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.

Monday, June 15, 2015

Reporting Fraud by Filing a Qui Tam Case

June 15, 2015 — To commence a qui tam lawsuit, a whistleblower is required to serve a copy of the disclosure statement and file a complaint under seal in court. What does this mean and how does this affect the whistleblower’s decision whether to move forward?

When a whistleblower decides to come forward and file a complaint, there are several important steps to note about a qui tam case that are different than your run of the mill lawsuit.

Provide Disclosure Statement

First, the whistleblower must provide a disclosure statement to the government. This document is prepared by the whistleblower’s attorney, and it has all of the relevant facts and evidence needed for the government to conduct an investigation. It sets forth the wrongful conduct of the defendant(s), whether there are any documents to prove the wrongful conduct, and whether there are any witnesses to whom the government may speak to verify the facts alleged. This document is not filed with the court. Instead, it is sent to United States Attorney General, the local United States Attorney where the case is filed, and the respective State Attorney’s office, if need be.

File Complaint Under Seal

Generally a week or two after the disclosure statement is sent, the complaint is filed in court. This triggers another important step. All qui tam statutes require that the whistleblower file her complaint under seal. This is very important as it requires the whistleblower to refrain from speaking about the case to anyone while it allows for the government to conduct an investigation. The case may remain under seal for years while the government investigates. During the investigation, depending on the type of fraud alleged, the government may interview the whistleblower, who is called a relator, may request documents from government agencies that support the relator’s allegations, and may issue a request for documents from the defendant without revealing the relator’s identity. During this time period, it is imperative that the relator not break the seal by speaking about or announcing the fact that she has filed a qui tam case.

Whistleblowers Must Act Quickly

Lastly, if a whistleblower is interested in filing a qui tam case, she must act quickly to retain an attorney to execute the two requirements described above: serving a disclosure statement and filing a complaint. This is because, unique to qui tam cases, only the “first to file” whistleblower is entitled to a reward from the government. “First to file” refers to the first person to file the complaint (determined by the date that the complaint is filed) who wins the race to the courthouse. Because all cases are filed under seal, the general public, including qui tam attorneys, are unable to check whether any other whistleblowers have come forward during the seal period to report the same conduct against the same defendant(s). Only the government attorneys are able to determine when multiple whistleblowers have come forward. By the time they inform the whistleblower or her attorneys, it may be too late to make a difference. Therefore, if one is interested in filing a qui tam case {link to types of litigation}, one must do so quickly in order to be considered the first to file.

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.

Thursday, June 4, 2015

Supreme Court Rules on Two Important FCA Issues

Split Decision Clarifies Applicability Of The First-To-File Bar and Wartime Tolling of FCA Statute of Limitations

June 4, 2015 — On May 26, 2015, the United States Supreme Court issued a unanimous ruling in the matter of Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter. The opinion resolves two significant issues under the False Claims Act (FCA), which imposes liability on persons or entities who knowingly present false or fraudulent claims to the Government for payment or approval. The FCA, which covers many different types of fraud, may be enforced through litigation brought by the Government or through a civil qui tam action brought by private parties, known as relators, on the Government’s behalf. The FCA is commonly used by whistleblowers in actions against companies who have committed fraud against the United States.

The Carter Ruling

In Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, a relator filed a qui tam action against a defense contractor, Kellogg Brown & Root Services (“KBR”), alleging that KBR had fraudulently billed the government for services performed during the armed conflict in Iraq. After several dismissals, new case filings, and an appeal, the matter went before the Supreme Court wherein two important issues were examined. The first issue concerned whether the FCA’s “first-to-file” bar, which precludes a qui tam suit “based on facts underlying [a] pending action,” precludes new actions while related claims are still active, or whether it may bar new actions in perpetuity. The second issue concerned the FCA’s statute of limitations provisions, under which a qui tam action must be brought within six years of a violation or within three years of the date by which the United States should have known about the violation, but no more than ten years after the date of the violation. The Court examined whether the Wartime Suspension of Limitations Act (WSLA), which suspends the statute of limitations for offenses committed against the government during wartime, applies only to criminal cases or if it also applies to civil qui tam claims under the FCA.

