Health Care Fraud Institute Discusses False Claims Act Developments

December 18, 2012

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.

Another Record Year--False Claims Act Recoveries Triple in FY 2012

October 25, 2012

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:

Continue reading "Another Record Year--False Claims Act Recoveries Triple in FY 2012" »

Fraud Enforcement Adds Teeth by Pursuing Individuals Allegedly Responsible for Organizations' Frauds

May 16, 2011

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.


Offshore Alert Conference: Protecting Whistleblowers from Criminal and Civil Liability

March 8, 2011

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:

Continue reading "Offshore Alert Conference: Protecting Whistleblowers from Criminal and Civil Liability" »

Part 4: How the False Claims Act Works After the 2009-2010 Amendments (with Comparisons to Some State False Claims Acts)

December 7, 2010

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:

Continue reading "Part 4: How the False Claims Act Works After the 2009-2010 Amendments (with Comparisons to Some State False Claims Acts)" »

Health Care Fraud Cases and 2009-2010 Amendments to False Claims Act Discussed at National Fraud and Compliance Forum

September 26, 2010

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:

Continue reading "Health Care Fraud Cases and 2009-2010 Amendments to False Claims Act Discussed at National Fraud and Compliance Forum " »

Indiana Attorney General Invites Qui Tam Whistleblower Cases by Health Care & Pharmaceutical Employees To Stop Health Care Fraud

August 20, 2010

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.

Continue reading "Indiana Attorney General Invites Qui Tam Whistleblower Cases by Health Care & Pharmaceutical Employees To Stop Health Care Fraud" »

How Whistleblower Lawyers Work Alongside Government Lawyers In Successful Qui Tam Cases Under the False Claims Act

August 2, 2010

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.

Continue reading "How Whistleblower Lawyers Work Alongside Government Lawyers In Successful Qui Tam Cases Under the False Claims Act" »

Health Care Industry and 2009-2010 Changes to False Claims Act

June 6, 2010

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.

New Health Care Law Arrives With Announcement of $12 Million Recovery in Qui Tam Whistleblower Case Under False Claims Act

March 26, 2010

The major new "health care" law that the President signed this week, the Patient Protection and Affordable Care Act (Public Law 111-148), includes increased efforts to combat health care fraud and abuse, especially fraud in the Medicare and Medicaid programs.

It was significant that, on the very same day that this law took effect, an outstanding group of government prosecutors and investigators brought to an efficient conclusion a $12 million recovery of funds in a qui tam whistleblower case alleging health care fraud in violation of the False Claims Act. The case was brought by our firm, Finch McCranie, LLP, the Simpson Firm, LLC, and James G. Gustino, P.A..

The next day, after a meeting in Washington with the Department of Justice on another False Claims Act case, I sat in on the Senate debate of amendments to the new health care law. Whatever differing views may exist about many of the new law's provisions, all taxpayers agree that stopping fraud in health care is an essential step to preserving scarce health care dollars.

We are proud to have been able to work with an excellent government team of lawyers and investigators in helping recover this $12 million for the American taxpayers. They are Renee Brooker and Eva Gunasekera of the Department of Justice, Ralph Hopkins of the U.S. Attorney’s Office for the Middle District of Florida, and Special Agent Robert Murphy of HHS-OIG.

A description of the case is below:

Melbourne Internal Medicine Associates (MIMA) of Brevard County, Florida, will pay $12 million to resolve a whistleblower lawsuit alleging hidden schemes to defraud Medicare and other federal programs in connection with radiation cancer treatment. This whistleblower case was successfully pursued by Finch McCranie, LLP and Simpson Law Firm, LLC, both of Atlanta.

After investigating the whistleblower’s claims, the U.S. Department of Justice joined the lawsuit and filed its own complaint alleging a sustained fraudulent course of conduct by the MIMA Cancer Center and its former Medical Director, Todd Scarbrough, MD. The government’s complaint contended that MIMA submitted millions of dollars of claims for radiation oncology services that were provided without required physician supervision, were never provided at all or were otherwise improper, and sought to hide the fraud through “sham” practices. The complaint also alleged that executives at MIMA were aware of a substantial number of the fraudulent billing practices.

“Health care fraud is incompatible with patient safety,” said Michael A. Sullivan, attorney with Finch McCranie, LLP, and author of the leading whistleblower blog www.whistleblowerlawyerblog.com. “These doctors were paid for personally supervising radiation treatments for cancer patients, but did not provide the supervision that they gave the appearance of providing. How would patients feel to learn that their doctor’s ‘supervision’ of a potentially dangerous radiation treatment was to set up an ‘autoreply’ to emailed images of the patients, which the doctor would not review at all, or would review too late to make adjustments before patients are irradiated? With growing concerns over how cancer patients can be overexposed to radiation even when physicians are supervising the procedures, how much harm can be caused when physicians fail to provide the personal supervision that they are paid to provide?”

Continue reading "New Health Care Law Arrives With Announcement of $12 Million Recovery in Qui Tam Whistleblower Case Under False Claims Act" »

Greatest Impact of 2009 False Claims Act Amendments--"Civil Investigative Demands"

March 17, 2010

Among the many 2009 changes to strengthen the False Claims Act is one whose impact is about to be experienced: greater use of "civil investigative demands" to gather evidence.

Civil investigative demands allow to government to require any person believed to have documents or information relevant to a False Claims Act investigation to do the following:

(A) to produce such documentary material for inspection and copying,

(B) to answer in writing written interrogatories with respect to such documentary material or information,

(C) to give oral testimony concerning such documentary material or information, or

(D) to furnish any combination of such material, answers, or testimony. (31 U.S.C. § 3733 (a)).

Until now, civil investigative demands were theoretically available, but seldom used, as they required authorization by the Attorney General. Now, as the 2009 amendments permit, the U.S. Attorney General has just delegated that authority to local U.S. Attorneys.

The result should be far greater use of these valuable investigative tools, which are now more available to the line prosecutors who investigate False Claims Act cases. Although reporting requirements apply, the change gives a leg up to aggressive investigators in gathering evidence.

Another significant 2009 change is that prosecutors are now authorized to share with qui tam relators or whistleblowers the information or documents obtained by CIDs, if they deem it necessary. This change will enhance the important "collaboration" between government counsel, the whistleblower, and the whistleblower's counsel that has proved extremely effective in prosecuting qui tam cases under the False Claims Act.

As time will tell, of all the 2009 amendments, this change may have the greatest impact on False Claims Act investigations. It should allow the government lawyers and investigators who actually work cases to take sworn testimony and require answers to interrogatories and document requests, before suit is commenced.

Georgia Psychiatric Hospitals: Justice Department Suit for Immediate Relief to Protect Patients

January 29, 2010

The Justice Department has just announced that, to protect patients from harm in seven Georgia psychiatric hospitals, its Civil Rights Division has filed for relief including immediate appointment of a monitor to protect those patients.

DOJ cited the threat to patients of "imminent and serious threat of harm to their lives, health and safety."

The seven hospitals include East Central Regional Hospital, Georgia Regional Hospital at Savannah, Georgia Regional Hospital at Atlanta, Southwestern State Hospital, Central State Hospital, West Central Georgia Regional Hospital, and Northwest Georgia Regional Hospital.


The announcement is repinted below:

Continue reading "Georgia Psychiatric Hospitals: Justice Department Suit for Immediate Relief to Protect Patients" »

Health Care Fraud Lawyers Gather to Discuss Amendments to False Claims Act and Other Whistleblower Developments

December 16, 2009

Attorneys from across the country will gather tomorrow in Atlanta to discuss health care fraud and the 2009 amendments to the False Claims Act, the nation's primary whistleblower statute.

I am pleased to be on the panel discussing "False Claims Act Developments," moderated by Jack Boese of Fried Frank. This will be a particularly interesting year for this annual meeting, as Congress enacted major changes to the False Claims Act that took effect on May 20, 2009.

In addition, the "Health Care Fraud Enforcement Act" pending in the Senate would enhance further the government's tools used to investigate and remedy Medicare and Medicaid fraud. This bill would remove any question that all payments made pursuant to illegal kickbacks are "false" for purposes of the False Claims Act.

Among the significant 2009 changes to the False Claims Act made by the Fraud Enforcement and Recovery Act are the following:

1. The amendments expanded the definition of "claim," and fraud directed against government contractors, grantees, and other recipients is now plainly covered by the False Claims Act.

2. Funds administered by the United States government (e.g., in Iraq) are now protected.

3. Retaining overpayments of money from the government is now a stated basis of liability, which is a source of concern for health care providers, among others.

4. Liability for "conspiracy" to violate the Act is now broader.

5. Protection of whistleblowers and others against "retaliation" now extends not only to "employees," but also to "contractors" and "agents"; and persons other than "employers" potentially may be liable for retaliation.

6. In investigations, the government now has authority to use "Civil Investigative Demands" more broadly, and to share information more with state and local authorities and with whistleblowers/relators.

7. A standard definition of what is "material" now applies in False Claims Act cases.

8. The statute of limitations has been clarified for when the government asserts its own claims, after the whistleblower (or "relator") has filed a qui tam case under the False Claims Act.

The full agenda for tomorrow's "SOUTHEASTERN HEALTH CARE FRAUD INSTITUTE" is below:

Continue reading "Health Care Fraud Lawyers Gather to Discuss Amendments to False Claims Act and Other Whistleblower Developments" »

New ‘‘Health Care Fraud Enforcement Act of 2009’’ Includes Health Care Whistleblower Provisions Aimed at Kickbacks

October 30, 2009

The battle against those who steal taxpayer dollars through Medicare fraud and other health care fraud took a step forward this week. The Senate is now considering the "Health Care Fraud Enforcement Act," which will enhance the government's tools used to investigate and remedy Medicare and Medicaid fraud.

After a Senate Judiciary Committee hearing Wednesday on “Effective Strategies for Preventing Health Care Fraud,” Senators Leahy, Kaufman, Specter, Kohl, Schumer, and Klobuchar sponsored the new anti-fraud measure.

