Articles Posted in Health Care Fraud

Yesterday the Justice Department apparently responded to the frequent lament, “Why has almost no one gone to prison for the financial crisis?” DOJ signaled that it will now look to hold responsible both culpable individuals and their companies for corporate misdeeds–both criminally and civilly.

If DOJ means what it says, this policy change is profound. It should hit corporate officers whose business models are based on fraud and false claims. It should also snare high level executives who turn a blind eye to wrongdoing, and who typically get away with it.

Corporations can act only through the humans who run them. Sometimes those humans steer the business to corrupt methods.

Until yesterday’s change in DOJ policy, however, the few corporations brought to heel by DOJ for crimes, fraud, or false claims absorbed the consequences, while the individuals who directed the wrongdoing usually escaped responsibility. Those individuals were free to continue their corrupt practices at the same firm or a different one.

New U.S. Deputy Attorney General Sally Yates plans to change that result. As a federal prosecutor in Atlanta, Yates was not afraid of pursuing big cases against individuals and their companies, as I learned from representing clients in some of those cases.

Yesterday Yates issued a Memorandum titled, “Individual Accountability for Corporate Wrongdoing.” It is far-reaching, if implemented. Yates announced “six key steps to strengthen [DOJ’s] pursuit of individual corporate wrongdoing, some of which reflect policy shifts and each of which is described in greater detail below:
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Each December, some of the nation’s top health care lawyers gather to discuss developments in prosecuting and defending health care fraud cases at the Health Care Fraud Institute in Atlanta. Because the qui tam law–the False Claims Act– is the government’s primary civil tool to combat fraud and false claims, the False Claims Act developments are a highlight of the discussion.

This year, I was honored again to be invited to participate as part of the False Claims Act panel with Rick Shackelford, an accomplished defense lawyer at King & Spalding, LLP; Marlan Wilbanks, my colleague; and our excellent moderator, Jim Breen.

One of the major developments we focused on was the increasing number of cases in which the Justice Department relies on private attorneys representing whistleblowers (“relators”) to litigate cases, since the government has limited resources.

This practice allows the government to leverage its resources in the “public-private partnership” model that Congress intended to make the law more successful. governmentrmment either works alongside private counsel, or has private attorneys take the lead in cases that the government declines initially. When private counsel is successful, the government often intervenes later to conclude the case.

Joe Whitley of Greenburg Traurig and Paul Murphy of King and Spalding organized the program, which also included insights from government counsel.

Each Fall, the Justice Department tallies its recoveries of taxpayer dollars that have been pilfered through fraud directed at federal programs. A year ago, DOJ proudly announced $3 billion in recoveries in False Claims Act cases, and a record $8.7 billion recovered in the three years starting in 2009.

Late this year, DOJ will announce that its fraud recoveries tripled from $3 million in FY 2011 to more than $9 million in FY 2012. This trend of increasingly large recoveries of stolen taxpayer funds proves once again the effectiveness of laws like the False Claims Act, which incentivize whistleblowers to expose fraud through its qui tam provisions.

Although health care cases account for the vast majority of FCA recoveries, growing areas include banking, mortgage, and pension fraud cases involving fraudulently obtained taxpayer dollars, as my colleagues at Taxpayers Against Fraud point out. States are also using their own false claims laws to recover stolen taxpayer funds.

In qui tam cases, private citizen whistleblowers (known as “relators”) file suit on the government’s behalf to expose fraud against taxpayer funds. The whistleblowers can receive 15-25% of the government’s recovery of stolen funds if the government prosecutes the case, and 25-30% if the government leaves it to the whistleblower to pursue the recovery.

Consider the history of False Claims Act recoveries that have totalled more than $39 billion since 1986, when Congress authorized meaningful rewards to whistleblowers:
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Last week the government’s criminal trial of former GlaxoSmithKline vice president and associate general counsel Lauren Stevens ended abruptly, as the judge found no basis to allow the case to go to a jury. Prosecutors had charged that she obstructed justice and made false statements to cover up the company’s improper marketing of the antidepressant drug Wellbutrin SR.