The Supreme Court ruled that the FCA’s “first-to-file” bar only blocks litigation of new claims while related claims are still active. The bar does not obstruct qui tam suits filed after a previously filed action is no longer pending. The Court concluded that use of the word “pending” in the FCA “first-to-file” rule must be interpreted to comply with the common meanings of the word - “remaining undecided” or “awaiting decision.” The Court rejected KBR’s argument that the word “pending” in the “first-to-file” rule was “short-hand for the first filed action.” The Court reasoned that such an interpretation would preclude suits dismissed for reasons other than the merits of the case, preventing potentially successful suits that might result in a large recovery for the Government, a result that Congress likely did not intend.

As to the statute of limitations issue, the Court ruled that the FCA’s statute of limitations could not be extended in civil qui tam lawsuits by the WLSA. The Court reasoned that, historically, the text and structure of the WLSA show that it applies only to criminal offenses and that any ambiguity in its current language must be resolved in favor of a narrow definition that comports with such history. Accordingly, the WLSA may  not be applied to civil claims under the False Claims Act.

Carter’s Implications on Future False Claims Act Lawsuits

While the WLSA portion of the Court’s ruling limits the filing of qui tam actions in a number of cases, the decision concerning the “first-to-file” bar has more far-reaching implication. Prior to Carter, in many jurisdictions, defendants accused of fraud in FCA cases could avoid liability under the “first-to-file” bar by simply illustrating that a previous case, based on related facts, had previously been filed – even if the claims in the prior action had been dismissed without reaching a decision on the merits, crippling countless credible qui tam cases. Under the new rule announced in Carter, the Government and taxpayers no longer face this unfair barrier to justice.

While Waters & Kraus is not handling this particular False Claims Act case, we are representing whistleblowers in similar lawsuits. If you have comparable claims concerning defense and homeland security fraud, 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 notify the government about fraud against it. Jonathan R. Davis and Louisa O. Kirakosian, qui tam lawyers in Waters & Kraus’ Los Angeles office, protect tipsters throughout the whistleblower lawsuit process.

Wednesday, June 3, 2015

Foreign Bribery and the SEC Whistleblower Program

June 1, 2015 — For several years now, the United States Securities and Exchange Commission (“SEC”) has stated that enforcing the United States Foreign Corrupt Practice Act (“FCPA”) is a high priority. Since the enactment of the Dodd-frank Wall Street Reform and Consumer Protection Act and the creation of the SEC’s Whistleblower Program, private individuals may provide inside information to the SEC related to foreign bribery or related recordkeeping and internal controls violations and, in cases where the SEC investigates and recovers $1 million or more as a result, may be entitled to an award.


The FCPA was enacted in 1977, and prohibits issuers , as well as their agents, employees, officers, or directors, from bribing or offering to bribe foreign officials, political parties, or certain third parties in order to gain or retain a business advantage. The FCPA also  requires that issuers keep accurate books and records and maintain internal controls; indeed, several FCPA enforcement actions, including this enforcement action against Allianz SE, concerned these accounting provisions. Because both U.S.-based and foreign companies may be subject to the FCPA if they are required to file periodic reports with the SEC (that is, if they are “issuers” within the meaning of the Act), the SEC investigates and enforces FCPA violations across the world.

The FCPA Whistleblower

Now that the SEC is able to receive and investigate whistleblower tips, complaints, and referrals through its Office of the Whistleblower, private individuals – including those outside of the U.S. – have a framework for and incentive to provide inside information to the SEC about FCPA violations. As of 2014, the SEC has received 436 such tips from whistleblowers concerning FCPA violations since the program began in 2011.

Importantly, while other U.S. whistleblower programs entitle the whistleblower to litigate the matter in the event that the government declines to do so, the SEC program merely provides a procedure for whistleblowers to communicate to, and claim awards from the SEC. The whistleblower is expected to provide as much assistance, information, and insight into the allegations as possible, and when the SEC recovers from the issuer as a result of the whistleblower’s tip, complaint, or referral, he or she may be entitled to an award. Furthermore, SEC whistleblowers are entitled to protection from retaliation, though this protection currently only applies to U.S. whistleblowers, not to those living abroad.

The SEC authorizes whistleblowers to remain anonymous throughout the investigation into the FCPA allegations, and must keep the identity of the whistleblower confidential in most circumstances. Whistleblowers who wish to remain anonymous must be represented by counsel, and must disclose their identity to the SEC prior to receiving an award.

