(404) 609-1696

ATLANTA,GA

(404) 341-5314

DULUTH, GA

Whistleblower Blog

The Most Significant Recent Qui Tam Whistleblower Cases Under the False Claims Act

This is the final section of my article. It discusses the most significant recent qui tam cases under the False Claims Act (as of December 2006).

B. Recent Significant Recoveries Under the False Claims Act:

1. Health Care Industry

a. Tenet Healthcare Corporation: $900 million

In June 2006, Justice Department announced that Tenet Healthcare Corporation, operator of the Nation’s second largest hospital chain, had agreed to pay the United States more than $900 million for alleged unlawful billing practices.

According to the government, the settlement amount, which was based on the company’s “ability to pay” (a phrase that suggests the government’s calculation of damages was higher), included more than $788 million to resolve claims arising from Tenet’s receipt of excessive “outlier” payments (payments that are intended to be limited to situations involving extraordinarily costly episodes of care, resulting from the hospitals’ inflating their charges substantially in excess of any increase in the costs associated with patient care and billing for services and supplies not provided to patients); more than $47 million to resolve claims that Tenet paid kickbacks to physicians to have Medicare patients referred to its facilities; and that Tenet billed Medicare for services that were ordered or referred by physicians with whom Tenet had an improper financial relationship; and more than $46 million to resolve claims that Tenet engaged in “upcoding.” The Justice Department acknowledged that “several” of the issues arose from lawsuits filed by whistleblowers under the qui tam provisions of the Act.

b. Serona, S.A: $704 million

The Swiss corporation, Serona, S.A., with its U.S. subsidiaries and related entities, agreed to pay $704 million to resolve criminal and civil allegations in October 2005. According to the Justice Department’s announcement, these allegations were in connection with illegal schemes to promote, market, and sell Serostim, an AIDS drug. The civil portion of the settlement was $567 million, and Serona also agreed to pay a $136.9 million criminal fine. This was the third largest health care fraud recovery by the government at the time.

According to the government, Serona knowingly submitted false and fraudulent claims for Serostim that were not eligible for reimbursement because they were for unnecessary and/or for off-label use of Serostim, and because the claims were for prescriptions induced by kickbacks. The investigation began in 2000 because a former Serona Lab’s employee filed a qui tam action, which was followed by other whistleblower suits in other states. This Serona settlement was reportedly the largest civil drug settlement to date.

(more…)
Continue Reading

The Growing Importance of the Qui Tam Whistleblower Cases Under the False Claims Act

This is part 4 of my article on the False Claims Act. This part discusses the huge increase in federal dollars recovered in the past few years:

IV. Recent Recoveries and Other Developments In Qui Tam Litigation

A. An Explosion of Federal Dollars Recovered Since 1986, Under the False Claims Act

Over the past 20 years since the modern False Claims Act was established through the 1986 Amendments, the federal government’s recoveries of dollars have grown astronomically. The Department of Justice statistics reprinted in Appendix 2 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.51

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 derived from qui tam cases. Similarly, in 2005, of the government’s total recovery of $1.4 billion, $1.1 billion of that amount derived from qui tam cases.

(more…)
Continue Reading

How the Modern False Claims Act Works in Qui Tam Whistleblower Cases

This is part 3 of my article on how the False Claims Act works:

III. Brief Overview of How the Modern False Claims Act Works

A. Conduct Prohibited

The federal False Claims Act imposes civil liability under several different theories:

First, the Act makes liable any person who knowingly presents, or causes to be presented, a “false or fraudulent claim for payment or approval” to the federal government.27 “Claim” is broadly defined to include not only submissions made directly to the federal government, but also “any request or demand . . . for money or property” made to a “contractor, grantee, or other recipient” if the federal government provides any portion of the money or property in question.28

Second, the Act creates liability for using a “false record or statement” to obtain payment of a false claim. It imposes liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government.”29

Third, the False Claims Act imposes liability under a “conspiracy” provision. Any person who “conspires to defraud the Government by getting a false or fraudulent claim allowed or paid” is also liable under the Act.30
Fourth, since the government also can be defrauded when a private entity underpays or avoids paying an obligation to the government, the modern Act contains what is known as a “reverse false claim” provision. It creates liability for any person who “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.”31 For example, a company that is obligated to pay royalties to the government under an oil lease can be held liable if it uses false records or statements to pay less than what it owes.