Excerpts of the Senate announcement follow:

The bill makes straightforward but critical improvements to the federal sentencing guidelines, to health care fraud statutes, and to forfeiture, money laundering, and obstruction statutes, all of which would strengthen prosecutors’ ability to combat this particularly destructive form of fraud. These improvements include:

o Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.

o Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.

o Improving whistleblower claims: Kickbacks lead to unnecessary and risky medical care and pervert the doctor-patient relationship. This bill clarifies that all payments made pursuant to illegal kickbacks are false for purposes of the False Claims Act.

o Creating a common-sense mental state requirement for health care fraud offenses: Some courts have held that defendants must be aware that their conduct violates a specific provision of criminal law in order to be held accountable. This bill restores the original intent of Congress that a person is guilty of a health care offense if he knowingly does what the law forbids.

o Increasing funding: Money spent on health care fraud prevention and enforcement is returned manifold through costs savings and civil and criminal recoveries. This bill authorizes a modest, yet significant, increase in federal antifraud spending of $20,000,000 per year through 2016.

The new bill would add to legislation earlier this year to strengthen law enforcement statutes aimed at fraud, the Fraud Enforcement and Recovery Act.

Of particular importance to qui tam whistleblower cases under the False Claims Act, the nation's major whistleblower law, the new bill removes any ambiguity that "kickbacks" violate the False Claims Act. The official summary discusses kickbacks in section 2(c):

Section 2(c). Kickbacks

All too often, health care providers secure business by paying illegal kickbacks, which needlessly increase health care risks and costs. When a doctor’s independent judgment is compromised by a kickback, the patient faces the risk that the doctor is making decisions that are not in the patient’s best interest. In addition, excessive payments to doctors increase health care costs, may result in unfair competition, and may compromise medical research independence and the standards of scientific integrity.

The Department of Justice has had success both prosecuting illegal kickbacks and pursuing False Claims Act (FCA) matters predicated on underlying violations of the Anti-Kickback Statute (AKS). Nevertheless, defendants in such FCA cases continue to mount legal challenges. A court recently held that, even though a device company may have paid a kickback to a doctor to use a particular medical device, the bill for the procedure to implant the device was not false because the claim was submitted by the innocent hospital, and not by the doctor. United States ex rel. Thomas v. Bailey, 2008 WL 4853630 (E.D. Ark.) (Nov. 6, 2008). In other words, a claim that results from a kickback and that is false when submitted by a wrongdoer is laundered into a "clean" claim when an innocent third party finally submits the claim to the government for payment. This has the effect of insulating both the payor and the recipient of the kickback from FCA liability. This obstacle to a successful FCA action particularly limits Department’s ability to recover from pharmaceutical and device manufacturers, because in such instances the claims arising from the illegal kickbacks typically are not submitted by the physicians that received the kickbacks, but by pharmacies and hospitals that had no knowledge of the underlying unlawful conduct.

This section remedies the problem by amending the AKS to ensure that all claims resulting from illegal kickbacks are false, even when the claims are not submitted directly by the wrongdoers themselves. (Notably, in such circumstances, neither AKS nor FCA liability will lie against an innocent third party that submitted the claim but lacked the requisite intent required under those statutes.)

The full text of the bill is below:

Continue reading "New ‘‘Health Care Fraud Enforcement Act of 2009’’ Includes Health Care Whistleblower Provisions Aimed at Kickbacks" »

Health Care Fraud Strike Force Targets Medicare and Medicaid Fraud

October 25, 2009

With the nation's health care costs growing, a DOJ and HHS initiative to combat health care fraud continues to show progress.

Building on past enforcement efforts, in May 2009 the government announced its Health Care Fraud Prevention and Enforcement Action Team (HEAT), as part of what is now a Cabinet-level battle against Medicare fraud. To date in FY 2009, the Department of Justice has recovered close to one billion dollars in health care fraud cases, and has obtained 300 convictions.

Last week, the government announced that its Medicare Fraud Strike Force has charged twenty California defendants with $26 million in Medicare fraud from the sale of durable medical equipment (DME). That same week, the government charged six Houston area residents with participating in a scheme to submit claims to Medicare for medically unnecessary DME.

DME fraud and abuse are frequently reported in the calls we receive in representing "whistleblowers" under the qui tam provisions of the False Claims Act. The nation's major whistleblower law, the False Claims Act allows private citizens who report fraud or false claims to share in the government's recovery of damages.

Significant changes to the False Claims Act made earlier this year will improve its effectiveness in stopping fraud against taxpayer funds.

New False Claims Act Amendments Strengthen Enforcement of Health Care Fraud and Procurement Fraud Laws

October 25, 2009

Defrauding the government of taxpayer dollars has gotten tougher over the past five months.

Important changes to the nation's primary anti-fraud statute, the False Claims Act, took effect on May 20, 2009, when the Fraud Enforcement and Recovery Act of 2009 became law.

Among the most significant changes, Congress clarified and corrected the False Claims Act by legislatively overruling certain court decisions that sought to limit the scope of the Act, including Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004), cert. denied, 544 U.S. 1032 (2005); and United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. 2005), rev'd, 562 F.3d 295 (4th Cir. 2009).

These important 2009 changes to the False Claims Act include the following:

1. The amendments expand the definition of "claim," and fraud directed against government contractors, grantees and other recipients is now plainly covered by the law.

2. Funds administered by the United States government (such as in Iraq) are now protected.

3. Retaining overpayments of money from the government is now an explicit basis of liability, which will be a source of concern for health care providers, among others.

4. Liability for "conspiracy" to violate the Act is broader than before.

5. Protection of whistleblowers and others against "retaliation" now extends not only to "employees," but also to "contractors" and "agents"; and persons other than "employers" potentially may be liable for retaliation.

6. In investigating, the government now has authority to use "Civil Investigative Demands" more broadly, and to share information more with state and local authorities and with whistleblowers/relators.

7. A standard definition of what is "material" now applies in False Claims Act cases.

8. The statute of limitations has been clarified to allow the government to assert its own claims, after the whistleblower (or "relator") has filed a qui tam case under the False Claims Act.

Click here for a detailed discussion of the False Claims Act and the wave of new State False Claims Acts.

The amended False Claims Act is reprinted below, in its entirety:

Continue reading "New False Claims Act Amendments Strengthen Enforcement of Health Care Fraud and Procurement Fraud Laws " »

Health Care Fraud Lawyers to Analyze Recent Amendments to False Claims Act

September 26, 2009

At the "Advanced Health Law" seminar on October 9, attorneys prosecuting and defending cases of alleged health care fraud will discuss the important new amendments to the False Claims Act. I am honored to be the panelist who will discuss these important new provisions from the perspective of representing whistleblowers (known as "relators") who bring qui tam whistleblower cases under the False Claims Act.

These significant changes to the False Claims Act took effect on May 20, 2009, when the Fraud Enforcement and Recovery Act of 2009 became law. Among the most important changes, Congress corrected and clarified the False Claims Act by legislatively overruling certain court decisions that sought to limit the scope of the Act, including Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004), cert. denied, 544 U.S. 1032 (2005); and United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. 2005), rev'd, 562 F.3d 295 (4th Cir. 2009).

The False Claims Act, as amended, now has these provisions:

1. The amendments expand the definition of "claim," and fraud directed against government contractors, grantees and other recipients is now covered by the law.

2. Funds administered by the United States government (such as in Iraq) are now protected.

3. Retaining overpayments of money from the government is now an explicit basis of liability, which will be a source of concern for health care providers, among others.

4. Liability for "conspiracy" to violate the Act is broader than before.

5. Protection of whistleblowers and others against "retaliation" now extends not only to "employees," but also to "contractors" and "agents"; and persons other than "employers" potentially may be held liable for retaliation.

6. In investigating, the government now has authority to use "Civil Investigative Demands" more broadly, and to share information more with state and local authorities and with whistleblowers/relators.

7. A standard definition of what is "material" now applies in False Claims Act cases.

8. The statute of limitations has been clarified to allow the government to assert its own claims.

Health care fraud lawyers on this October 9 panel include government counsel Christopher J. Huber (Assistant U.S. Attorney, Atlanta); defense counsel Richard L. ("Rick") Shackelford (King & Spalding LLP, Atlanta); and this whistleblower lawyer blog author Michael A. Sullivan (Finch McCranie, LLP, Atlanta). Our moderator will be Summer H. Martin (McKenna Long Aldridge LLP, Atlanta). The program will be chaired by Tracy M. Field, Chair, Health Law Section, State Bar of Georgia (Arnall Golden Gregory LLP, Atlanta). I look forward to working with this distinguished group.

These health care attorneys will discuss which aspects of the amendments to the False Claims Act will be most significant to hospitals, physicians, pharmaceutical companies, and others in the health care industry.

It has been interesting to discuss with our colleagues which of the changes are likely to have the greatest impact, not only in health care fraud cases, but in cases involving contractor fraud in the Iraq and Afghanistan wars and reconstruction, other military contracts, NASA programs, Hurricane Katrina and other disaster relief, the new TARP and "Stimulus" programs (the American Recovery and Reinvestment Act), and other federal contracts, which are among the cases clients have brought to our firm.

Federal Contractor Fraud Laws To Get Tougher? ACORN Controversy Casts Spotlight on Larger Contractors That Violate False Claims Act

September 25, 2009

Outrage over misuse of public funds is a healthy reaction to those who cheat taxpayers. It can also create interesting bedfellows, as newly-introduced legislation in the House demonstrates.

HR 3571, aimed at "de-funding ACORN," would ban federal contracts and most federal funds to any organization that "has filed a fraudulent form with any Federal or State regulatory agency," among other things. (Complete bill is below.)

As. Rep. Alan Grayson (D-FL) observed correctly, fraud by those who receive government funds involves much "bigger fish" than ACORN--and bigger dollar amounts of alleged fraud.

"We can't have a situation where the laws of justice are applied to one organization and not to any of the others, particularly when there are organizations that are polluting water for our soldiers and electrocuting them." Grayson presumably was referring to allegations that KBR's performance of government contracts for our troops has caused soldiers to be electrocuted and otherwise endangered.