While she dodged a bullet, the case jolted lawyers handling health care fraud investigations, which are more typically civil cases under the False Claims Act.

Yet also last week, prosecutors succeeded in convicting Raj Rajaratnam for insider trading. Wall Street’s hedge fund industry took note of the government’s use of investigative tools such as recorded phone calls.

Jury selection begins today in the trial of Zfi Goffer, his brother Emanuel Goffer, and securities trader Michael Kimelman, on charges of securities fraud and conspiracy. More than one lawyer at a white-shoe firm was ensnared in this investigation and pleaded guilty.

Writers at the Wall Street Journal blog correctly observed recently that the federal government–after years of targeting primarily companies engaged in fraud–has turned to pursuing individuals allegedly responsible for corporate fraud.

In egregious cases–especially those involving falsifying or concealing evidence–individuals now face criminal prosecution more frequently. Even if the person escapes prosecution, exclusion and debarment of individuals who had responsibility over their companies’ fraud is a growing trend.

Fraud hurts taxpayers and investors. If sanctioning the company is seen as just a “cost of doing business,” it is a logical step for the government to pursue those individuals who direct fraud.

Of interest to whistleblowers reporting fraud under the False Claims Act, the IRS Whistleblower Program, or the brand new SEC Whistleblower and CFTC Whistleblower Programs is an upcoming presentation, “Avoiding the Mistakes of the UBS/Birkenfeld Case: Protecting Whistleblowers from Criminal and Civil Liability.”

This discussion is part of a fascinating gathering this April in South Beach–the OffshoreAlert Conference. As the brochure promises:

Where else could tax collectors mingle with tax minimizers, asset tracers with asset protectors, regulators with the regulated, whistleblowers with their former employers and crooks with prosecutors?

How to protect whistleblowers from criminal and civil liability was a topic my panel discussed at the 2010 IRS Whistleblower Boot Camp in Washington. Because we had the IRS Chief Counsel’s Office participating in that discussion, we were unable to discuss directly what went wrong for Birkenfeld as he brought important information about tax evasion to the attention of the IRS, but ended up serving a prison sentence of 40 months. (We have written previously about Birkenfeld’s errors revealed in the court record.)

At the OffshoreAlert Conference discussion this year, I will moderate the panel discussion about what can be done to protect whistleblowers from criminal and civil exposure. Joining me are former Justice Department official and former General Counsel of the U.S. Department of Homeland Security Joe D. Whitley; former prosecutor and now whistleblower attorney Marc Raspanti; and federal and international tax attorney Richard Rubin.

The program description is reprinted below:
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This Part 4 of a six part summary explains how the federal False Claims Act works, after Congress amended it three times in 2009-2010. It also discusses similar provisions of some state False Claims Acts.

This is an update from a previously published article by whistleblower lawyer blog author Michael A. Sullivan.

III. Overview of How the Modern False Claims Act Works (with Comparisons to Some State False Claims Acts)

A. Conduct Prohibited

The federal False Claims Act imposes civil liability under several different theories, only four of which were generally used before FERA. FERA has added an additional theory of liability for retention of overpayments, which now will likely be used quite often in health care cases:

First, the Act makes liable any person who knowingly presents, or causes to be presented, a “false or fraudulent claim for payment or approval.”

Second, the Act creates liability for using a “false record or statement.” It imposes liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”

“Claim” is broadly defined, and is not limited to submissions made directly to the federal government:
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At the annual Fraud and Compliance Forum in Baltimore that runs through Tuesday, the nation’s top health care lawyers will be paying close attention to recent changes to the nation’s primary whistleblower law, the False Claims Act. The “qui tam” provisions of the False Claims Act allow private citizen whistleblowers (“relators”) to share in the government’s recovery of damages.

