Whistleblower Lawyer Blog

This past week, more than 450 of the country's best employment lawyers who represent individuals gathered in Atlanta for the National Employment Lawyers Association's Annual Conference.

I had the pleasure of appearing with a group of excellent attorneys on a panel of that discussed "Strategic Thinking in Whistleblower Cases," moderated by Robin Potter of Chicago (who won a major victory last week).

Speakers at the 2008 NELA Conference panel on "Strategic Thinking in Whistleblower Cases" were (front row) David Marshall and Bryan J. Schwartz, and (back row) Michael A. Sullivan and Mark Kleiman.

David Marshall of D.C.'s Katz, Marshall & Banks, LLP began by discussing how nesessary whistleblowers are, as well as important considerations in pursuing Sarbanes-Oxley whistleblower cases.

Bryan J. Schwartz of Nichols Kaster & Anderson’s office in San Francisco then spoke on strategies in representing federal employees as whistleblowers.

Next, Michael A. Sullivan (this whistleblower lawyer blog author) of Finch McCranie, LLP discussed briefly the trend of new State False Claims Acts, and then explained in greater detail the new IRS Whistleblower Rewards Program.

Mark A. Kleiman of Santa Monica closed by regaling the audience with lessons he has learned from False Claims Act litigation, in particular from the recent case against Merck that resulted in a huge settlement.

I enjoyed this terrific opportunity to work with and hear from these accomplished lawyers, and thank NELA (especially Terri Chaw and the NELA staff) and my friends at NELA-Georgia for organizing this outstanding conference. I applaud the work not only of my co-panelists at the NELA Conference, but also of the many NELA members who strive tirelessly to obtain justice for their clients.

A wave of new “whistleblower” laws continues, inspired by the successes of the federal False Claims Act. These new laws include (1) state versions of the federal False Claims Act, and (2) the new IRS Whistleblower Rewards Program. At the same time, in 2008 Congress is considering legislation to strengthen the False Claims Act.

This article focuses on the new state False Claims Acts, which mirror the federal False Claims Act in important respects, but can differ in some significant ways. For employees who report fraud against the government and who face adverse employment actions, these new whistleblower laws may provide substantial relief.

One of the new state whistleblower laws, the Georgia “State False Medical Claims Act,” became law on May 24, 2007. 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.

These new state False Claims Acts and the federal False Claims Act create civil liability for treble damages and potentially huge penalties for fraud and false claims submitted to the government. They authorize “qui tam” or “whistleblower” lawsuits by employees or other persons, who may share in the government’s recovery, as well as allow employees to recover damages for retaliation. These state False Claims Acts, like the federal Act, have unique procedural requirements that are foreign to most lawyers.

This article explains how the state False Claims Acts work, which itself requires an explanation of the unique and sometimes perplexing federal False Claims Act on which these state Acts are based. This article summarizes the background of the federal False Claims Act, outlines how it operates, and discusses the Act’s increasing use to combat fraud directed at public funds. This article also highlights the important differences between state False Claims Acts and the federal False Claims Act by focusing especially on one example, the new Georgia State False Medicaid Claims Act. Finally, this article also compares other states’ False Claims Acts, their retaliation provisions, and some of the recoveries that states have obtained to date.

Continue reading "Whistleblower Lawyer Blog Update: New State False Claims Acts Reward Employees and Other Persons Who Report Fraud " »

The trend of new state False Claims Acts with qui tam whistleblower provisions continues, as Louisiana considers whether to adopt its own version of the federal False Claims Act.

The growing number of state False Claims Acts has been a frequent topic of this whistleblower lawyer blog. In 2007, New York, Georgia, and Oklahoma joined the 16 other states that have enacted versions of the federal False Claims Act, the government's primary weapon for fighting fraud against taxpayers.

New Jersey enacted its new False Claims Act in January 2008. It became the 20th state with such a qui tam whistleblower law.

We applaud Louisiana's progress with its new False Claims Act!

This whistleblower lawyer blog reported earlier that the New Jersey Assembly had passed the New Jersey False Claims Act, which provides incentives to whistleblowers ("relators") to expose fraud affecting state funds--much like the federal False Claims Act does.

Governor Jon Corzine signed the new bill into law yesterday, which makes New Jersey the 20th state to enact a state False Claims Act with qui tam whistleblower provisions similar to those of the federal False Claims Act. (Click here for a detailed explanation of the False Claims Act and why states are passing their own False Claims Acts.)

New Jersey's citizens should be proud that their taxpayer dollars have the additional protection of the new statute. Congratulations to all who accomplished this result!

The wave of new state False Claims Acts with qui tam whistleblower provisions has been a frequent topic of this whistleblower lawyer blog. In 2007, New York, Georgia, and Oklahoma joined the 16 other states that have enacted versions of the federal False Claims Act, the government's primary weapon for fighting fraud against taxpayers.