Rep. Grayson is on target. He saw these abuses as a lawyer vindicating the public's interest in fighting fraud in pursuing qui tam whistleblower cases under the False Claims Act, the nation's primary civil statute for combating fraud and false claims against the government.

On the other side of the aisle, Rep. Dan Issa (R-CA) appeared to agree with this principle--"abuse and fraud will not be tolerated," as his spokeperson told ABC News.

Battling fraud against taxpayers can and should be a universal concern of both parties. Let's see whether this bill is weakened by those who reap the most rewards from cheating the public. The full text of the proposed legislation is below:

Continue reading "Federal Contractor Fraud Laws To Get Tougher? ACORN Controversy Casts Spotlight on Larger Contractors That Violate False Claims Act" »

Protecting Whistleblowers from Criminal Prosecution: The Mystery of the UBS Whistleblower's Prison Sentence

September 3, 2009

In one of two prominent whistleblower cases in the news this week, whistleblower John Kopchinski will be awarded more than $50 million for his role in exposing improper "off-label marketing" of the drug Bextra by Pfizer. Other whistleblowers also will be rewarded because of this settlement. That settlement of $2.3 billion is the largest in history ($1 billion to settle False Claims Act allegations, and $1.3 billion in criminal fine and forfeiture).

As large as the Pfizer settlement is, the other whistleblower's actions seem likely to lead to recovery of dollars that could dwarf this $2.3 billion settlement. UBS whistleblower Bradley Birkenfeld has lifted the shroud of secrecy from thousands of American taxpayers' offshore accounts at UBS. He has given the IRS a foothold into recovering potentially many billions in unpaid taxes owed.

Yet Birkenfeld was recently sentenced to serve 40 months in federal prison for conspiracy to defraud the United States in a tax fraud scheme while at UBS. His conviction also calls into question his ability to receive a reward under the IRS Whistleblower Program from the billions to be collected by the IRS.

How could this happen?

There are tried and true steps lawyers representing whistleblowers must take to protect their clients from the risk of prosecution. This was one of the topics of the "IRS Whistleblower Boot Camp" panel discussion that I led this past March, with panelists including IRS Whistleblower Office Director Steve Whitlock--how to protect the whistleblower who has potential criminal liability, but who has valuable information.

If adequate protection cannot be obtained, often the whistleblower with real criminal exposure should choose not to go forward. If the information is important enough to the government, however, protection for the whistleblower often can be negotiated, so long as the whistleblower is truthful and forthcoming. As former federal prosecutors who have also defended clients in white collar criminal prosecutions, we have represented many clients in obtaining this type of protection.

Continue reading "Protecting Whistleblowers from Criminal Prosecution: The Mystery of the UBS Whistleblower's Prison Sentence" »

Court Agrees with IRS That Hospital CEO Is Personally Liable for Unpaid Payroll Taxes

August 9, 2009

Health care cases that our lawyers see most often involve whistleblowers who know of violations of the False Claims Act. While we also pursue many IRS violations under the IRS Whistleblower Program, the health care industry is not the source of most of those claims.

In perhaps a new trend, last week a federal court in Florida agreed with the IRS that a hospital CEO is personally liable for failing to pay over to the IRS close to $2 million in payroll taxes. (Doulgeris v. United States, M.D.Fla., August 03, 2009).

Earlier this year, the chairman of the board of a tax-exempt hospital was held personally liable for the hospital's failing to collect and pay to the IRS payroll taxes, as the Fifth Circuit Court of Appeals affirmed that decision. (Verret v. United States, 5th Cir., 2009). The board chair, however, had extensive involvement in the operations of the entity.

Payroll tax fraud thus appears to remain an IRS priority. The reasoning of the Florida federal judge explains how the CEO was found personally liable for unpaid payroll taxes;

Continue reading "Court Agrees with IRS That Hospital CEO Is Personally Liable for Unpaid Payroll Taxes" »

Whistleblower Attorneys Discuss False Claims Act Amendments & "The Most Pressing Issues in Representing Whistleblowers"

July 12, 2009

At the 20th Annual Convention of NELA, the National Employment Lawyers Association, I recently had the pleasure of moderating a panel discussion of some of the country's top "whistleblower" lawyers. The topic was "The Most Pressing Issues in Representing Whistleblowers."

Joining me in this panel discussion were Richard Renner and David J. Marshall. Richard is an attorney with Kohn & Colapinto in Washington, DC. and also serves as Legal Director of the National Whistleblowers Center. David is a partner with Katz, Marshall & Banks, LLP in DC.

The discussion included:

(1) the brand new Amendments to the False Claims Act that became law on May 20, 2009;

(2) "winning" cases and clients;

(3) what documents and other evidence may lawfully be gathered;

(4) protecting clients who may have been forced to participate in unlawful acts, and who therefore may face liability or prosecution themselves; and

(5) presenting cases most effectively to capture the government's interest.

In addition, we discussed the new IRS Whistleblower Program, in this second consecutive year that NELA invited me to participate in its national convention's panel discussion of whistleblower issues. Audience members had many excellent questions during and after the discussion.

After our session, my friend Mark Kleiman led a discussion of whistleblower issues entitled "The California False Claims Act & Other Whistleblower Cases." Joining Mark were J. Bernard Alexander III and Wilmer J. Harris.

Much thanks to NELA's fine Board and Executive Director Teri Chaw in arranging this terrific conference in Rancho Mirage, California.

False Claims Act Amendments Become Law Today, and Justice Department Expands Health Care Fraud Task Force

May 20, 2009

Today was a monentous day for those who believe in integrity in how taxpayer funds are treated.

President Obama signed into law today the Fraud Enforcement and Recovery Act of 2009, which makes important amendments to the country's most important tool for fighting fraud, the False Claims Act.

Also important today, the Obama administration announced an expansion of DOJ's health-care strike forces, which are designed to combat fraud in Medicare and Medicaid programs. Attorney General Eric H. Holder Jr. and Health and Human Services Secretary Kathleen Sebelius announced the initiative.

The new Fraud Enforcement and Recovery Act of 2009 protects the hundreds of billions being spent on government programs, as we have written about previously.

We will discuss in future posts how the new amendments will affect anti-fraud efforts . We congratulate all taxpayers on having Congress and the President take their interests to heart through these amendments.

Major Whistleblower Law Development--False Claims Act Amendments Pass House of Representatives, As Part of the "Fraud Enforcement and Recovery Act of 2009"

May 6, 2009

Today is an historic day--the House of Representatives has passed the Fraud Enforcement and Recovery Act of 2009 by a vote of 367-59. The Act includes long-needed amendments to the nation's primary anti-fraud law, the False Claims Act, about which we have written often.

The amendments are designed to protect the hundreds of billions in taxpayer funds now being spent from fraud affecting TARP, other "stimulus" measures, Medicare and Medicaid, national defense including the Iraq and Afghanistan wars and reconstruction efforts, and countless other government programs.

The Senate approved the Act by a vote of 92-4 on April 28th. A conference committee now will consider reconciling differences in the versions of the bill.

The new law closes a series of "loopholes" that allowed dishonest contractors to cheat the American public, and is intended to restore the False Claims Act to its original intent.

Our whistleblower lawyer blog has provided previously a detailed explanation of how the False Claims Act works by allowing private citizen "whistleblowers" (also known as qui tam "relators") to report fraud and share in the government's recovery. The False Claims Act also protects whistleblowers from retaliation.

Much will be written about the new amendments, which will greatly strengthen the Act's effectiveness in combating fraud. We congratulate those in Congress with the wisdom to pass the amendments, as well as all involved in this effort!

Continue reading "Major Whistleblower Law Development--False Claims Act Amendments Pass House of Representatives, As Part of the "Fraud Enforcement and Recovery Act of 2009" " »

False Claims Act Amendments Gain Momentum In Bill to Combat Financial Fraud

April 21, 2009

New legislation to combat financial institution fraud, securities fraud, mortgage fraud, and other fraud and abuse is gaining momentum, and brings closer long-needed amendments to restore to its intended strength the nation's major "whistleblower" law, the False Claims Act.

The Fraud Enforcement and Recovery Act of 2009 (S. 386) received support yesterday in a statement from the Administration:

The Administration strongly supports enactment of S. 386. Its provisions would provide Federal investigators and prosecutors with significant new criminal and civil tools and resources that would assist in holding accountable those who have committed financial fraud.

Specifically, the legislative enhancements would help the Department of Justice to combat mortgage fraud, securities and commodities fraud, money laundering and related offenses, and to protect taxpayer money that has been expended on recent economic stimulus and rescue packages. Further, the legislation would amend the False Claims Act (FCA) in several important respects so that the FCA remains a potent and useful weapon against the misuse of taxpayer funds. In general, this legislation would benefit U.S. taxpayers by both addressing existing fraud and deterring waste, fraud, and abuse of public funds. Moreover, S. 386 would provide needed resources to strained law enforcement agencies and prosecutors that would enable the Department and its partners to advance the pace and reach of the enforcement response to the current economic crisis. These additional resources will provide a return on investment through additional fines, penalties, restitution, damages, and forfeitures. With the tools and resources that S. 386 provides, the Department of Justice and others would be better equipped to address the challenges that face this Nation in difficult economic times and to do their part to help the Nation respond to this challenge.

We have written previously about the amendments to restore the False Claims Act to full strength, by clarifying various provisions that led some courts to weaken this important anti-fraud law.

The abuses now being exposed in the financial industry join the list of many other types of fraud designed to steal taxpayer funds--health care fraud,defense procurement fraud (especially in Iraq and Afghanistan), Hurricane Katrina fraud, and many other species of fraud and false claims.

With hundreds on billions of new federal spending underway in the TARP program and other "bailout" and "stimulus" efforts, the need is urgent to protect these funds with the most effective anti-fraud measures. That protection begins with the amendments to the False Claims Act, and we applaud this bipartisan effort to restore that critical law to its original intent.