(more…)
Continue Reading

History of the False Claims Act

This is the second part of my article explaining the False Claims Act–it addresses the history of the Act:

II. Background of the False Claims Act
While the False Claims Act may be the best known qui tam statute, it is far from being the first. Qui tam actions date back to English law in the 13th and 14th Centuries. This tradition took root in the American colonies and, by 1789, states and the new federal government had authorized qui tam actions in various contexts.7
According to one writer, “[i]n the early years of the Nation, the qui tam mechanism served a need at a time when federal and state governments were fairly small and unable to devote significant resources to law enforcement. As the role of the Government expanded, the utility of private assistance in law enforcement did not diminish. If anything, changes in the role and size of Government created a greater role for this method of law enforcement.” 8

A. Birth of the False Claims Act
The Civil War prompted Congress to enact the original False Claims Act in 1863. As government spending on war materials increased, dishonest government contractors took advantage of opportunities to defraud the United States government. “Through haste, carelessness, or criminal collusion, the state and federal officers accepted almost every offer and paid almost any price for the commodities, regardless of character, quality, or quantity.”9 The original legislative proposal would have made contractors subject to martial law. A substitute bill provided for both civil and criminal penalties, and it authorized private individuals to sue on behalf of the United States. One senator explained how the qui tam provision of the Act was intended to work:

The effect of the [qui tam provision] is simply to hold out to a confederate a strong temptation to betray his co-conspirator, and bring him to justice. The bill offers, in short, a reward to the informer who comes into court and betrays his co-conspirator, if he be such; but it is not confined that class. . . . In short, sir, I have based the [qui tam provision] upon the old fashioned idea of holding out a temptation and setting a rogue to catch a rogue, which is the safest and most expeditious way I have ever discovered of bringing rogues to justice.10
The original Act provided for civil penalties of double the amount of damages sustained by the United States as a result of the false claim, plus a $2,000 forfeiture for each claim submitted.11 In the original Act, if a private citizen used the qui tam provision to file suit, the government had no right to intervene or control the litigation. The “relator” who was successful was entitled to receive one-half the amount of the final judgment in forfeiture and damages, with the United States receiving the other half.12

(more…)
Continue Reading

Introduction to the False Claims Act and Qui Tam Whistleblower Cases

I wrote this article for a seminar to explain the False Claims Act to those who may not know about it. I hope it may be useful to those who are interested in the Act. I have divided it into several sections–this is the first section, summarizing how the False Claims Act came to be in the time of Abraham Lincoln, and how it has evolved since then:

I. Introduction

Fraud is perhaps so pervasive and, therefore, costly to the Government due to a lack of deterrence. GAO concluded in its 1981 study that most fraud goes undetected due to the failure of Governmental agencies to effectively ensure accountability on the part of program recipients and Government contractors. The study states:

For those who are caught committing fraud, the chances of being prosecuted and eventually going to jail are slim . . . The sad truth is that crime against the Government often does pay.1

Fraud–and allegations of fraud–plague government spending at every level. Today, as the federal and state governments struggle to fund the billions of dollars spent annually on health care through Medicare and Medicaid; the Iraq war and reconstruction effort; other Department of Defense procurement; Hurricane Katrina and other disaster relief; and government grants and programs of every description, there is no shortage of opportunities for fraud against the public fisc.