Waters & Kraus Represents Whistleblowers

Our lawyers have been representing FCPA whistleblowers before the SEC since the inception of the agency's Whistleblower Program. If you need help reporting potential foreign bribery violations, send us an email or call us at 800.226.9880 to learn more about our practice and how we can assist.

Tuesday, June 2, 2015

Evidence and Proof in Qui Tam Cases

May 15, 2015 — When we discuss cases with individuals who are seeking counsel, they often have witnessed purposeful and illegal billing to a government agency, but often the evidence is unavailable to the individual, or the individual has few documents and proof compared to the documentation in the fraudster’s possession. This article aims to respond to a common question raised by potential clients: What if I do not have all of the proof in my possession? Can I still pursue a qui tam lawsuit? The short answer is likely yes.

By way of background, it is important to note that although there are many types of whistleblowers as that term is used in the media, in the qui tam context, it refers to an individual prepared to fight for justice within specific types of litigation. Generally, we represent individuals that have relevant and detailed information about a scheme or tactics used to purposefully and fraudulently engage in illegal conduct against the government. Among the more commonly recognized frauds include the following examples:

  • Billing for products or services not provided to the government
  • Billing for defective, sub-par, or mislabeled products or services, or otherwise different from the products or services agreed upon in the government contract
  • Billing for over-payments and failing to report over-payments by the government
  • Acquiring government funds using fraudulent means
  • Using kickbacks to promote medical drugs or devices to health care professionals in violation of the Anti-Kickback Statute
  • Selling or marketing off-label drugs (meaning outside of FDA approved uses)

Again, this list merely provides examples since those who intend to defraud the government are often creative with the means used to obtain undue government funds.

With that said, these examples demonstrate the variety of evidence and proof that a whistleblower may use to bring a case: documents that help prove payments by the government that amount to false claims. The actual evidence and proof necessary is dependent upon the industry and the type of fraud that the whistleblower intends to reveal. These documents can be voluminous, but if some representative documents are presented with her case, this helps pique the government’s interest and assists in understanding the fraudulent scheme. Understandably, many companies have policies that prevent employees from taking home documents, and in the age of electronic data, many companies no longer have paper files. But generally, if the whistleblower recalls where the data, documents, and evidence are stored, to the extent that her recollection is accurate, a detailed description of where documents or the data are located may be sufficient. The bottom line is that if the whistleblower has witnessed illegal conduct and she is able to amply describe the conduct in detail, even without proof in her possession, she may still pursue a qui tam lawsuit.

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 1, 2015

DaVita to Pay $495 Million to Settle Whistleblower Case

May 12, 2015 — On Monday, March 4, 2015, Davita HealthCare Partners announced it will pay up to $495 million to settle a whistleblower lawsuit alleging the Denver company defrauded Medicare and other federal healthcare programs of millions of dollars. This is the third whistleblower suit the company has settled since 2012, with payouts totaling almost $1 billion.

The suit was based on claims by two former DaVita employees, Dr. Alon Vainer and Daniel Barbir, that the company manipulated drug doses administered through its clinics so that the government’s Medicaid, Medicare, CHAMPUS, and CHAMPUSVA programs paid for more pharmaceuticals than were actually dispensed. Dr. Vainer, a board-certified nephrologist, was a medical director for several DaVita clinics in Georgia. Mr. Barbir, a registered nurse, worked as a clinic director at Davita’s Cumming, Georgia clinic.

Largest False Claims Act Settlement Without Government Intervention

This is the largest settlement in history for a False Claims Act case in which the Government has declined to intervene, meaning the Department of Justice has decided not to join the lawsuit and has suspended its involvement in the matter. Marlan Wilbanks, attorney for Vainer and Barbir, said, “In previous decades, if the government did not elector to prosecute a [False Claims Act] case, the whistleblower and their attorney would typically either accept a nominal amount of money or dismiss the case altogether. This case illustrates the true intent of the False Claims Act—to maximize the efficiency of the public-private partnership that Congress envisioned when they passed the act. We invested millions of dollars of our own money and many years of time without any guarantee of success, and we prevailed.”

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 medical provider, 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 notify the government about fraudulent abuses of government-funded programs.

Anne Izzo is an attorney at Waters, Kraus & Paul in the firm’s Baltimore office. Anne focuses her practice on qui tam whistleblower matters, asbestos litigation, premises liability, product liability, and toxic tort cases.