Today, New Jersey's Assembly unanimously passed the New Jersey State False Claims Act, which upon signature by the Governor will make New Jersey the 20th state to have a state version of the venerable qui tam whistleblower statute.

We congratulate New Jersey for taking the prudent action of passing a state False Claims Act. As we have written about extensively, Congress through the Deficit Reduction Act of 2005 has created financial incentives for states that pass such qui tam whistleblower laws that are at least as effective as the federal False Claims Act.

The New Jersey False Claims Act expands on the federal Act. It also includes criminal provisions as well as civil liability for treble damages and civil penalties. The text of the Act passed today is reprinted below:

Continue reading "False Claims Act Passed in New Jersey Continues Trend of New State Qui Tam Whistleblower Statutes" »

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.

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!

At a conference on False Claims Act Litigation on November 30, attorneys representing the government, relators or whistleblowers, and defendants gathered to discuss whistleblower law issues. The conference was organized by the law firm of Balch & Bingham LLP.

This whistleblower lawyer blog writer had the pleasure of appearing on a panel with the Chief of the Civil Division of the U.S. Attorney's Office in Atlanta, Amy Berne, and with Balch & Bingham's John Markus.

Amy Berne opened with an overview of how the government handles False Claims Act cases, and answered many questions about what affects the government's assessment of an FCA case. It is always informative to be able to ask the chief prosecutor what influences her decisions.

John Markus offered a very interesting perspective on compliance issues. From 2004 to 2007, John served as Executive Vice President and Chief Compliance Officer for HealthSouth Corporation, where he directed the development of a regulatory compliance program as part of a comprehensive restructuring initiative. He also negotiated and directed the implementation of Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services.

This whistleblower lawyer spoke on some of the reasons whistleblowers come forward and report fraud; goals in representing whistleblowers or relators; and new legal developments such as the wave of new State False Claims Acts, and proposed dramatic changes to the federal False Claims Act.

I appreciated the opportunity to join this group of accomplished lawyers, and thank Balch & Bingham's Mike Bowers, Rich Saunders, John Markus, and Christopher S. Anulewicz for organizing the seminar.

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!

Your whistleblower lawyer blog attorneys are proud to announce that a retired judge has joined their firm, Finch McCranie, LLP, to assist in representing their clients.

Stephen E. Boswell, former Chief Judge of Clayton County Superior Court in the metro Atlanta, Georgia area, has joined the firm as "counsel."

Judge Boswell recently retired from the Superior Court bench after serving 13 years as a Superior Court Judge, over two periods of service since 1982. Previously, he was in private practice in the Atlanta area for 16 years, with a variety of experience in civil and criminal jury trials.

As of Oct. 1, 2007, he has become “counsel” to Finch McCranie and will assist the firm’s attorneys and clients in, among other things, qui tam “whistleblower” cases under the federal False Claims Act and the state False Claims Acts, and claims under the new IRS Whistleblower Rewards Program.

“I am excited to be joining a group of excellent lawyers who have earned an outstanding reputation over decades for representing their clients with integrity to great success,” Judge Boswell said. “Finch McCranie is one of the most well-respected firms around, and I have known its lawyers both for the quality of their work and for their character in representing clients in my court. I am pleased to be able to help represent those clients now.”

“Our firm is proud to have Judge Boswell join our practice,” said Richard W. Hendrix, partner in the firm. “He brings a wealth of knowledge and experience from having been in involved in literally hundreds of trials over his career. “He’ll be an invaluable resource for our clients. No one knows how to try a case any better than Judge Boswell, and that experience also will benefit all of our clients.”

Judge Boswell, a native of Hogansville, Georgia, is a 1974 graduate of the University of Georgia Law School. Before completing his legal education, he served as a U.S. Army officer and was awarded a Bronze Star in Vietnam. In addition to his years on the trial court bench, Judge Boswell has been appointed to sit specially on the Georgia Supreme Court, has taught courses at the American Bar Association's National Judicial College, and is a former President of the Clayton County Bar Association.

Judge Boswell also has served on the Boards of Heritage Bank and of many community organizations, including as Chairman of the board of the Salvation Army. He has also successfully acted as a mediator in bringing many cases to resolution. He has elected not to accept cases as a Senior Superior Court Judge at this time.

As former federal prosecutors who prosecuted fraud against the government and have tried many cases, we are thrilled to add Judge Boswell's expertise in evaluating cases for trial to the services we provide our whistleblower clients. In addition, his civil and criminal trial experience and our experience in defending white collar criminal cases are a huge advantage to whistleblower clients who need to evaluate whether they have any exposure or liability themselves.

Finch McCranie, LLP is an “all-litigation” trial practice law firm with more than 40 years of continuous practice. The firm's main office is in Atlanta, Georgia. It holds numerous records, including the first million dollar jury verdict in the state. The firm’s practice includes representation of citizens who report fraud against the government, including qui tam "relators" or whistleblowers under the False Claims Act and the state False Claims Acts, as well as IRS tax whistleblowers. Members of the firm also testified in legislative hearings and helped draft one of the nation's newest qui tam “whistleblower” statutes, Georgia's new State False Medicaid Claims Act in 2007.

