Whistleblower Lawyer Blog

IRS whistleblowers and whistleblower attorneys take note: accounting firms participating in selling tax shelters were jolted by today's announcement of the indictment of four Ernst & Young partners for tax fraud conspiracy and other federal criminal charges relating to tax shelters.

The four accountants were alleged to have marketed tax shelter transactions based on fraudulent factual scenarios, through which wealthy taxpayers could eliminate or reduce the taxes paid to the IRS, according to the government's announcement. All four persons charged had worked in E&Y's group that developed tax shelters, initially named VIPER ("Value Ideas Produce Extraordinary Results"), and later SISG ("Strategic Income Solutions Group"), according to the government.

The indictment announced by the U.S. Attorney for the Southern District of New York named present or former E&Y tax partners in Texas, New York, and Louisiana. Three of the four reportedly were also lawyers. The indictments allege a scheme to defraud the IRS through fraudulent tax shelters from 1998 through 2004.

One defendant--a lawyer--was alleged to have instructed the accounting firm's employees to destroy documents when he knew of a pending IRS audit of the transaction, according to the announcement by the government. The government also alleged that eleven of the firm's used the tax shelter scheme to eliminate $3.7 million of their own tax liability.

"Where were the lawyers" was the refrain of a judge after the S&L collapse. Although defendants are presumed innocent until proven guilty, it appears the same question may be asked here.

We applaud the IRS Criminal Investigation Division for pursuing those who do not pay their fair share of taxes, leaving you and me to pay more.

I was excited to be invited to participate in today's signing of the new Georgia "State False Medicaid Claims Act," the newest state qui tam whistleblower law. The bill's sponsor, Rep. Edward Lindsey, asked this whistleblower lawyer blog author to join him and representatives of the Georgia Department of Community Health in the Governor's Office for the signing ceremony.

Having worked with legislators on this bill, I was very happy to celebrate the law's passage today:

Participating in the signing ceremony with Governor Sonny Perdue were (shown above from left to right) Carrie Downing, Director of Legislative and External Affairs of the Georgia Department of Community Health; Dr. Rhonda Medows, Commissioner of the Georgia Department of Community Health; Inspector General Doug Colburn; Governor Perdue; Rep. Edward Lindsey, sponsor of the State False Medicaid Claims Act; whistleblower lawyer blog author Michael A. Sullivan of Finch McCranie, LLP; and Philip Consuegra, Legislative Assistant to Rep. Lindsey.

With an excellent draft bill already prepared by the State Law Department headed by Attorney General Thurbert Baker and his Senior Assistant AGs Mary Beth Westmoreland and Charlie Richards, I had provided input to Rep. Lindsey on clarifying and improving the bill, before the Legislature considered it. Inspector General Doug Colburn and I then made the rounds through the three legislative committee hearings to explain how the False Claims Act works, and how the new State False Medicaid Claims Act would operate in Georgia.

The new whistleblower law protects the State's Medicaid funds by creating liability for "treble damages" (actual losses multiplied by three), and penalties of $5,500 to $11,000 for each false claim submitted to obtain payment by the State Medicaid Program. It also encourages private citizens who know of fraud in health care to file qui tam whistleblower cases, by permitting the whistleblower to share in up to 30% of the State's recovery of money.

Georgia has joined more than 15 other states that have enacted laws to protect tax dollars used in state programs. New York and Oklahoma likewise enacted their own False Claims Act this year. Congress has encouraged states to pass similar whistleblower laws with provisions that are at least as effective as the federal False Claims Act--the states that do so will receive an extra 10% of Medicaid fraud recoveries (which works out to more than 10% when you do the math, which I will not fo here, but can explain if you email me).

To explain the new law to Georgia attorneys, our firm has already scheduled what will be a great seminar at the State Bar of Georgia Headquarters in Atlanta on September 20, 2007. We are excited that joining us is the leader of Texas' already hugely successful effort to recover damages for Medicaid fraud, Pat O'Connell, the Chief of the Civil Medicaid Fraud Section of the Texas Office of Attorney General. We also have some other excellent speakers.