False Claims Act Amendments Approved by Senate Judiciary Committee As Part of FERA (Fraud Enforcement and Recovery Act) Today

March 5, 2009

Today, we were excited to hear that the Senate Judiciary Committee has sent long-needed amendments to the False Claims Act to the full Senate, as part of the "bailout" and "stimulus" inspired "Fraud Enforcement and Recovery Act" (FERA).

Where there are taxpayer funds being spent, there will be attempts to engage in fraud to cheat the public. As hundreds of billions of dollars are poured into federal and state programs through the “economic stimulus” package, the continuation of the Troubled Assets Relief Program (“TARP”), the many federally funded health care programs such as Medicare and Medicaid, and the vast defense procurement industry that is servicing two wars, opportunities for fraud will only increase. The speed at which the "stimulus" funds will be spent will only increase the opportunities for fraud.

Senator Grassley has been steadfast in his efforts to ensure that these taxpayer funds receive the protection of the False Claims Act, which is the primary civil weapon to combat fraud and false claims. This bipartisan legislation would restore the False Claims Act to its original intent by "undoing" several attempts by judges to limit its reach. Among the goals of the Amendments are:

--to clarify that False Claims Act liability protects all federal funds;

--to solely vest the Government with the power to dismiss whistleblower- filed False Claims Act lawsuits that are based on public allegations;

--to remove confusion over the statute of limitations period;

--to explicitly clarify that the False Claims Act applies to those who discover an overpayment and decide to pocket the funds; and

--to provide strengthened employment protection for whistleblowers.

All taxpayers should support these Amendments to the False Claims Act, and we applaud the Senate Judiciary Committee for this bipartisan effort to protect taxpayer funds.

Whistleblower Attorneys to Discuss Qui Tam Cases Under False Claims Act, IRS Whistleblower Program, and Sarbanes-Oxley Whistleblower Cases at Annual "Whistleblower Law Symposium"

March 1, 2009

I am very excited about co-chairing the Annual "Whistleblower Law Symposium" once again this week.

From Atlanta, Boston, Chicago, New Orleans, San Antonio, and Washington, D.C., many of the country's leading attorneys in whistleblower cases under the "qui tam" statute, the False Claims Act, the Sarbanes-Oxley statute, and the IRS Whistleblower Program will gather in Atlanta on March 4 to discuss some of the more challenging aspects of representing whistleblowers (or defending against whistleblower claims) under these laws.

We are honored to have one of the officials of the IRS Whistleblower Office, Dawn Applebaum, join us in person to discuss the progress of the new IRS Whistleblower Rewards Program. The IRS Whistleblower Office has just celebrated its second anniversary.

We are also privileged to have the top state enforcement officials in health care fraud cases from Texas, Florida, and Georgia, to explain how they coordinate state and federal health care fraud whistleblower cases under the federal and state False Claims Acts.

Also joining us is Rep. Edward Lindsey, the Legislative Sponsor both of the Georgia State False Medicaid Claims Act, and recent legislation to solidify Georgia’s Office of State Inspector General.

Because of the wave of new whistleblower statutes that have been inspired by the successes of the False Claims Act, our firm instituted the Whistleblower Law Symposium. Once again, top-notch speakers will address a broad variety of issues that arise under these whistleblower laws, including:

--Whistleblowers in Health Care: Recent Cases and Strategies for Healthcare Providers and Counsel When a Whistleblower Calls

--Recent Developments in Qui Tam Cases Under the False Claims Act—The Relator’s Perspective

--Current Issues in Defending Qui Tam Claims

--Coordinating State and Federal Whistleblower Cases Under the State and Federal False Claims Acts—Current Priorities and Recent Results

--Federal Priorities and Procedures in Qui Tam Cases

--Plaintiffs’ & Defendants’ Approaches to Sarbanes-Oxley Claims

--Update on the IRS Whistleblower Program

We are fortunate to have such excellent faculty members from around the country join us. Our faculty members and their topics are listed below.

Continue reading "Whistleblower Attorneys to Discuss Qui Tam Cases Under False Claims Act, IRS Whistleblower Program, and Sarbanes-Oxley Whistleblower Cases at Annual "Whistleblower Law Symposium"" »

Pharma Manufacturer in Medicaid Fraud Case Ordered to Pay Millions by Wisconsin Jury

February 18, 2009

Hidden schemes to defraud Medicare and state Medicaid programs of scarce taxpayer dollars are at the heart of many whistleblower cases under the federal and state False Claims Acts.

This morning, Wisconsin Attorney General J. B. Van Hollen announced that a Dane County, Wisconsin jury has just declared that a pharmaceutical manufacturer defrauded the Wisconsin Medicaid program by reporting grossly inflated and fraudulent prices.

Pfizer was on the receiving end of the health care fraud verdict, which may result in more than $153 million in damages based on alleged practices by Pharmacia (which Pfizer had acquired). The AG reportedly cited a 1993 internal memo in which a pharma employee wrote that "three decades of gaming the present reimbursement scheme has provided a lucrative avenue of profit."

"We as taxpayers, we as consumers, are not going to put up with being 'gamed' by anyone - no matter how big, no matter how small," Van Hollen said.

The case continues the trend of "Average Wholesale Price" litigation (AWP), alleging that drug manufacturers are defrauding state Medicaid programs by publishing false average wholesale prices for their products, in order to grossly overcharge these public programs for drugs. At least 27 states have sued pharmaceutical manufacturers over alleged AWP violations. Alabama has already obtained jury verdicts against three companies of approximately $330 million.

As an example, Wisconsin reportedly argued that Pharmacia listed the wholesale price of its anti-breast cancer drug Adriamycin at $241.36, when in fact it sold the drug to providers wholesale for as little as $33.43. Pharmacia then reportedly "marketed the spread" of $207.93 to oncology providers--a large profit margin.

As Wisconsin argued, the wider the "spread," the more probable a doctor or pharmacy is to increase sales of the drug.

We congratulate the Wisconsin Attorney General's Office on recovering these taxpayer funds.

Qui Tam Whistleblower Recoveries under False Claims Acts (Federal and State) in 2008

December 16, 2008

Some recent significant recoveries under the False Claims Act--the nation's primary tool for fighting fraud and false claims--are summarized below. This summary is part of a paper I submitted in connection with serving on the faculty (with some excellent attorneys) of the "Southeastern Health Care Fraud Institute" on December 18, 2008.

Health care attorneys will gather at the Institute to discuss developments under the qui tam provisions of the nation's major whistleblower statute, the False Claims Act, as well as other issues relating to fraud in the health care industry.

Recent Significant False Claims Act Recoveries
(as reported by www.taf.org)

Merck ($650 million settlement in February 2008, arising from allegations of nominal pricing fraud, and kickback and best price violations for the arthritis drug Vioxx, the cholesterol drug Zocor, the acid-reflux drug Pepcid, the hypertensive medication Cozaar, the bone loss drug Fosamax, the migraine medication Maxalt, and the asthma medication Singulair.)

Cephalon ($375 million settlement in November 2007 arising from alleged off-label marketing of narcotic lollipop Actiq (Afentanyl citrate@) as well as Gabitril (an epilepsy medication) and Provigil (a narcolepsy medication.)

Amerigroup ($225 million settlement in July 2008, which was the final settlement after jury trial over allegations that the defendant was Acherry-picking@ the healthiest patients to reduce Medicaid HMO liability/spending.)

Staten Island University Hospital ($88 million settlement in September 2008, based on allegations that the hospital fraudulently billed Medicaid and Medicare for inpatient alcohol and substance abuse detoxification treatment beds for which it did not have verification, fraudulently inflated its patient count, and fraudulently billed Medicare for stereotactic body radiosurgery treatment that was provided on an out-patient basis to cancer patients.)

Continue reading "Qui Tam Whistleblower Recoveries under False Claims Acts (Federal and State) in 2008" »

Pharmaceutical Industry Hit by Layoffs

December 8, 2008

The country's ongoing economic distress has produced layoffs in many industries, and pharma appears to be feeling the pain as well.

Recent layoffs reported in the drug industry include Sanofi (650 sales reps);Novartis (550 U.S. salespersons);Merck (8,000); Wyeth (2,440); GSK (1,000); Schering-Plough (5,500);and Boehringer Ingelheim (200).

Justice Department Announces 2008 Fraud & "Qui Tam" False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds

November 11, 2008

Will Wall Street Bailout Produce the Next Round of Whistleblowers Reporting Fraud?

The U.S. Department of Justice this week announced its FY 2008 recoveries in fraud and False Claims Act cases, with more than $1 billion in health care fraud recoveries alone, and a total of more than $1.3 billion. (As explained below, we believe the $1.3 billion figure is low and understates the actual fraud recoveries this year.)

Cases brought by "relators" or whistleblowers under the nation's primary whistleblower statute, the False Claims Act, accounted for 78% of the money recovered. Since the False Claims Act took its current form in 1986, this law has recovered more than $21 billion of taxpayer funds from those who defraud the government.

As health care costs have grown as a percentage of the federal budget, so have recoveries for health care fraud. Recoveries of federal dollars were made because of fraud not only in Medicare and Medicaid, but also other federal programs such as Tricare and the Federal Employees Health Benefits Program.

The largest recoveries were from pharmaceutical companies--Cephalon Inc., Merck & Co. and CVS Caremark Corp. paid more than $640 million. Pharmaceutical fraud cases also repaid $430 million to state Medicaid programs.

DOJ also cited recoveries in cases of fraud affecting defense procurement contracts, disaster assistance loans and agricultural subsidies.

The actual recoveries were greater if you compare DOJ's announcements of its settlements, as well as include dollars recovered under the various State False Claims Acts. (We have written extensively about why states are enacting their own State False Claims Acts to mirror the federal False Claims Act, given the federal law's successes.)

With whistleblowers reporting fraud infecting in the Wall Street bailout funds (because no federal program is immune), it will be interesting to see how these billions of federal dollars show up in future statistics of fraud recoveries.

We have reprinted below DOJ's "fact sheet" about its FY 2008 significant recoveries. We congratulate Justice on another very successful year in fighting fraud and false claims.

