the United States has further assurances that it will obtain payment from Tuomey for Tuomey’s wrongful conduct. According to the press release issued by the Department of Justice, Tuomey will be sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The whistleblower-relator, Dr. Drakeford, will receive approximately $18.1 million under the settlement for coming forward and reporting the fraud.

Contact Waters & Kraus to Report False Claims and Medicare Fraud

While Waters & Kraus is not handling this particular False Claims Act case, we are representing whistleblowers in similar Medicare fraud lawsuits. If you have comparable claims against a different medical facility, contact us by email, or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government about illegal kickbacks and Medicare Fraud.

This article was contributed by Louisa Kirakosian one of the qui tam attorneys in the firm’s Los Angeles office.

Florida Hospital Pays $69.5 Million to Settle False Claims Act Case

October 15, 2015 — North Broward Hospital District (“Broward Health”), a taxpayer financed system of hospitals and health facilities, agreed to pay $69.5 million to settle federal charges that it made illegal payments to physicians using a secret compensation system that rewarded doctors for patient referrals and penalized them for accepting low income patients. 

The False Claims Act case was filed by Dr. Michael Reilly, a Fort Lauderdale orthopedic surgeon, who was once approached by Broward Health about becoming a staff physician, which he turned down. In his whistleblower lawsuit, he said the hospital district maintained a secret compensation system for cardiologists, oncologists, and orthopedic surgeons, who collected salaries of $1 million or more. This system rewarded physicians for referrals to hospital services, such as physical therapy, and penalized doctors for taking on low-paying charity cases. Reilly claimed that tying compensation to referrals could lead to raised medical costs by generating unnecessary tests and doctor visits and could compromise patient care. 

"Broward Health's scheme to overcompensate physicians in exchange for referrals over the last eight years has been a deliberate strategic plan to boost hospital admissions and outpatient visits for all paying patients, including patients with Medicare and Medicaid coverage," the lawsuit claims. "Broward Health's financial strategists have personally profited from bonus payments based in part on hospital revenues." 

 

Healthcare Fraud Leads to Higher Healthcare Costs for All

Fraudulent schemes run by hospitals, such as the one discussed above, have long lasting consequences for everyday Americans. Specifically, the diversion of funds due to fraud increases the costs of other legitimate medical services and may foster mechanisms designed to recoup these losses. These mechanisms may result in reduced benefit coverage, changes in eligibility for federal programs, higher premiums for individuals and/or employers, and higher copays. Additionally, physicians performing unnecessary procedures to increase reimbursement compromises patient safety. Healthcare fraud also tarnishes the reputation of the medical community and raises concerns about the ethics governing the conduct of all physicians, not just the bad ones.  Thus, healthcare fraud is not a victimless crime and needs to be stopped.

Contact Waters & Kraus to Report Similar Fraud

While Waters & Kraus is not handling this particular qui tam case, we are well versed in the False Claims Act and have handled similar complex healthcare fraud cases. If you have comparable claims against a different healthcare provider we can help you report it. 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 of fraudulent abuses.

This article was contributed by Anne Izzo, one of the firm’s whistleblower attorneys.

Drug Manufacturer Coupons as Kickbacks to Medicare Beneficiaries

October 8, 2015 — On September 1, 2015, the Department of Justice announced that Kmart resolved a whistleblower’s allegations that it violated the False Claims Act by offering improper inducements to Medicare beneficiaries. The whistleblower in the case, Joshua Leighr, was a pharmacist who worked in various Springfield, MO-area Kmart pharmacies. While there, he witnessed various Kmart schemes intended to induce Medicare beneficiaries to fill prescriptions at Kmart pharmacies, including  using drug manufacturer coupons to reduce customers’ copays,  and giving gasoline discounts in exchange for filling prescriptions at Kmart pharmacies. According to his complaint, Mr. Leighr refused to engage in this conduct, and complained about it to his superiors; ultimately, when the company continued to offer these prohibited kickbacks to Medicare beneficiaries, he filed a qui tam case.

The inducements at issue in Mr. Leighr’s case are examples of remuneration that Medicare providers are prohibited from offering or paying to Medicare beneficiaries. Under a Federal law known as the Anti-Kickback Statute (the “AKS”), pharmacies and other providers may not knowingly and willfully offer or pay remuneration — including kickbacks, bribes, or rebates — to any person to induce that person to purchase or order a Medicare-covered item. In this case, Mr. Leighr alleged that Kmart intended the manufacturer coupons and gas discounts to induce and reward Medicare beneficiaries for filling their prescriptions at Kmart and for seeking expensive, name-brand drugs instead of cheaper, generic drugs. After investigating Mr. Leighr’s allegations, the government reached a settlement with the company.  

Other examples of remuneration prohibited by the AKS include 

• Gifts;
• Above or below-market rent or lease payments;
• Rebates;
• Furnishing supplies or services for free, or above or below the market rate;
• Credit arrangements that are below or above the market rate;
• Waivers of payments.  

Not all forms of remuneration fall within the ambit of the AKS: there are several “safe harbors” exempting certain common or low-risk arrangements from the statute.  As with other bases for liability under the False Claims Act, AKS allegations are complex, and their viability under the FCA depends on the specific circumstances of each case. When filing a False Claims Act lawsuit, it is important that you work with experienced qui tam counsel.