After today's signing of the new Georgia False Medicaid Claims Act, Rep. Lindsey convinced the Governor to join us for another photo. Left to right are yours truly, Governor Perdue, Rep. Lindsey's Assistant Philip Consuegra, and Rep. Edward Lindsey:

Georgia taxpayers will benefit by this smart new tool that the Legislature has created. It should help deter those who would consider cheating the State Medicaid system by classic fraudulent methods such as over-billing, upcoding, and billing for services not rendered.

There is no reason why Georgia cannot replicate Texas' successes in recovering large damages when, for example, drug companies overcharge or otherwise defraud the State. Many states have taken action against pharmaceutical companies over "off-label" marketing of drugs such as Zyprexa, to recover damages for their Medicaid programs.

I posted earlier today on this whistle blower lawyer blog about the comments of the Director of the new IRS Whistleblower Office, Stephen Whitlock, on how the IRS Whistleblower program is off to a good start, with credible claims and supporting evidence having been submitted by whistleblowers and their attorneys.

Since then, my partner commented that he believes one of our larger cases was referred to in the IRS Director's comments about "knowledgeable insiders." We also neglected to mention our IRS Whistleblower claims for our clients in New York and the Northeast.

So much for blogging on days when I am out with a bug. The new IRS Whistleblower Rewards Program goes on!

The head of the new IRS Whistleblower Office, Stephen Whitlock, reports that the new IRS Whistleblower Rewards Program is off to a strong start.

Today's Wall Street Journal quotes Mr. Whitlock as saying that the claims submitted to the IRS Whistleblower Office to date appear to have credibility and have evidence to support them.

Since the new IRS Whistleblower program was authorized by Congress in December, our firm has been working with the IRS in pursuing whistleblower claims in the Midwest, West, Southwest, and Southeast, and is evaluating IRS claims in other parts of the country. We have written about it extensively on this whistle blower lawyer blog, including a discussion of proposed legislation that would modify the program.

Senator Charles Grassley of Iowa, who pushed for such an IRS Whistleblower program for years, also complimented the progress of the IRS Whistleblower Office's efforts.

Our congratulations go to Mr. Whitlock and the IRS for protecting taxpayer funds by making tax cheats pay--like honest taxpayers do!

A qui tam whistleblower and his lawyer are very happy as a result of a $102 million jury verdict--to be shared by the whistleblower--in a False Claims Act trial that ended on May 14.

The defendants in this whistleblower case included Bill Harbert International Construction Inc.; Harbert Construction Services; Bilhar International Establishment; Harbert Corp.; and Harbert International. The case alleged bid-rigging on three U.S. government-funded construction contracts in Egypt in the 1980s and 1990s.

The jury found that defendants violated the False Claims Act and awarded $34 million in damages, which are "trebled" under the False Claims Act.

The Department of Justice lawyer, Carolyn Mark, is a veteran prosecutor. She handled one of my first cases under the False Claims Act in the late 1980s--another bid-rigging case against electrical contractors, one of whom I was defending (in my former life, before I represented whistleblowers). I sent Carolyn a note of congratulations today.

AUSA Keith Morgan also deserves kudos, as does Robert Bell, who represented whistleblower Richard Miller.

Two of my favorite D.C. federal judges presided over the case. Initially, the late Judge William Bryant had it, and it was later transferred to Judge Royce Lamberth.

Continue reading "Whistleblower Case Victory in D.C. Bid-Rigging Trial" »

Because health care fraud in the Medicare and Medicaid programs is such a huge problem, this week our whistleblower lawyer blog writers (former federal prosecutors who are now whistleblower attorneys) begin a series of posts on "Lessons from Health Care Fraud in Medicare and Medicaid."

We will discuss how whistle blowers in the medical services profession have been important resources in revealing and stopping health care fraud in hospitals, nursing homes, physicians' practices, and the pharmaceutical or drug industry. We also discuss how the new IRS Whistleblower Rewards program may apply to unlawful referral arrangements involving hospitals or other medical facilities.

You may be surprised that more than 70% of the federal government's recoveries in fraud cases are in health care fraud cases affecting Medicare and Medicaid. Many health care fraud cases have addressed over-billing or up-coding, fraudulent cost reporting, and billing for services not provided. Medicare, Medicaid, Tricare and Champus are some of the federal programs affected.