Continue reading "Justice Department Announces 2008 Fraud & "Qui Tam" False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds" »

IRS Addresses Deductibility of Payments by Defendants to Settle False Claims Act Cases

October 23, 2008

In our former life as lawyers defending False Claims Act cases, our defendant clients had to consider whether the payments made to settle qui tam cases under the False Claims Act were deductible for tax purposes, and to what extent.

The IRS recently issued a paper on the subject: whether a defendant's payment to the Department of Justice to resolve False Claims Act allegations is "deductible in its entirety as a section 162(a) ordinary and necessary business expense, or includes non-deductible penalty amounts under section 162(f)."

This paper, LMSB-4-0908-045, is reproduced below:

Continue reading "IRS Addresses Deductibility of Payments by Defendants to Settle False Claims Act Cases" »

New Jersey Medicare Contractor Settles Health Care Fraud Case under False Claims Act

August 16, 2008

The Medicare program depends on the integrity of "trusted contractors" to process and pay Medicare claims. This past week, one of those "trusted contractors" operating in New Jersey, BlueCross BlueShield of Tennessee, agreed to pay the federal government $2.1 million to resolve allegations that it violated the False Claims Act.

BlueCross BlueShield of Tennessee operated as the primary Medicare Part A Fiscal Intermediary for New Jersey, under the name "Riverbend Government Benefit Administrators."

The government had alleged that BlueCross BlueShield of Tennessee "failed to adjust the cost-to-charge ratios for many New Jersey hospitals in a timely manner between 2000 and 2002 that resulted in the payment of excessive 'outlier payments' by Medicare program to those medical facilities." The "outlier payments" are supplemental reimbursements to hospitals in situations when the cost of care is unusually high, which are paid "to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs," as described in the government's announcement.

The Justice Department's announcement took aim at "contractors that falsely bill for crucial tasks that they do not perform,” in the words of Gregory G. Katsas, Assistant Attorney General of the Civil Division.

We congratulate the coordinated efforts of the various agencies that brought about this result: the Justice Department’s Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of New Jersey, Affirmative Civil Enforcement Unit; the Department of Health and Human Services, Office of Inspector General and Office of Counsel to the Inspector General; the Centers for Medicare and Medicaid Services; and the FBI.

OIG Approves False Claims Acts of California, Georgia, Indiana, and Rhode Island, But Disapproves False Claims Acts of Florida, Louisiana, Michigan, New Hampshire, New Mexico, and Oklahoma

August 6, 2008

The wave of new State False Claims Acts has generated a flurry of letters from the Office of Inspector General of HHS this past week. OIG has now "approved" the new State False Claims Acts of California, Georgia, Indiana, and Rhode Island, but has "disapproved" those of six other states: Florida, Louisiana, Michigan, New Hampshire, New Mexico, and Oklahoma.

As this whistleblower lawyer blog has written about extensively, Congress has created financial incentives for states to enact their own versions of the highly successful qui tam whistleblower law, the False Claims Act, which is the government's primary tool for combating fraud directed at taxpayer funds.

Under the Deficit Reduction Act of 2005, each state that has a False Claims Act that is at least as effective in facilitating and rewarding qui tam actions as the Federal False Claims Act in protecting state Medicaid funds is entitled to a greater share of fraud recoveries from those actions.

OIG must "approve" the state's whistleblower law for the state to be eligible for the additional funds. In effect, states may enact laws with stronger or more effective provisions than the federal False Claims Act, but cannot enact a "weaker" or less effective version of the False Claims Act and still receive the increased funds.

You can read here OIG's analysis of the problems it found with the False Claims Acts of Florida, Louisiana, Michigan, New Hampshire, New Mexico, and Oklahoma.

Fortunately, these problems are easily corrected. OIG has now informed these states precisely how their statutes should be amended to entitle them to receive the additional share of fraud recoveries.

Nursing Home Operators Plead Guilty to Medicaid Fraud and Abuse of Patients

July 27, 2008

Having lunch this week with a public servant who investigates heath care fraud, I was struck once again by his descriptions of abuses that nursing home residents too often suffer, many of which our whistleblower attorneys had also encountered in past cases.

It is damnable enough to steal federal and state taxpayer funds that are supposed to pay for care of our elderly through Medicare and Medicaid. It is another level of depravity to ignore our elder citizens' medical needs--and even to steal from patient accounts--for personal gain.

The Attorney General of Massachusetts this past week announced that two such persons--brothers who operated nursing homes--have pleaded guilty to charges based on stealing funds and neglecting nursing home patients.

Joel K. Logan and Todd Logan reportedly pled guilty to charges of Larceny, Medical Assistance Fraud by a Provider, Conspiracy, Fiduciary Embezzlement, and Neglect of Patients in Long-Term Care Facilities.

According to the State, the Logans and their nursing home corporations admitted that they converted Medicaid funds to their own personal use, and failed to provide patients in the homes necessities such as food, medicine, sanitary conditions and bed linens. The defendants reportedly used the money for personal expenditures, including "horse racing activities and luxury boats."

They also admitted to "stealing $82,000 from the statutorily regulated Patients Needs Accounts (PNA)" for three of the nursing homes, to embezzling funds from the employer-sponsored 401(k) Plan, and to other misconduct, according to the State.

Because nursing home residents are so vulnerable, they depend on honest persons to "blow the whistle" on such abuses. We commend those who helped stop these abuses--and urge others to speak out to protect our elderly citizens and taxpayer funds.

Hospital System Settles Medicare Fraud False Claims Act Allegations for $60 Million

July 26, 2008

The government's announcement this week of a $60 million Medicare fraud settlement with a Missouri hospital system is yet another example of the need for ongoing deterrence of health care fraud.

According to the government, Lester E. Cox Medical Systems violated the False Claims Act, the nation's primary tool for combating fraud against taxpayer funds. Dating back to 1995 and continuing to recent years, Cox allegedly committed various unlawful acts, including submitting fraudulent cost reports to obtain Medicare funds, entering into illegal arrangements with doctors that violated the Stark Law and the Anti-Kickback Statute, and other misconduct.

Cox reportedly will pay $35 million immediately, with five annual payments of $5 million (plus interest) to follow. Cox also has entered into a "comprehensive" Corporate Integrity Agreement with the Office of Inspector General of the United States Department of Health and Human Services, designed to cause compliance with federal requirements for receiving federal dollars.

Although the settlement amount sounds substantial, it appears that the government alleged that the Medicare program's losses were far greater. The government says it took into account Cox's "ability to pay" and continuation of services to the community.

I have been most impressed by the federal prosecutors I have dealt with in Missouri who investigate health care fraud cases brought under the qui tam provisions of the False Claims Act. The government's attorneys' work is to be applauded.

Still, from a taxpayers' perspective, the settlement only recovers a portion of the taxpayers' loss. As doctors and patients fight to keep scarce Medicare dollars available for patient care, we cannot tolerate fraud that reduces the funds needed by patients.

This settlement demonstrates the need for continued action any time health care fraud is detected. It was this need that motivated Congress in 1986 to create meaningful financial incentives for private citizens (relators) to bring qui tam cases under the False Claims Act, and to share in the government's recovery of damages from those who defraud the government.

Acknowledging the Integrity That Whistleblowers Stand For in Bringing Qui Tam Whistleblower Cases Under the False Claims Act

July 18, 2008

"What motivates whistleblowers" is a question that our whistleblower attorneys are asked frequently. Basic honesty and integrity--trying to do the right thing--is what we see most.

It is deeply satisfying when a whistleblower's courage in insisting on honesty and integrity is recognized and applauded. I just received this note that was sent to a client who had "taken a stand" for honesty and integrity in handling federal grant funds at an educational institution, and I am reprinting portions here. Its truth and eloquence speak for themselves:

You don't know me, but we share a couple of things in common. I worked in the [same institution] from late 2002 to early 2004. . . .

Your integrity amidst pressure from multiple sources is truly admirable, and I'm heartened that others ultimately saw matters as you did. A particular quote of yours resonated with me. "You have to stand up and defend academic values." . . .

Thank you for your personal example of integrity, of honoring academic standards, and persistence. To be sure, you are a gifted scholar AND champion to so many. I wish you and your family all good things in the future.


Major "Qui Tam" Whistleblower Law Amendments Clear House Judiciary Committee, Which Approves "False Claims Act Correction Act of 2007"

July 16, 2008

Very important amendments to the nation's major whistleblower law, the False Claims Act, cleared the House Judiciary Committee today. The False Claims Act Corrections Act of 2007 is intended to restore the False Claims Act to its originally intended usefulness. It will eliminate many "loopholes" that dishonest government contractors have used to avoid liability.

Our whistleblower lawyer blog has often written about the False Claims Act, the qui tam law that empowers private citizens to report fraud as whistleblowers or "relators," and to share in the government's recovery of damages. We have tracked the development of the Senate version of the new whistleblower law amendments, the False Claims Act Correction Act (S. 2041), since it was proposed last September by a bipartisan group that included Senators Grassley, Durbin, Leahy, Specter and Graham.

Taxpayers Against Fraud (with which I am proud to be associated) summarizes its key provisions as follows:

--to clarify that False Claims Act liability protects all federal funds;

--to solely vest the Government with the power to dismiss whistleblower- filed False Claims Act lawsuits that are based on public allegations;

--to remove confusion over the statute of limitations period;

--to explicitly clarify that the False Claims Act applies to those who discover an overpayment and decide to pocket the funds; and

--to provide strengthened employment protection for whistleblowers.

The bill moves on to consideration by the entire House of Representatives. We will continue to report on the progress of this essential bill, and applaud those who have worked for its passage!

Whistleblower False Claims Act Cases Lead New Jersey Health Care Consultant to Settle Allegations of Medicare Fraud

March 16, 2008

The Justice Department has announced that Besler & Company, Inc., a New Jersey health care consulting firm, and its principal Philip Besler, have agreed to settle allegations of fraud against the federal Medicare program, which were initiated by two qui tam whistleblower cases. The settlement is for $2.875 million, plus interest, paid to the federal government.