As a former defense attorney who now represents whistleblowers, I have been asked to present a program at this conference with Rick Shackelford of King & Spalding, to discuss these major amendments to the False Claims Act–the first since 1986. Congress acted decisively in three recent major bills to restore the False Claims Act to its intended strength, in the face of court decisions that created obstacles to its use.

The recent amendments were part of the Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (“FERA”); the Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (“PPACA”); and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (the “Dodd-Frank Financial Reform Act”).

This week’s forum is sponsored by the American Health Lawyers Association and Health Care Compliance Association.

An updated discussion of the False Claims Act after these 2009 and 2010 changes will appear soon on this Whistleblower Lawyer Blog. A brief summary of those important changes to the Act is below:
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Smart and effective state Attorneys General have fought fraud against their citizens through encouraging greater use of the country’s major whistleblower law, the False Claims Act, and state versions of that law.

Texas AG Greg Abbott, for example, has a staff that has long distinguished itself for recovering millions of stolen taxpayer funds in health care fraud cases, under the leadership of Pat O’Connell and, more recently, Ray Winter.

Following this tradition, Indiana AG Greg Zoeller is urging employees of pharmaceutical companies and heath care entities to help stop health care fraud, and possibly share in the recovery as qui tam whistleblowers under the state and federal False Claims Acts.

While we have discussed in detail how the False Claims Act operates, AG Zoeller’s announcement gives a succinct summary. We have reprinted it below, and applaud his efforts.
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When whistleblower attorneys bring a qui tam False Claims Act case, the most successful results usually occur when Government counsel and the whistleblower’s lawyers (Relator’s counsel) work together in what is known as the “public-private” partnership model.

This approach to qui tam cases allows the government to leverage its limited resources by calling on the resources provided by private attorneys. This is essentially a “joint prosecution effort, ” in which the government counsel and investigators can rely on Relator’s counsel at each stage,

–from the beginning of its investigation,

–to obtaining input for preparation of subpoenas for documentary evidence from the defendants,

–to review of evidence compiled by the government in response to subpoenas,

–to evaluation of the responses and explanations that defendants provide,

–to providing analyses and summaries of evidence rebutting the defendants’ factual arguments,

–to performing research that ultimately will be used by the government to rebut the defendants’ legal arguments,

–to performing damages calculations and marshaling arguments in support,

–to consulting with the government on negotiation strategies and steps to be taken to resolve the matter,

–and, finally, to try the case, or otherwise resolve the case.

The taxpaying members of the public are the beneficiaries of this joint effort, which allows the government both to stop and recover damages for fraud, as well as to make those who steal from taxpayers think twice.
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The health care industry is adjusting to major changes to the nation’s major “whistleblower” law, the False Claims Act.

Both in 2009 and 2010, Congress has removed obstacles to whistleblowers’ use of this anti-fraud statute to address Medicare and Medicaid fraud, as well as fraud affecting every other federal program. As we have written about previously, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) overruled key judicial decisions that had undermined the the False Claims Act’s effectiveness.

This year, the landmark health care bill, the Patient Protection and Affordable Care Act (“PPACA”), limited the FCA’s “public disclosure” bar, including by allowing the government to prevent dismissal of cases that it believes should proceed.

At the Health Care Compliance Association’s “Fraud and Compliance Forum” on Sept. 26-28, 2010 in Baltimore, Rick Shackelford of King & Spalding, LLP and I will discuss the effects on health care organizations of these 2009 and 2010 changes to the False Claims Act.

Rick is an outstanding defense attorney in these cases, and I look forward to discussing these important changes in the False Claims Act from his perspective as defense counsel for hospitals, pharmacy providers, pharmaceutical and medical device companies, health plans, pharmacy benefits managers, managed care organizations, physician organizations, and other health care organizations; and from my perspective as a former defense counsel who for years has represented “whistleblowers” or relators in health care fraud and other cases under the qui tam (or whistleblower) provisions of the False Claims Act.