The government also sometimes views the failure to furnish the required "quality of care" in nursing homes as fraudulent, which is encouraging to anyone who believes in caring for the elderly with dignity. Nursing home fraud and abuse, or neglect of nursing home patients, makes any decent American citizen's blood boil.

Unlawful referral arrangements involving hospitals or other medical facilities and doctors can be considered fraudulent. These referral agreements can trigger tax liability that makes the new IRS Whistleblower Program that we have written about extensively even more important in the effort to combat health care fraud in medicine.

Please stay tuned to our series on "Lessons from Health Care Fraud in Medicare and Medicaid."

Just after Georgia, New York, and Oklahoma have passed new whistleblower laws similar to the federal False Claims Act to protect at least state Medicaid funds, Texas is poised to do even more.

We were pleased to see that, on May 4, Texas upgraded its already successful Texas Medicaid Fraud Prevention Act. The changes were designed to allow Texas to receive a greater share of Medicaid fraud recoveries, as we have written about previously on this whistleblowerlawyerblog. The Deficit Reduction Act of 2005 creates incentives for states to pass False Claims Acts with qui tam whistleblower provisions that are at least as effective as the federal False Claims Act.

Also smart and beneficial to taxpayers, the Texas Senate and a House Committee also have passed a new "Texas False Claims Act," S.B 1309, which protects state funds other than simply those in the State Medicaid Program. It makes sense from a taxpayer's perspective to protect all state funds from fraud and false claims, and Texas appears ready to do so.

We saw that the new draft Texas False Claims Act contains an interesting new provision to allow recovery from someone who is "a beneficiary of an inadvertent submission of a false claim" who keeps the money after discovering it came from a false claim.

The Texas Attorney General's Office has been extremely effective using the old law in recovering money in health care fraud cases for the State, primarily due to the work of the group headed by Patrick O'Connell. The new legislation should only improve Texas' ability to recover funds obtained fraudulently from the State.

Did Texas not wish to see Georgia and other states that have only lately passed whistleblower statutes move ahead of Texas? And will states like Georgia and Oklahoma realize that perhaps all state taxpayer money should be protected, as Texas is apparently about to do?

Congratulations, Texas, on continuing to be an example for other states to follow in protecting public money.

We are pleased to see yet another state--Oklahoma--realize how effective qui tam whistleblower laws are by passing a state False Claims Act this week.

The Oklahoma legislature has passed the Oklahoma Medicaid False Claims Act (SB 889). The bill's primary author was Cox Crain.

The new whistleblower law appears to be modelled on the federal False Claims Act. As we have written about often on this whistleblower lawyer blog, states that pass such laws with qui tam whistleblower provisions that are at least as effective as the federal False Claims Act qualify for a 10 point increase in the state's share of Medicaid fraud recoveries.

This incentive created by Congress in the Deficit Reduction Act of 2005 makes it even more desirable for states to have their own whistleblower laws--a true no-brainer! Congratulations to Oklahoma..

To understand why states are passing their own "False Claims Acts" with qui tam whistleblower provisions, the heath care compliance newsletter Heathcare Auditing Strategies called on one of the authors of this whistleblower lawyer blog, Michael A. Sullivan.

The May 2007 edition of this heath care compliance publication discusses the results of our efforts in this blog to explain these new state statutes, and to report on how these state statutes have fared when reviewed by the Office of Inspector General of HHS. States with false claim statutes with qui tam whistleblower provisions at least as effective as those of the federal False Claims Act are entitled to a 10 point increase in the state's share of Medicaid fraud recoveries.

This well-presented article by Andrea Leptinsky, "Whistleblower laws cause states to scramble for their own," explains to health care compliance and auditing professionals the progression of these new false claims acts, and what it means to them.

Separately, we have also been busy in providing input to legislators to explain and improve the version of the False Claims Act that passed on April 13 in Georgia, the Georgia State False Medicaid Claims Act. We have also planned a seminar for September 20 in Atlanta with some nationally known speakers to explain these whistleblower statutes and the new IRS Whistleblower program in which we have been busily working as well--details to follow in future posts on this whistleblower lawyer blog.