The settlement concludes that the Besler firm counseled hospital clients to improperly increase charges to Medicare patients, so that they would obtain enhanced reimbursement from Medicare.

Medicare pays supplemental reimbursements or "outlier payments" to hospitals when the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

The Justice Department's announcement alleged that, "between January 2001 and August 2003, Besler & Company advised hospitals to purposefully inflate charges for inpatient and outpatient care to make these cases appear more costly than they actually were, and thereby augment their outlier reimbursements."

We congratulate those involved for bringing about this result!

Durable Medical Equipment (DME) Fraud Crackdown by CMS Announced--to Combat False Claims Act Violations of Types Often Exposed by Whistleblowers and Their Attorneys

January 12, 2008

Some of the many types of health care fraud that this whistleblower lawyer blog has followed involves "durable medical equipment" (DME). The sale of wheelchairs, walkers, oxygen supplies and equipment, hospital beds, orthotics, prosthetics, and various medical devices is yet another opportunity for dishonest suppliers to defraud taxpayers.

This week, the Centers for Medicare & Medicaid Services (CMS) announced an initiative designed to improve care, save $1 billion annually, and lower Medicare beneficiaries’ out-of-pocket costs--by promoting competition in the sale of durable medical equipment.

Seventy new areas across the country have been added to the second phase of a competitive bidding program. One goal is to "prevent unscrupulous suppliers from participating in Medicare."

According to CMS Acting Administrator Kerry Weems,“Competitive bidding means that Medicare beneficiaries will have access to these products at substantially lower costs.” Mr Weems noted that “[s]ince all successful bidders will be required to meet quality standards and be accredited by Medicare, people with Medicare in these 70 new areas can be assured of access, low prices and high quality."

The new program is also intended to provide another layer of protection against Medicare fraud. As our whistleblower clients and other whistleblower attorneys know too well, fraud in health care is bleeding our nation's precious health care resources--and cost taxpayers millions each year.

We congratulate CMS for its ongoing efforts to to root out health care fraud.

IRS Tax Whistleblowers & False Claims Act Qui Tam Cases--2007 Year in Review by Whistleblower Lawyer Blog

December 31, 2007

2007 has been a most significant year for whistleblowers. The whistleblower lawyer blog attorneys look back on some of the milestones:

1. As soon as Congress authorized the first meaningful IRS Whistleblower Rewards Program to pay tax whistleblowers 15-30% of IRS recoveries from those who violate the tax laws by statue effective on December 20, 2006, beginning in January our whistleblower lawyers submitted some of the first IRS Whistleblower claims in the nation under the new law. Our IRS Whistleblower cases have continued to grow throughout the year.

2. Our IRS whistleblower submissions have led to criminal and civil investigations over tax cheating, and our whistleblower clients are in a position to receive 15-30% of the amount of collected proceeds (including penalties, interest, additions to tax, and additional amounts) recovered by the IRS.

3. This Spring, legislative officials requested that one of our whistleblower lawyer blog co-authors help draft a state False Claims Act for Georgia, and then invited him as the only private attorney to testify at the legislative hearings to explain the federal False Claims Act, and how the new state False Claims Act will operate. The new Georgia State False Medicaid Claims Act was signed into law on May 24, 2007, and early results show that it already has been effective in uncovering and stopping Medicaid fraud.
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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.

4. As the new IRS Whistleblower Program took shape during 2007, our whistleblower lawyer blog followed each development to educate the public and other attorneys about the new IRS Whistleblower Rewards.

5. At a national conference sponsored by Taxpayers Against Fraud in September, whistleblower lawyer blog author Michael A. Sullivan joined IRS Whistleblower Office Director Stephen Whitlock, Professor Dennis Ventry, and fellow IRS whistleblower attorneys Paul Scott and Erika Kelton for a panel discussion to explain how the new IRS Whistleblower Program will operate.

6. To educate other professionals about developments with the False Claims Act and the wave of new state False Claims Acts, whistleblower lawyer blog attorneys published articles in journals that included Compliance Today, a publication of the Health Care Compliance Association. Our whistleblower lawyer blog attorneys also chaired the Whistleblower Law Symposium, and were invited to lead panel discussions and give presentations at the Southeastern Health Care Fraud Conference and various other conferences.

7. Of course, like other whistleblower law attorneys, our firm has continued to represent whistleblowers to recover damages for fraud in health care programs inclluding Medicare and Medicaid, Hurricane Katrina federal disaster relief, government procurement, and other matters affecting federal and state tax dollars.

We are continually inspired by our clients for their commitment to honesty and integrity in the use of government funds. We look forward to another successful year keeping you informed with this whistleblower lawyer blog!

TRICARE Medical Fraud Report--Whistleblower Attorneys Take Note that Health Care Fraud Continues to Plague Government

November 2, 2007

Fraud affecting health care is a frequent topic of our whistleblower lawyer blog. A new report on TRICARE, the U.S. Military's health care system, shows that medical fraud continues, as honest whistleblowers and their lawyers continue the fight against government fraud.

More than 200 "qui tam" whistleblower cases were mentioned in the annual report of the Program Integrity Office of TRICARE, and more than 200 whistleblower cases have been brought each year since 2002.

The Report outlines numerous types of health care fraud, including double billing, upcoding, kickbacks, illegal drug marketing practices, and quality of care violations. The Report notes that TRICARE obtained judgments for $36.7 million for 2006, including a settlement with Tenet Healthcare Corporation for more than $20 million.

The Report encourages service members and their families to pay attention to their EOB's (Explanation of Benefits) as a first line of defense against fraud.

It is galling to us that fraud steals millions of the dollars that our veterans and service men and women need and deserve for their own health care. We applaud the efforts of whistleblowers to report this fraud and recoup these funds, so that they can go to the persons who have served our country.

False Claims Acts and Unauthorized Laboratory Tests

October 23, 2007

Our whistleblower lawyer blog attorneys have written extensively about Georgia’s enactment of the new State False Medicaid Claims Act, a new whistleblower law that an attorney with our law firm helped enact. This qui tam whistleblower law has applicability to anyone who files a false or fraudulent claim for reimbursement with the State’s Medicaid program.

A classic example of this would be filing false claims for reimbursement for unnecessary and/or unauthorized laboratory tests. If a health care provider submits false or fraudulent claims for reimbursement under the State Medicaid program for performing lab tests which are not properly authorized by a medical physician, or do not otherwise meet Medicaid standards for reimbursement, such a submission could constitute a false claim against the Medicaid program, thus entitling any whistleblower reporting that claim to a reward for reporting Medicaid fraud. One such case, recently filed by the State of Massachusetts, indicates just how expensive such claims may be for the taxpayer.

Last week, in Boston, Boston Clinical Laboratories, Inc. was alleged to have submitted 66,000 false Medicaid claims for urine drug screens in circumstances where they were not ordered by an authorized prescriber or were ordered for non-medical purposes. According to allegations made by the Massachusetts Attorney General, many of these laboratory urine screens were to monitor sobriety tests for the individuals and were not approved for medical reasons. Under state regulations, eligible Medicaid claims are limited to laboratory services prescribed by a physician and must serve a medically necessary purpose. Court ordered and Social Service Agency drug testing, as well as testing for resident sobriety in out-patient treatment facilities, are not covered under the Medicaid program.

While we do not know whether the allegations against Boston Clinical Laboratories, Inc. are true, the fact remains that the case indicates just how expensive unauthorized laboratory tests could be for taxpayers. If laboratories are submitting false claims for reimbursement under the State Medicaid program and if the claims being submitted are not properly approved or authorized, this could constitute a claim under the applicable State False Claims Act for which a whistleblower/informant could receive a reward.

Procedurally, a False Medicaid Claims Act Complaint alleging Medicaid fraud must be filed under seal. The State Attorney General is then given adequate opportunity to investigate the case to determine whether the State wishes to intervene in the lawsuit and take it over as a case that the Attorney General will prosecute. If the State intervenes, the whistleblower is still entitled to a recovery out of any eventual settlement or judgment obtained. In those cases in which the State does not intervene, the whistleblower and his or her counsel can proceed nonetheless in the name of the State and receive an even greater percentage of any recovery assuming fraud is demonstrated. In any event, obviously, fraud needs to be exposed in whatever form it takes.

The claims filed against Boston Clinical Laboratories, Inc. represent merely one type of claim that can be pursued under a State’s False Claims Act. Because Medicaid fraud is such a national problem one must consider just how significant false laboratory claim are in reality. The problem could be huge particularly if only one provider can submit 66,000 claims just for urine screens!

Part 6: The State False Claims Acts: Qui Tam Whistleblower Laws That Seek to Repeat the Successes of the Federal False Claims Act

October 7, 2007

This Part 6 is the final installment by whistleblower lawyer blog of an article explaining why the major qui tam whistleblower statutes, the federal False Claims Act, has led to a wave of new state False Claims Acts. It is part of a recently published article by whistleblower lawyer blog author Michael A. Sullivan, and this article is reprinted with the permission of the Georgia Bar Journal.

This Part 6 describes the new state whistleblower laws and how states have fared to date in recovering taxpayer money wrongfully through fraud and false claims. It also discusses some interesting new approaches that some states have taken in improving on the federal False Claims Act with their own statutes.

V. Other States’ Experiences With Their Own False Claims Acts

As noted, in 2007 Georgia, New York, and Oklahoma joined the 16 other states that have a False Claims statute, and at least a dozen other states are considering similar laws. [58] The financial incentives of the Deficit Reduction Act of 2005 have not only prompted states that had lacked False Claims statutes to enact them, but also have caused many states wishing to qualify for the additional funds to amend their existing False Claims statutes.