The federal False Claims Act, 31 U.S.C. §§ 3729 – 3733, has been the federal government’s “primary” weapon to recover losses from those who defraud it.2 The Act not only authorizes the government to pursue actions for treble damages and penalties, but also empowers and provides incentives to private citizens to file suit on the government’s behalf as “qui tam relators.”3 Over the past 20 years, recoveries for the federal government have grown dramatically since Congress amended the Act in 1986 to encourage greater use of the qui tam provisions, as part of a “coordinated effort of both the [g]overnment and the citizenry [to] decrease this wave of defrauding public funds.”4

The False Claims Act has unique procedural requirements that create many pitfalls for a lawyer prosecuting or defending cases under the Act. In addition, the law varies among the different federal circuits in ways that can determine the outcome of a False Claims Act case, depending on where it is filed.

——————————————————————————–

1 Legislative History to P.L. 99-562, False Claims Amendments Act of 1986, Senate Report No. 99-345 S. Rep. 99-345, 3, 1986 U.S.C.C.A.N. 5266, 5268 (hereinafter “Legislative History”) (quoting 1981 GAO Report to Congress, “Fraud in Government Programs: How Extensive is it? How Can it be Controlled?”).

2 Legislative History, at 2, 1986 U.S.C.C.A.N. at 5266.

3 The term “qui tam” is derived from the Latin phrase, “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “who pursues this action on our Lord the King’s behalf as well as his own.” Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 769 N.1 (2000).

4 Senate Report No. 99-345 S. Rep. 99-345, *2, 1986 U.S.C.C.A.N. 5266, **5267. Appendix 2 shows the growth in revenues, which is discussed in section IV infra.

(more…)
Continue Reading

Search

Topics

Our Other Blog

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

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 https://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?”
(more…)

Continue Reading

Greatest Impact of 2009 False Claims Act Amendments–“Civil Investigative Demands”

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
(more…)

Continue Reading

Bank CEO’s Alleged TARP Fraud Results in First Reported Criminal Charges For Misuse of TARP Funds

We have written previously about how the “Troubled Asset Relief Program” (TARP) that began with the financial meltdown in 2008 would undoubtedly beget fraud that may be actionable under the False Claims Act. The qui tam provisions of the False Claims Act, the country’s major whistleblower law, allow whistleblowers (“relators”) who report fraud or false claims to share in the government’s recovery of damages.

Yesterday, the first TARP fraud criminal charges appeared. Federal prosecutors in New York’s Southern District announced the arrest of Charles J. Antonucci, Sr., former President and Chief Executive Officer of The Park Avenue Bank.

The criminal complaint filed on March 13, as summarized by prosecutors, alleges “self-dealing, bank bribery, embezzlement of bank funds, and fraud, among others. ANTONUCCI also was alleged to have attempted to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program, or TARP. ANTONUCCI is the first defendant ever charged with attempting to defraud TARP. Additionally, ANTONUCCI was alleged to have used The Park Avenue Bank in a scheme to defraud two pastors of a Florida congregation out of more than $100,000 set aside to build a new church.”

Antonucci likely will not be the last former bank executive to have to surrender his passport and post bond. If it were not for the dearth of restrictions on permissible uses of TARP funds–which has provoked outrage as TARP recipients paid large bonuses–more TARP cases for “misuse” of TARP funds would have appeared by now. (We received many calls from potential TARP whistleblowers interested in bringing cases under the False Claims Act).

Nonetheless, Antonucci’s case alleges some of the more traditional types of fraud that will be prosecuted as they undoubtedly surface in the TARP program, especially as more TARP whistleblowers come forward.

With the billions used to fund TARP, those TARP whistleblowers may be motivated by the prospect of receiving 15-25% of money that the government recovers when the whistleblowers use the qui tam provisions of the False Claims Act to pursue TARP fraud.

The government’s full announcement is reprinted below.
(more…)

Continue Reading

Iraq Reconstruction Fraud Continues to Fuel Investigations by Office of the Special Inspector General for Iraq Reconstruction

As if the nation’s expenditures to rebuild Iraq were not enough, fraud that steals taxpayer dollars continues to infect the Iraq reconstruction program. This fraud often results in qui tam whistleblower cases under the False Claims Act, which allows those reporting the fraud to receive a a share of the government’s recovery of money.

