Whistleblower Lawyer Blog

Once again displaying the effectiveness of the False Claims Act in combating government fraud, the Justice Department has announced that it recovered $2 billion in fraud cases in the latest fiscal year that ended September 30, 2007. Qui tam whistleblower cases under the False Claims Act accounted for at least $1.45 billion of those recoveries, with the whistleblowers (or "relators') sharing in those recoveries.

In all but one year since 2000, False Claims Act cases have generated at least $1 billion in recoveries, with whistleblowers responsible for cases that produced most of those judgments and settlements.

Health care fraud cases involving Medicare, Medicaid, and other government programs once again generated the most dollars--$1.54 billion, more than 75% of the total recoveries.

Pharmaceutical companies paid the lion's share of the health care fraud recoveries. The government's settlements with Bristol-Myers Squibb Co., Aventis Pharmaceuticals, Inc., Medco Health Solutions, Inc., Purdue Pharma L.P., Purdue Frederick Co., and InterMune, Inc. totalled over $800 million.

The Justice Department has focused on cases of Pharma's “off-label” marketing; kickbacks to physicians, wholesalers, and pharmacies to induce sales of drugs or medical devices; inflating the drug "prices" that federal programs use to reimburse providers, then "marketing the spread” between the federal reimbursement and the provider’s lower cost; and failing to report the drug company’s actual “best price” so as to reduce rebates required to be paid.

In addition to the federal dollars recovered, states recovered an additional $264 million in pharmaceutical fraud cases--demonstrating why state versions of the False Claims Act such as those enacted in 2007 by New York, Georgia, and Oklahoma are such a good idea.

The defense industry once again holds the number two position in government fraud, accounting for more than $48 million.

For an understanding of the False Claims Act, please see our in-depth article explaining the False Claims Act and its increasing importance in combating fraud by rewarding whistleblowers for stepping forward.

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.

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" »

Whistleblowers and whistleblower attorneys may consider Senator Charles Grassley of Iowa as the "patron saint" of protecting taxpayer money from fraud against the government. Sen. Grassley continues his great work as he testifies today before the Senate Judiciary Committee about Iraq contractor profiteering and fraud.

The Senator already claimed another recent victory by spearheading passage of the new IRS Whistleblower Rewards Program. Sen. Grassley saw how cost-effective the False Claims Act has been in recovering more than $20 billion for the government--largely because of the improved qui tam whistleblower enhancements enacted in 1986. (Sen. Grassley and Rep. Howard Berman were sponsors of the landmark 1986 amendments to the False Claims Act.)

Sen. Grassley was to testify that the False Claims Act whistleblower statute should be strengthened to deal with contractors such as Halliburton. He mentioned trying to recover $60 billion for meals not provided to the military by the defense contractor.

We find it refreshing to see someone like Sen. Grassley who is a true public servant--again and again. Congress and the American people should follow his lead in recognizing the value of effective whistleblower programs that encourage whistleblowers to report fraud, waste, and abuse of taxpayer dollars.

Otherwise, crime does pay for those who cheat the government--and thus other taxpayers.

We found a very interesting article from last week's Legal Times, with an excerpt of interest to whistleblower lawyers as follows:

"Last fall, the Justice Department launched a National Procurement Fraud Task Force to focus "resources at all levels of government to increase criminal enforcement" in areas of procurement fraud. The stepped-up attention to this area throughout the government may signal that the $3.1 billion record in federal fraud recoveries in 2006 could soon be broken. More than 50 inspectors general from across all government departments and agencies also are actively pursuing thousands of investigations."

"In addition, powerful newly installed Democratic committee and subcommittee chairs in Congress are launching dozens of oversight investigations of alleged government and contractor abuses, focusing on the reconstruction effort in Iraq and in the U.S. Gulf Coast following Hurricane Katrina, numerous areas of military and homeland-security procurement, the pricing of pharmaceuticals and other significant areas of federal contracting. For instance, House Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., in the first week of February began one set of hearings on alleged waste, fraud and abuse by government contractors in Iraq and another set of hearings on alleged overcharging by drug companies in federal health programs."

Congressional Committee Explores Contractor Overcharges

Of great interest to whistleblower lawyers is how much suspected fraud and abuse has occurred in Iraq reconstruction contracts. Goverment auditors recently announced that they now believe that Iraq contractor fraud and abuse may be three times greater than the previous estimates--and may affect one out of every six dollars spent in the Iraq reconstruction effort.

The estimate has grown from $3.5 billion to more than $10 billion in "questioned and unsupported costs," according to the Defense Contract Audit Agency (DCAA), which audits Iraq reconstruction contracts and troop support contracts of the Department of Defense and the U.S. military.

We find it sobering that this report is based on audits of only a small amount of the total taxpayer dollars spent on Iraq contracts. Only approximately $57 billion of our government contracts have been audited, and many significant contracts have not been audited.

The DCAA memo acknowledges that the total is probably much greater than the more than $10 billion found to date.

We believe this report shows that there cannot be enough auditors to catch every act of fraud and abuse--and even audits cannot detect every fraud. The American taxpayer will continue to depend on whistleblowers to expose and stop fraud, whether in Iraq contract fraud, Hurricane Katrina relief contract fraud, or in Medicare and Medicaid fraud.