To assist those who want to know more details about the nation's primary whistleblower law, the False Claims Act, as well as the wave of new state qui tam whistleblower laws that mirror the False Claims Act, the whistleblower lawyer blog attorneys are pleased to present this detailed article. A version of this article by whistleblower lawyer blog author Michael A. Sullivan has just been published in the October 2007 Georgia Bar Journal, and is reprinted here in updated form with permission of the Bar Journal.

For ease of reading, we have divided this detailed article into six parts:

1. Introduction: The False Claims Act and How It Has Inspired a Wave of State Qui Tam Whistleblower Laws

2. The Basics: The False Claims Act and the Growing Number of State False Claims Acts With Qui Tam Whistleblower Provisions

3. Background and History of the False Claims Act

4. The Modern False Claims Act--How It Works

5. The Successes of the Modern False Claims Act--and How They Have Prompted a Wave of State False Claims Acts With Qui Tam Whistleblower Provisions

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

We hope that you find useful and informative our article on the False Claims Act and the new state False Claims Acts. If you have any questions, please feel free to call us at 800-228-9159, or email us through our website link here.

This article is reprinted with permission of the Georgia Bar Journal.

Copyright © 2007 by Finch McCranie, LLP

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 " »

This is Part 5 of 6 by whistleblower lawyer blog of a detailed article for those wishing to know more about the principal qui tam whistleblower statutes, the federal False Claims Act and the 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 5 discusses the dramatic successes of the federal False Claims Act since its 1986 Amendments in recovering taxpayers' money wrongfully obtained by fraud and false claims.

IV. The Trend of Recent Recoveries Under the False Claims Act

Over the past two decades since the modern False Claims Act was established through the 1986 Amendments, the federal government’s recoveries of dollars have grown astronomically, especially in health care cases. The Department of Justice statistics [52] tell the story:

In 1987, the government’s recoveries in qui tam cases totaled zero, presumably because the 1986 Amendments had just taken effect; and total recoveries under the False Claims Act were just $86 million. The following year, qui tam and other False Claims Act settlements and judgments began a steady climb upward, exceeding $200 million by 1989, and $300 million by 1991. By 1994, the government’s recoveries broke the $1 billion mark for the first time, with $380 million of that amount attributable to qui tam case recoveries alone.

In 2000, the government recovered more than $1.5 billion, of which $1.2 billion was derived from qui tam actions. In 2001, the government recovered more than $1.7 billion, with almost $1.2 billion of that amount from qui tam cases. With the exception of 2004, in each year since 2000 the government has recovered more than a billion dollars per year under the False Claims Act, and qui tam actions were responsible for the lion’s share of those recoveries. For example, in 2003, government recoveries exceeded $2.2 billion, of which $1.4 billion came from qui tam cases. Similarly, in 2005, of the government’s total recovery of $1.4 billion, $1.1 billion of that amount came from qui tam cases.

In 2006, the Justice Department recovered a record of more than $3.1 billion in settlements and judgments for fraud and false claims. Of this record $3.1 billion in recoveries, 72% came from the health care field; 20% from defense; and 8% from other sources. Health care alone accounted for $2.2 billion in settlements and judgments, which included a $920 million settlement with Tenet Healthcare Corporation, the country’s second-largest hospital chain. Defense procurement fraud amounted to $609 million in recoveries, which included a $565 million settlement with the Boeing Company.

It is interesting that, while defense procurement fraud both inspired the Act and was the largest source of recoveries at the time of the 1986 Amendments, health care cases now lead in recoveries, as health care costs have grown as a percentage of the federal budget. By industry, in 1987 the defense industry was the largest source of cases under the False Claims Act. [53] The health care industry accounted for only 12% of cases under the False Claims Act in 1987; that percentage grew to 54% by 1997. [54]

Many health care fraud cases have addressed over-billing or up-coding, fraudulent cost reporting, billing for services not provided, and failure to furnish the required “quality of care.” [55] The breakdown of the Department of Justice statistics shows that government recoveries in the health care field have grown from less than $2 million in 1988 to more than $1.8 billion in 2003. Although the amounts recovered rise and fall each year, from 2001–2006 government recoveries from the health care field exceeded $1 billion in five out of six years.

The trend has continued in 2007, as the Office of Inspector General of the Department of Health and Human Services recently announced that it expects $2.9 billion in recoveries for Medicare, Medicaid, and other federal health and human services programs for the first half of fiscal year 2007. [56]

In short, the health care industry now consistently accounts for the vast majority of settlements and judgments obtained by the federal government for fraud and false claims.

Continue reading "Part 5: The False Claims Act's Successes--and How They Have Prompted a Wave of State False Claims Acts With Qui Tam Whistleblower Provisions" »