In essence, while states may enact “tougher” or more comprehensive laws than the federal False Claims Act, states with “weaker” or less effective laws—as judged by the standards of the Deficit Reduction Act—will not qualify for the additional funds. [59]

Seven of the first ten states whose statutes were scrutinized by the Office of Inspector General (OIG) quickly learned this lesson when OIG disapproved their state statutes. [60] These included California (which lacked a minimum penalty), Florida (which omitted “fraudulent” from its definition of claims), Indiana (which did not make defendants liable for “deliberate ignorance” and “reckless disregard”), Louisiana (which did not permit the state to intervene in cases, set too low a percentage for whistleblowers to recover, and set no minimum penalty), Michigan (which omitted penalties and liability for decreasing or avoiding an obligation to pay the government, i.e., a “reverse false claim”), Nevada (which had a statute of limitations too short and a minimum penalty too low), and Texas (which did not permit the whistleblower to litigate the case if the state did not, and which provided for lower percentage shares to whistleblowers and lower penalties). Most of these states have gone back to the drawing board to correct these deficiencies.

In sum, the Deficit Reduction Act has set minimum standards for state False Claims Acts for states wishing to receive these additional funds. In plain English, the state laws must protect at least Medicaid funds, and they must be at least as effective as the federal False Claims Act, especially in rewarding and facilitating qui tam actions for false or fraudulent claims, with damages and penalties no less than those under the federal Act. [61]

A. How Other States’ False Claims Acts Compare to the New Georgia Statute

Many state False Claims laws have been in transition in 2007. States whose laws have been “disapproved” by OIG have begun to amend their statutes to meet the requirements for obtaining the additional funds under the Deficit Reduction Act, as Florida and Texas already have done in 2007. While these laws are in flux, some significant differences from Georgia’s new State False Medicaid Claims Act are likely to remain.

First, the majority of state False Claims statutes protect the state’s funds generally, rather than protecting only state Medicaid funds, as Georgia’s new State False Medicaid Claims Act is limited. Just as the federal False Claims Act is not limited to health care fraud, but encompasses fraud against the government generally (except for Internal Revenue violations, which are now covered by the new IRS Whistleblower program), [62] many states have used these statutes to protect public funds in general from fraud. Those states include California, Delaware, Florida, Hawaii, Illinois, Indiana, Massachusetts, Montana, Nevada, Oklahoma, Virginia, and Tennessee.

In addition, several states—including Hawaii, Massachusetts, Nevada and Tennessee— have expanded on the federal Act’s four commonly-used theories of liability listed above. These state laws create a new legal theory for holding liable a person or entity who is the “beneficiary” of the “inadvertent submission” of a false or fraudulent claim, if that person or entity fails to disclose (and presumably correct) the false claim after discovering it. [63]

Moreover, Tennessee’s False Claims Act reaches beyond false or fraudulent “claims” and imposes liability for false or fraudulent “conduct” that apparently does not necessarily involve “claims” submitted to the state. This state law adds a new category of liability for “any false or fraudulent conduct, representation, or practice in order to procure anything of value directly or indirectly from the state or any political subdivision.” [64]

Because states have this leeway under the Deficit Reduction Act to pass laws that may be “tougher” or more “effective” than the federal Act, some states have set the statutory penalties higher than the federal level of $5,500 to $11,000 per claim. For instance, under the New York law enacted in 2007, penalties range from $6,000 to $12,000 for each false or fraudulent claim. [65]

Some other states authorize a higher percentage of the state’s recovery that a relator (whistleblower) may receive, instead of the percentages that the federal False Claims Act authorizes (which the Georgia statute also uses): 15-25% of the recovery in cases in which the government intervenes, and 25-30% in cases in which the government does not intervene. For example, Nevada’s percentages are 15-33% in intervened cases, and 25-50% in non-intervened cases; Tennessee’s are 25-33% in intervened cases and 35-50% in non-intervened cases; and Montana’s range from 15-50%. [66]

B. Notable Results Obtained by States Under Their False Claim Statutes

Most qui tam cases filed under the state False Claims statutes have related to health care. Many are “global” Medicaid cases that were first developed in federal courts as Medicare and Medicaid fraud cases and that concerned a nationwide fraud which had been investigated by multiple federal and state jurisdictions. [67] Each state that enacts a False Claims Act that meets the minimum requirements is in a position to join the process.

Most of the state settlements have come from “piggy backing” on federal law enforcement efforts and from joining in global settlements. [68] Experience with some of the newer state statutes is too recent to evaluate, but many states have reported the desire for more resources to develop such cases. [69]

Texas’s experience is worth special mention because the Texas Attorney General’s Office has been especially effective in pursuing cases involving false claims in health care. Texas’s statute has allowed it to recover more than $216 million in health care fraud cases since 1999.

Because the Texas Attorney General’s Office has been a leader in recovering damages for health care fraud by using the Texas statute, it was perhaps ironic that OIG initially “disapproved” the highly successful Texas law before it was amended in 2007 to comply with the Deficit Reduction Act standards. [70]

California, whose statute is not limited to health care, recovered $43.1 million in 2005 in a state False Claims action alleging fraud in the installation and monitoring of heating and cooling equipment in San Francisco schools. [71] In 2001, California recovered $31.9 million in an action alleging fraudulent billing during construction of the Los Angeles subway system. [72] Similarly, California recovered $30 million in 2000 in a matter alleging the knowing sale of defective computers to the state and political subdivisions. In 1998, California recovered $187 million in an action alleging the improper retention of unclaimed municipal bonds. [73]

We do not know with any precision the dollar amount of fraud that affects any particular state's government spending, or how much of that fraud can be prevented through effective use of a state False Claims Act. For now, New York, Oklahoma, and Georgia have joined the list of states that will see how much of at least their Medicaid fraud losses can be recovered through the new state False Claims Acts.

Conclusion

We hope that our article on the False Claims Act and the new state False Claims Acts has been useful. If you would like, please feel free to call us to discuss any questions you may have at 800-228-9159, or email us through our website link here (or directly to msullivan@finchmccranie.com.)

Continue reading "Part 6: The State False Claims Acts: Qui Tam Whistleblower Laws That Seek to Repeat the Successes of the Federal False Claims Act " »

Whistleblower Law Attorneys to Gather for Symposium on False Claims Act, State False Medicaid Claims Act, and New IRS Whistleblower Rewards Program

September 18, 2007

Some of the country's leading attorneys in qui tam whistleblower cases and IRS Whistleblower cases will gather for the "First Annual Whistleblower Law Symposium," which will take place at the Georgia State Bar Headquarters on Thursday, September 20, beginning at 9:00 a.m. (See Agenda below). This Whistleblower Law Symposium is organized and co-chaired by the authors of this whistleblower lawyer blog, Michael A. Sullivan and Richard W. Hendrix.

The presenters will include the very successful Pat O’Connell of the Texas Attorney General’s Office, whose group has recovered more than $216 million in health care fraud cases since 1999; and Jim Breen, who has represented relator Ven-A-Care of the Florida Keys Inc. in many very substantial qui tam cases, including the action that led to last week’s announcement by DOJ of a settlement with Aventis Pharmaceuticals Inc.

In addition, Steve Cowen of King & Spalding, LLP will chair a discussion of issues in defending False Claims Act cases; Marlan Wilbanks and other relators’ counsel will speak as well; and Charlie Richards of the Georgia Attorney General's Office and Georgia’s Inspector General Doug Colburn will discuss the new Georgia State False Medicaid Claims Act.

We will also discuss the bill introduced last week by Senators Grassley, Durbin, Specter, and Leahy to make substantial modifications to the federal False Claims Act, the “False Claims Act Correction Act of 2007.” (See http://grassley.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=fac0a482-1321-0e36-ba6f-0150b8a2b182&Month=9&Year=2007).

Further, my partner Richard Hendrix and I will explain and discuss the new IRS Whistleblower Program created by Congress in December 2006. I spent several hours this past week in Washington with the Director of the new IRS Whistleblower Office, Stephen Whitlock, to prepare for and appear in a panel discussion to explain the new IRS Whistleblower Program. I also enjoyed lunch with the lead IRS official responsible for IRS Whistleblower claims in the financial services industry, Stuart Mann, and with Nicole Cammarota, an IRS official who is working on the new regulations. There is a great deal of excitement about this new IRS Whistleblower program, which rewards citizens who report large tax fraud, tax evasion, and other tax law violations to the IRS. (Our firm is pursuing a variety of IRS Whistleblower cases across the country.)

For anyone who believes that taxpayers pay too much to allow fraud against the federal and state governments, these exciting new developments in the law are important.

We are excited to be hosting this Whistleblower Law Symposium, and to discuss recent developments in the False Claims Act, the new state False Claims Acts, and the new IRS Whistleblower Program. The Agenda for the Symposium is below.

Continue reading "Whistleblower Law Attorneys to Gather for Symposium on False Claims Act, State False Medicaid Claims Act, and New IRS Whistleblower Rewards Program" »

New State False Claims Act Trend Is Evaluated at Southeastern Health Care Fraud Conference in Atlanta

September 8, 2007

Yesterday I enjoyed leading a panel discussion of the new State False Claims Acts, at the Southeastern Health Care Fraud Conference in Atlanta. Of particular interest to this audience was the new Georgia State False Medicaid Claims Act that became law in May 2007, which has qui tam whistleblower provisions similar to the federal False Claims Act.

Our audience of health care attorneys heard a detailed account of Florida's successes with its State False Claims Act by Mark S. Thomas, the Chief of Staff and Special Counsel of the Florida Agency for Health Care Administration. We also learned how the Georgia Attorney General's Office plans to implement the new State False Medicaid Claims Act in remarks by Charles M. Richards, Senior Assistant Attorney General of the Georgia State Health Care Fraud Control Unit.

Other excellent presentations were made in this seminar organized by my friends Steve Cowen of King & Spalding, LLP, and Joe Whitley of Alston & Bird, LLP. I am grateful to Joe and Steve for the opportunity to participate and explain the False Claims Act, the new Georgia State False Medicaid Claims Act and other state False Claims Acts, some of which have added interesting new wrinkles to health care compliance, by creating new theories of liability not found in the federal Act. (An article explaining some of the new thoeries of liability that these new State False Claims Acts introduce will appear in the October Georgia Bar Journal.)