You can read more about how this this report was received by the House Committee on Oversight and Government Reform, Congressman Waxman's committee. That congressional committee is busy this week, with the following schedule:

Full Committee Business Meeting, immediately followed by Full Committee hearing on Reforming the Presidential Library Funding Disclosure Process
Wednesday, February 28, 2007, 10:00 a.m., in 2154 Rayburn House Office Building

Subcommittee on Goverment Management, Organization, and Procurement hearing on 9/11 Health Effects: Federal Monitoring and Treatment of Residents and Responders
Wednesday, February 28, 2007, 12:00 noon, in 2247 Rayburn House Office Building

POSTPONED: Full Committee hearing to Examine Allegations of Political Interference with Government Climate Change Science (Part II)
This hearing has been postponed. Schedule information will be available shortly.

Subcommittee on Information Policy, Census, and National Archives hearing on The Presidential Records Act
Thursday, March 1, 2007, 2:00 p.m., in 2154 Rayburn House Office Building

As former federal prosecutors, it is always of interest to us to read about grand jury indictments involving fraud schemes. We have presented many such indictments to grand juries ourselves and know how the system works. On Tuesday of this week, a grand jury in Washington, D.C., returned an indictment against three Army Reserve Officers and two civilians based on allegations that they steered more than $8.6 million dollars in Iraqi reconstruction funds to a contractor in exchange for a variety of kickbacks and other inducements. The 25 count indictment, which includes charges of conspiracy and money laundering, is obviously the “Tip of the Iceberg” because the amount of money at issue in this particular scheme ($8.6 million) is insignificant when it comes to the billions of dollars that are still unaccounted for according to the Special Inspector General’s Office responsible for the oversight of the expenditure of government monies in Iraq.

The Department of Justice has always tried to publicize indictments in specific areas because of the “deterrent affect” it might have relative to others. Here, however, the proverbial horse is already out of the barn and there is not going to be much deterrence with respect to the billions already spent and unaccounted for (typically in no bid contracts). Hopefully, this indictment is a sign of things to come in terms of holding accountable those who would defraud their own government when it comes to schemes of this nature.

We continue to believe that Whistleblowers and Qui Tam lawsuits are the best deterrent there is for schemes of this nature. When you hit someone’s pocketbook, particularly companies who enrich themselves at taxpayers’ expense, with the treble damages and attorney’s fees and other remedies available under the False Claims Act, this truly does have a deterrent effect on others. Indictments, of course, are necessary in order to prosecute the guilty but with respect to the ill-gotten gain, indictments are not the best vehicle for getting taxpayer money back. While the government presumably will proceed in this case with forfeiture actions because of the money laundering charges, nonetheless, whistleblower suits are still the government’s most effective tool at combating fraud and waste.

In its Press Conference announcing this indictment, U.S. Deputy Attorney General Paul McNulty stated that “U. S. Government Officials working in Iraq are not for sale. We will prosecute anyone who attempts to exploit the reconstruction efforts in Iraq for their personal gain.” While such bravado sounds good, the fact remains that the Department of Justice will not be able to indict those responsible for fraud schemes without the assistance of informants and whistleblowers. We encourage all whistleblowers with knowledge of fraud in the Iraqi reconstruction effort to come forward so that more indictments can be handed down and more ill-gotten gain recovered from those who would participate in such schemes. As former prosecutors ourselves, we would be delighted to assist those who have such knowledge in seeing to it that the guilty are punished and the ill-gotten gains recovered.

We saw yesterday's quarterly audit report on Iraq fraud, published by the Special Inspector General for Iraq Reconstruction (SIGIR), Stuart Bowen Jr. The message is sobering:

"The security situation in Iraq continues to deteriorate, hindering progress in all reconstruction sectors and threatening the overall reconstruction effort," in the words of the Inspector General.

We all have already seen reports of how the United States is being exploited by dishonest and incompetent contractors in Iraq. This IG Report discusses not only poor security, but also corruption among Iraqi officials and bad management of the contracts.

You may have seen footage on the news of shoddy construction of a police building in Iraq, with the Special IG blaming the contractor.

From what our whistleblower clients report to us, efforts to defraud the U.S. government continue--shamelessly. We are continuing to evaluate potential cases of Iraq fraud and, when appropriate, to pursue for our whistleblower clients litigation under the qui tam provisions of the False Claims Act.

According to the Congressional Research Service, the United States has spent to date over $437 billion on the Iraq War. An additional $100 billion is estimated to be spent this year. While much of the money, obviously, goes for troops, a great deal of these amounts has gone to civilian contractors involved in reconstruction efforts in Iraq. But where has the money gone and who is accounting for its proper use?

According to Senator Patrick Leahy of Vermont, “Eventually we’re going to have a bill for about $1 trillion dollars and people are not going to be able to account for a very, very large part of it.” It is shocking to us that the Justice Department has done so little to address ever increasing reports of contractor fraud and abuse in Iraq. After three and a half (3 ½) years of war, to the best of our knowledge, not a single criminal case has been filed against any large corporation doing work in Iraq. While a few qui tam actions are beginning to emerge publicly, given that the war effort is taking place in a foreign country which obviously creates evidentiary issues, it may be some time before the full extent of contractor fraud and abuse becomes publicly known. Nonetheless, given the amount of no-bid contracts, this proves to be a major problem.

We support any effort to increase criminal penalties for those who exploit the war effort and obviously would encourage greater, not fewer, False Claims Act cases directed at such fraud and abuse. Billions of tax dollars are being spent on the war effort and most agree that billions are probably being lost to contractor waste, fraud and abuse. If contractor fraud continues to go unchecked in Iraq, the Government only invites more fraud. Accordingly, the whistleblower plaintiff’s bar should step up its efforts and utilize where applicable the government’s most effective tool in combating waste fraud and abuse in government programs: the False Claims Act.