Contact Waters & Kraus to Report Kickbacks

While Waters & Kraus is not handling this particular qui tam case, we are well versed in the False Claims Act and the Anti-Kickback Statute. If you have comparable claims against a different pharmacy we can help you report it. Contact us by email or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government of fraudulent abuses.

This article was contributed by Caitlyn Silhan, one of the whistleblower attorneys in the firm's Dallas office.

What is a Relator Interview and What Can One Do to Prepare for it?

October 1, 2015 — Upon retaining a qui tam attorney and filing a case under seal, the Assistant opportunity to discuss the wrongful conduct. United States Attorney assigned to investigate the case may contact the qui tam attorney on the record to schedule an in person interview with the relator (also known as a whistleblower). This occurs in a majority of cases that hold merit. The relator interview is one of the first steps undertaken during the investigation. It is the
whistleblower's

Who attends?

Generally, the relator will be there along with the relator's attorney(s). In addition, there will be several individuals from government agencies involved in the investigation. This includes the assistant U.S. Attorney leading the investigation, and any of her colleagues, any attorneys from the state attorney general's office if the case involves state claims, any paralegals, federal agents, among others. It is not uncommon for the room to be filled.

Who does not attend?

At this stage of the investigation, the defendant is not yet aware of the case, and as such, there will not be anyone present affiliated with the company or individuals whom the relator whistleblower is alleging is responsible for the wrongful conduct.

How long is the interview?

There is no set time period within which the government must complete the interview. The span of time generally depends on the depth of the allegations. It is safe a good idea to dedicate the full day to the interview to be on the safe side.

What can a relator do to prepare for the interview?

Generally, it is wise to review the disclosure statement and exhibits along with the complaint filed in court. If there are additional documents that were not included in the disclosure statement, reviewing those documents may be helpful as well. There is also an expectation that the relator will be able to sufficiently and specifically provide details about the fraudulent scheme.

What can the relator expect?

Because this is not an adversarial setting, the relator can rest at ease to the extent that the government is on the same side as the relator. This does not mean that the government agents and attorneys are going to be friendly. It is always best to keep the dialogue and atmosphere formal.


This article was contributed by Louisa Kirakosian, a qui tam attorney at Waters & Kraus, 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.

10 Fun Facts About the False Claims Act

1. The False Claims Act (“Act”) is over 150 years old. The Act, originally known as the Lincoln Law, after its original proponent, President Abraham Lincoln, was implemented during the Civil War. The Act was a response to war profiteering by federal contractors who attempted to defraud the government by selling inadequate firearms and horses.
2. The Act has a “qui tam” provision. Qui Tam is Latin for “in the name of the king.” This part of the statute allows a private person, usually referred to as a relator, to file a suit on behalf of the United States against those who have filed false or fraudulent claims or caused such claims to be filed. This part of the Act provides for incentives for the relator, so that he or she can receive part of the proceeds of a victory on behalf of the government.
3. From 1986 to 2013, the False Claims Act has allowed the federal government to recover over $40 billion. Nearly half of all these recoveries were a result of False Claims Act lawsuits brought by whistleblowers or relators. Whistleblowers have been paid upwards of $2 billion in statutory rewards for filing False Claims Act cases.
4. Most of the recoveries under the Act have been a result of healthcare fraud cases. Healthcare fraud cases represent the largest industry for False Claims Act cases. For example, in 2009, healthcare fraud cases accounted for about $1.6 billion in recoveries under the Act, more than two-thirds of the $2.4 billion collected under the Act that year.
5. There have also been recoveries for areas outside of healthcare fraud, including fraud and abuse in government contracts for defense, energy, construction, housing, natural disaster recovery, Iraq War reconstruction, and other forms of government procurement.
6. The Act is a first-in-time, first-in-right statute. As stated in previous posts, the Act bar subsequent cases that are based on the same facts underlying a pre-existing action. This first to file rule was intended to encourage the prompt reporting of fraud.
7. False Claims Act cases cannot be based solely on publicly disclosed information. The Act is designed to encourage individuals to report fraud on the government. Therefore, the Act prohibits cases in which the relator seeks to rely only on information that is substantially the same as allegations in the public domain, unless the relator is an “original source” of the information. An “original source” is defined as someone who has information independent of and materially adds to the publicly disclosed information.
8. False Claims Act cases are filed under seal and can remain so for many years. These cases are filed in federal court under seal and are not initially served on the defendant. The purpose of filing the case under seal is to give the government an opportunity to investigate the allegations without the defendant’s knowledge. While the initial statutory period of time for the case to be under seal is 60 days, the government is allowed to ask the court to extend this period and often does so, especially in complex False Claims Act cases.
9. False Claims Act cases cannot be brought against states, but may be brought against local governments and municipalities. In 2000, the Supreme Court ruled that a state government or agency cannot be sued for fraud in administering federally-funded programs under the Act. However, in 2003, the Supreme Court ruled that local governments and municipalities are not so exempt under the Act.
10. Relators who were involved in the fraud may have their reward substantially reduced or totally eliminated. Under the Act, the court is authorized to reduce the reward of a relator who planned and initiated the wrongdoing.

To learn more about the False Claims Act and filing a whistleblower case, please contact Waters & Kraus at 800.226.9880. This article was contributed by Anne Izzo, one of the firm’s whistleblower attorneys. Anne represents whistleblowers who have uncovered fraud against the government in the pharmaceutical, Medicare/Medicaid, and government contracting industries.