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.

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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.

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.

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

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.

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.

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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.

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.

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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. 

Adventist Health Settles Whistleblower Lawsuit for $5.4 Million

April 8, 2015 — The False Claims Act empowers health care insiders to file a whistleblower lawsuit on the government’s behalf. Courageous whistleblowers help to protect the integrity of our federal healthcare programs, like Medicare or Medicaid, for those who need them. Under the Act, the United States may choose to intervene in the lawsuit and take primary control for litigating it. The statute provides for the government’s recovery of three times the actual damages plus civil penalties. For their willingness to notify the government, tipsters — also referred to as “relators” — are rewarded with a portion of the government’s recovery.

Qui Tam Whistleblower Will Receive More than $1 Million for Notifying the Government of Alleged False Claims Act Violations

Adventist Health System Sunbelt Healthcare Corporation (Adventist) has consented to a $5,412,502 settlement in a False Claims Act lawsuit filed in Tampa, Florida. Dr. Michael Montejo, a former radiation oncologist with Florida Oncology Network P.A., alleged in a qui tam lawsuit that Adventist treated patients with radiation oncology services that were not directly supervised by a radiation oncologist. Then, in violation of Medicare and TRICARE rules, Adventist allegedly submitted claims for reimbursement to those federal healthcare programs for treatment of program beneficiaries. For his willingness to come forward and notify the government, Dr. Montejo will receive a $1,082,500 share of the government’s recovery. 

Adventist runs a large network of hospitals in the Midwest and South, including Florida where the company does business as Florida Hospital. Between 2010 and 2013, Adventist allegedly provided radiation oncology services, including radiation treatment delivery and devices, radiation simulation, dosimetry and intensity-modulated radiation therapy, to a large number of beneficiaries of the Medicare and TRICARE federal healthcare programs. Those programs require that beneficiaries’ radiation oncology services must be supervised directly by a radiation oncologist or a similarly qualified health care provider. But several Adventist locations, including those in Orlando, Daytona Beach and Winter Park, reportedly failed to follow the federal healthcare program rules. Adventist nevertheless filed claims for reimbursement with the government, in violation of the federal False Claims Act. 

Contact Us to File a False Claims Act Lawsuit Targeting Abuse by Medical Providers

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 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 of government-funded programs. Michael Armitage and Louisa Kirakosian, two of the firm’s qui tam attorneys in the California office, protect tipsters throughout the whistleblower lawsuit process.

Smile Magic Dental Clinics Settle Texas Medicaid Fraud Allegations for $4.5 Million

Waters & Kraus, LLP is pleased to announce a qui tam lawsuit it filed has resulted in the largest recovery to date in a Texas dental Medicaid fraud case.

DALLAS – March 19, 2015 (amended) – Four dental clinics of the Texas Smile Magic chain have agreed to settle Medicaid fraud charges for a total of $4.5 million. The four clinics that will pay the record-setting settlement include: Smile Magic of Denton, PLLC; Smile Magic of Lewisville, PLLC; Smile Magic of Garland, PLLC; and Smile Magic of El Paso, PLLC.

Amy Smith, represented by Waters & Kraus, LLP, blew the whistle on Smile Magic. To protect Texas children and taxpayers, Ms. Smith first reported to Texas officials that Smile Magic was allegedly engaging in several acts of misconduct that violated the rules of the Texas Medicaid program and later filed a qui tam lawsuit under the Texas Medicaid Fraud Prevention Act (TMFPA).

It is alleged that Smile Magic defrauded the Texas Medicaid program by performing unnecessary or excessive dental services on young children, billed Medicaid for dental services never-performed, targeted young Medicaid beneficiaries through improper financial incentives, and used paid recruiters to round up poor kids to be used to commit Medicaid fraud. At times, the clinics allegedly solicited young Texas children by targeting their parents in grocery store parking lots, bus stops and other locations in poor neighborhoods, paid money to parents to induce them to have their kids treated at these Smile Magic clinics, and orchestrated teams of solicitors to round up Texas kids for all of these purposes. It is further alleged that, once these young, mostly poor kids were in the dentist’s chair, Smile Magic’s goal was to maximize the amount it could bill Texas Medicaid, regardless of whether the services were medically necessary or, in some cases, even provided to the patient.

Based upon the allegations by Ms. Smith and another whistleblower, the Texas Health and Human Services Office of Inspector General (OIG) and the Civil Medicaid Fraud Division of the Texas Attorney General (OAG) conducted their own investigation of Smile Magic and determined that Smile Magic submitted improper claims to the Texas Medicaid program, leading OIG to initiate its own administrative enforcement action. The OAG intervened in Ms. Smith’s qui tam lawsuit.

“We are pleased to work with the Texas OIG and OAG to obtain this significant recovery for Texas taxpayers,” said Dan Hargrove of Waters & Kraus LLP, who represents Ms. Smith. “We applaud the tenacity and professionalism of the Texas investigators and attorneys. They are protecting Texas kids and Texas taxpayers. Dental clinics that engage in health care fraud waste our scarce health care dollars. Texas taxpayers should have confidence that their hard-earned tax dollars are being put to good use – to help the neediest kids in our state – not to line the pockets of fraudsters. Texas children and their parents should have confidence they won’t be used as tools by others who seek to rip off Medicaid. This case is a good first step towards protecting our children and cleaning up the Medicaid program. But much remains to be done.”

This settlement resolves the Medicaid fraud allegations in two lawsuits filed in Travis County, Texas, as well as the administrative action brought against Smile Magic by the OIG. The TMFPA allows private citizens to sue on the government’s behalf when health care providers commit Medicaid fraud. The qui tam provisions of the TMFPA reward whistleblowers, who often act in fear of losing their jobs, with a share of any recovery.

The Smile Magic dental clinics dispute the allegations against them and deny any wrongdoing.


About Waters & Kraus 

Waters & Kraus is a national plaintiffs’ law firm devoted to representing whistleblowers in False Claims Act lawsuits and other qui tam matters involving health care fraud, government contractor fraud, tax fraud, securities law violations and foreign bribery allegations under the Foreign Corrupt Practices Act (FCPA). In addition, the firm has won record-setting verdicts, negotiated monumental settlements, and established ground-breaking new law in cases involving toxic exposure and defective products. Based in Dallas, Texas, with offices in California and Maryland, Waters & Kraus has participated in the representation of families from all fifty states and many foreign countries, as well as foreign governments. Learn more about our qui tam whistleblower practice at www.myquitamlawsuit.com.