Today’s New York Times piece by James Glanz reports on the more than 50 new fraud investigations in the past six months alone in the Iraq reconstruction effort.

The Office of the Special Inspector General for Iraq Reconstruction is responsible for these investigations. “Chaos, weak oversight and wide use of cash payments in the reconstruction program in Iraq allowed many more Americans who took bribes or stole money to get off scot-free,” in Mr. Glanz’s words.

Fortunately, 2009 changes to strengthen the False Claims Act, the country’s primary whistleblower law, will allow whistleblowers reporting fraud to do so more effectively so that they may share in the dollars recovered.
(more…)

Continue Reading

IRS Whistleblower Program and Confidentiality of IRS Investigations of Whistleblower Claims

One of the most interesting and challenging issues in representing IRS whistleblowers is how this promising new IRS Whistleblower Program can co-exist with the limits Congress has imposed on disclosure of taxpayer information–which includes what the IRS does in pursuing claims brought by whistleblowers.

I wanted to pass along that Michelle M. Kwon, Assistant Professor of Law at Texas Tech Law School, has written a law review article about this subject. It discusses recommendations for allowing information to be shared more with whistleblowers
(more…)

Continue Reading

Next IRS Whistleblower Boot Camp Is Planned for April 2010

We have written about the highly successful 2009 IRS Whistleblower Boot Camp in Washington, D.C. The IRS Whistleblower Office gathered with attorneys representing whistleblowers for this conference to discuss in detail many of the issues that arise in representing IRS whistleblowers, persons who report tax fraud or tax noncompliance. This conference is sponsored by Taxpayers Against Fraud.

Planning for the 2010 IRS Whistleblower Boot Camp on April 27, 2010 in Washington is underway, and it should be at least as successful and
(more…)

Continue Reading

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

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:
(more…)

Continue Reading

IRS Whistleblower Office Prepares to Make Awards to IRS Whistleblowers Under New Program

Since Congress authorized new awards to IRS whistleblowers in December 2006, we have followed closely the progress of the new IRS Whistleblower Office led by Director Stephen Whitlock.

IRS Whistleblower Office Director Stephen Whitlock has just announced that the IRS Whistleblower Office is preparing to make award determinations on whistleblower claims submitted under the “new” rewards program.

The IRS Whistleblower Office (and no doubt the IRS Chief Counsel’s Office) have been working on “guidance” for determining the amount of awards within the range authorized by law.

We have written extensively on many of the issues that have arisen and will arise in handling IRS Whistleblower claims. Recent multi-million dollar payments apparently relate to claims under the “old” program. Those payments are encouraging signs of the success of the new program, which authorizes a higher range of awards of 15-30% of the recovery by the IRS.

Tax Analysts reported on Director Whitlock’s comments at the recent ABA meeting.

We are encouraged that the steady progress of the IRS Whistleblower Office continues, as this promises to be an extremely successful program to discourage tax cheats. Only meaningful rewards to whistleblowers will accomplish that goal.
(more…)

Continue Reading

Taxation of Qui Tam Whistleblower Awards by IRS Addressed by Tax Court

How does the IRS treat whistleblowers who receive awards under the False Claims Act’s “qui tam” provisions, which allow private citizens who expose fraud to share in the government’s recovery of money?

The Tax Court this week addressed that question. It held that awards to whistleblowers or “relators” are part of “gross income” and thus are taxable, but that the whistleblower nonetheless may deduct the attorney’s fees paid as a miscellaneous itemized deduction.

Thus, no income taxes were owed on that portion of the whistleblower’s award that was paid as attorney’s fees to the whistleblower’s attorney.

This result not only makes sense, but also is consistent with precedent. Since the whistleblower would have had no recovery but for the attorney’s efforts, it would be unfair to conclude otherwise.

The case is ALBERT D. CAMPBELL, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, decided January 21, 2010. It is reprinted below:
(more…)

Continue Reading

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

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:
(more…)

Continue Reading