To explain in depth this new whistleblower law to attorneys, as well as the federal False Claims Act and the new IRS Whistleblower Rewards Program, our firm has already scheduled the "First Annual Whistleblower Law Symposium" in Georgia 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. Other nationally-known speakers will join us as well on September 20.

Whistleblower Lawyer Update: Medicaid Fraud Investigation Into Fraudulent Pharmacy Billings Produces Recovery in Missouri

August 13, 2007

Medicaid Fraud Recovery Announced by Missouri Attorney General

False and fraudulent billings were uncovered in a Missouri Medicaid fraud investigation that has produced a recovery by the Missouri Attorney General's Office's Medicaid Fraud Control Unit. Billings like this typically violate the False Claims Act or the various state False Claims Acts.

Prescriptions that had not been authorized by physicians were submitted and paid for by the Medicaid program. Once the suspicious activity was reported, the Attorney General's Office's investigation followed and produced a recovery of $462,926 from apparently a single pharmacy in DeKalb County, Missouri, the Randolph Drug Store in Maysville.

The Attorney General's press release does not make clear whether a whistleblower other than the owner of the pharmacy was involved in reporting this health care fraud. We commend the Missouri Attorney General and the Medicaid Fraud Control Unit on their successful effort to stop fraud against taxpayers.

Whistleblower Lawyer Update: Medical Equipment Fraud, Fraudulent Billing by Doctor, and Home Health Care Fraud Highlight Week of Indictments in Health Care Compliance Cases

August 6, 2007

This past week produced examples of why whistleblowers and their attorneys must continue to insist that false claims and health care fraud not be tolerated. The indictments of Texas medical equipment suppliers--who are alleged to have overbilled Medicare and Medicaid for expensive scooters and chairs while providing cheaper ones --show how prevalent false claims are.

The indictment of a physician in West Virginia for allegedly falsifying the time spent in patient visits shows another common type of health care fraud and false claims.

A Virginia home health care provider's indictment for allegedly using unqualified nurses and nurses aides is yet another example of health care fraud that whistleblowers can help stop.

You can read the new articles at the links above--we attorneys who write this whistleblowerlawyerlog want to keep public awareness of health care fraud and other fraud against taxpayers front and center.

Pharmaceutical Company Bristol Settles Massachusetts Lawsuit Over Pricing of Drugs

July 20, 2007

Alleged Overcharging for Prescription Drugs Leads to $13 Million Settlement in Boston

Pharmaceutical fraud harms the Medicare and Medicaid programs--and the citizens who pay for them. Drug companies' alleged overcharging for prescription drugs has led to fraud investigations and lawsuits by whistleblower attorneys in the past. This week, shortly before trial, pharmaceutical manufacturer Bristol-Myers Squibb Co. reportedly agreed to pay $13 million to resolve allegations that it overcharged for its Taxol cancer medicine and other drugs.

The settlement follows a ruling last month ordering Bristol Myers-Squibb, AstraZeneca Plc and Schering-Plough Corp. to pay damages for allegedly overcharging on drugs by inflating the "average wholesale price" (AWP).

The lawsuit alleged that consumers' insurance co-payments were inflated under Medicare Part B, through use of average wholesale prices for prescription drugs, including Taxol, that were substantially greater than what the drug manufacturer actually charged doctors and hospitals.

The upcoming trial was to have addressed co-payments for Bristol's drugs. According to Bloomberg, the drug Taxol produced $1.6 billion in sales in 2000 alone before Bristol lost the patent protection for this drug.

The lawsuit is In Re: Pharmaceutical Industry Average Wholesale Price Litigation, MDL No. 1456, U.S. District Court, District of Massachusetts.

Cheating the public out of scarce health care dollars should be stopped--and whistleblowers are crucial to that effort.

Medicare Fraud Convictions for Florida Home Health Care Operator for False Claims

July 6, 2007

Durable Medical Equipment Company Received Kickbacks from Pharmacy Owners in Health Care Fraud Case

In a Medicare fraud case of interest to whistleblowers and whistleblower attorneys, a Miami a federal jury convicted a home health care operator of conspiracy to defraud and submit false claims and receive kickbacks, conspiracy to commit health care fraud, and three counts of receiving kickbacks. Gisela Valladares, owner of PRN Home Health Care, Inc., faces up to 30 years in prison.

According to the Justice Department, two pharmacy owners billed Medicare for more than $20 million in connection with the referral of false prescriptions for “compounded” aerosol medications furnished by Valladares and other co-conspirator owners of durable medical equipment (DME) companies. The pharmacy owners paid kickbacks of approximately half of the money paid by Medicare.

The pharmacy owners testified that Valladares played a key role--acquiring the patients’ information. The medication charged to Medicare was unlawfully manufactured in shell pharmacies that contained almost no actual pharmaceutical products. One pharmacy owner testified that his business had no foot traffic, no patients, no sundries and no real medicine, but was simply a "mill" used to defraud Medicare.

Sham billing by health care providers bleeds essential dollars from our Medicare system. Whistleblowers who bring qui tam cases under the False Claims Act can help fight this fraud against all of us.

Pharmaceutical Manufacturers Pursued for Medicaid Fraud by Texas Attorney General's Office

June 27, 2007

Whistleblower Reveals Alleged Drug Price Schemes to Defraud Medicaid

When drug companies hide the true prices charged for prescription drugs, the pharma companies can violate laws protecting state Medicaid programs from being defrauded by "overpaying" for drugs. The experienced Medicaid fraud prosecutors of the Texas Attorney General's Office have announced such allegations against three pharmaceutical manufacturers for tens of millions of dollars in Medicaid fraud in Texas.

For pharmaceutical products to be eligible for Medicaid reimbursement, the law generally requires that manufacturers accurately report "generally and currently available market prices" to the Medicaid program, according to the Attorney General's release.

The Attorney General alleges that these drug companies sold hundreds of Medicaid-covered drugs at large discounts to companies such as Wal-Mart, CVS Pharmacy and Walgreens, but failed to disclose the accurate pricing information to the Medicaid program. Consequently, the state was deceived about current market prices for the drugs.

When Wal-Mart, CVS, and Walgreens sought Medicaid reimbursement for these prescription drugs, the false pricing reports caused Medicaid to overpay by millions of dollars for these drugs. Ven-a-Care, an industry whistleblower, disclosed the scheme.

The pharma companies named by the Attorney General are:
• Mylan Laboratories Inc. of Pennsylvania (with national subsidiaries Mylan Pharmaceuticals Inc. and UDL Laboratories Inc.)
• Sandoz Inc. of New Jersey (with subsidiaries Geneva Pharmaceuticals Inc., Novartis Pharmaceuticals Inc., Eon Labs and Apothecon Inc.)
• Teva Pharmaceuticals Inc. of Pennsylvania (with subsidiaries Lemmon Pharmaceuticals Inc., Copley Pharmaceuticals Inc. Ivax Pharmaceuticals Inc., Sicor Pharmaceuticals Inc., Teva Novopharm Inc. and Teva Pharmaceutical Industries, Ltd.).

We applaud the Texas Attorney General's Office once again for leading the fight against health care fraud.


Home Health Care Operator Receives Prison Time for Medicare Fraud

June 26, 2007

False Claims Act Case Continues Over Health Care Fraud Allegations

As other whistleblower attorneys who were former federal prosecutors know, Medicare fraud may sometimes lead not only to a qui tam whistleblower lawsuit, but also to prison time for the guilty party. A former home health care company owner now faces almost three years in prison after being convicted of defrauding Medicare of more than $1 million.

U. S. District Judge Nancy Edmunds in Detroit sentenced Amjad Khan, a certified public accountant and the former CEO of American Home Health Care Inc., to 33 months in prison. A False Claims Act case remains pending against the defendant.

The health care fraud case concerned fraudulent claims for nonreimbursable expenses between 1995 and 1999.

We agree with U.S. Attorney Stephen Murphy's comment about the case: “Health care fraud is a silent tax forcing honest citizens and corporations to pay more for health insurance premiums and medical services than they should."

Nursing Home Abuse and Fraud Exposed by Nurses in Qui Tam Whistleblower Case

June 24, 2007

Medicare Fraud and Medicaid Fraud Alleged by Nurses at Nursing Homes

Two nurses disturbed by nursing home abuse and neglect of nursing home residents--who apparently were subjected to gross nursing home malpractice--are the "whistleblowers" in a nursing home False Claims Act qui tam lawsuit in Missouri, which the U.S. Attorney's Office in St. Louis has recently announced it has joined. The whistleblower suit alleges that the nursing home operator defrauded Medicare and Medicaid by providing care that was essentially "worthless" to the nursing home patients, according to news reports.

In this "quality of care" whistleblower case, the nurses alleged that many nursing home residents suffered from dehydration, weight loss, and preventable bed sores that eventually led to amputations; that nursing home staffing was cut to unacceptable levels to save money; and that other nurses misused patients' medicines, which were not locked securely, according to reports.

The U.S. Attorney's Office in St. Louis saw enough merit in the allegations after investigating that it is pursuing its own case.

The case reportedly has been filed against Cathedral Rock Corp., an operator of nursing homes; Kent Harrington, president and CEO; and five nursing home facilities: Spring Place Care Center and McLaran Care Center in St. Louis, Oak Forest Skilled Care in Ballwin, Cathedral Gardens Care Center in north St. Louis County and Blanchette Place Care Center in St. Charles.

Nursing home abuse and neglect presents one of the most appalling types of cases imaginable. Our firm has seen similar abuses in bringing cases in which we have represented distraught family members of an elderly relative who, for example, has been allowed to develop bedsores so badly that amputations of limbs have been necessary.

We applaud nurses and other health care professionals for their courage and decency in speaking out to stop such abuses, and we hope that these Missouri nurses receive a substantial share of the money recovered by the government in this whistleblower case--they deserve it. We also commend the members of the Office of U.S. Attorney Catherine Hanaway in St. Louis for pursuing this case.

"Lessons from Health Care Fraud in Medicare and Medicaid" to Begin on This Whistleblower Lawyer Blog

May 8, 2007

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."