Whistleblower Blog Archives - Page 20 of 35

Whistleblower Blog

News in Government Procurement Fraud and False Claims

March 7, 2007
Michael Sullivan

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
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IRS Names New Head of IRS Criminal Investigative Division

February 27, 2007
Michael Sullivan

The IRS agents we have been meeting with since January to pursue whistleblower claims under the new IRS Whistleblower Rewards Program have a new boss, the IRS announced today.

The Criminal Investigative Division of the IRS will be led by Eileen Mayer, who was most recently head of the IRS’s Office of Fraud/Bank Secrecy Act.

We are encouraged by IRS Commissioner Mark W. Everson’s comments that “she will play a key role in IRS efforts to halt tax fraud.” Agents of the Criminal Investigative Division work tax fraud cases, some of which are now originating under the new IRS Whistleblower Rewards program.

As a result of the IRS’s efforts, the Department of Justice has brought many successful prosecutions.
The IRS’s press release is reprinted below:
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New Medicaid False Claims Act Proposed in Georgia

February 26, 2007
Michael Sullivan

We were encouraged to see that Georgia has just joined the states that are considering a State “False Claims Act” with whistleblower provisions.

As we have discussed before on the Whistleblower Lawyer Blog, Congress has created great financial incentives for states that pass their own versions of the federal False Claims Act, with qui tam provisions that encourage whistleblowers. States can increase by 10% their share of Medicare fraud recoveries by passing their own False Claims Acts, but the state laws must pass muster with OIG and be at least as effective as the federal False Claims Act. Otherwise, as approximately seven other states were disappointed to find, the state does not receive an increase in its share of Medicare fraud recoveries.

Rep. Ed Lindsey is the sponsor of Georgia’s proposed “State False Medicaid Claims Act.” The new law would apply to Medicaid fraud and false claims, but not other fraud and false claims that cost the state taxpayers money.

The challenge will be to make sure that the new law is tough enough and broad enough to meet OIG’s criteria. As we reported before, OIG has disapproved the False Claims statutes of California, Florida, Louisiana, Indiana, Michigan, Nevada, and Texas, as not as effective as the federal False Claims Act. No approval by OIG, no extra money for the state.

We will be discussing this new whistleblower statute, as well as others. Those who wish to read it can do so here:
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Has Iraq Fraud Cost Taxpayers Even More Than Previously Believed?

February 26, 2007
Michael Sullivan

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
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Comments–Whistleblower Lawyers, Other Attorneys, and Clients on the Whistleblower Lawyer Blog

February 22, 2007
Michael Sullivan

Since we began the Whistleblower Lawyer Blog to discuss topics of interest to attorneys, potential whistleblowers and others about developments in the new IRS Whistleblower Rewards Program, in qui tam litigation under the False Claims Act, and other whistleblower developments that might be of interest to other lawyers or whistleblowers, we have received some very positive feedback.

We have discussed not only how the IRS Whistleblower Program and the False Claims Act work, but we have also tried to highlight specific
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New Whistleblower Protections Approved by House Committee

February 21, 2007
Michael Sullivan

Recognizing how important whistleblowers are to stopping fraud, the U.S. House Oversight and Government Reform Committee today approved the Whistleblower Protection Enhancement Act (H.R. 985).

The new whistleblower protections would apply to federal employees and government contractors. The law would establish whistleblower protections for scientific, intelligence and transportation security employees. It would also apparently mean that officials would investigate whether security clearances are revoked as retribution for a whistleblower’s reporting allegations of waste, fraud or abuse.

Congressman Henry Waxman (D-Cal.) introduced the bill last week. Additional amendments would strengthen the effectiveness of the whistleblower provisions.

We find it very encouraging that Congress is taking such logical steps to protect the public’s money from waste, fraud and abuse.

The specific sections of the proposed new whistleblower law are as follows:

H.R.985 Whistleblower Protection Enhancement Act of 2007 (Introduced in House)
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Medicare Fraud Indictments in Los Angeles

February 20, 2007
Michael Sullivan

We find it staggering to read about how blatant Medicare fraud can be, which often provokes a whistleblower to step forward. Today’s L.A. Times reports on a shameless scheme to defraud Medicare:

Elderly and mentally ill patients allegedly were offered doughnuts, candy and other gifts to lure them into more than $12 million worth of unnecessary respiratory treatments that were fraudulently billed to Medicare, according to the Indictment. Doctors and administrators were charged, according to this report.

What can you say about such criminality,
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State Whistleblower Act Is a Powerful Tool in Texas–But Could Produce Even More Medicaid Fraud Recoveries

February 20, 2007
Michael Sullivan

Whistleblower suits that reveal Medicaid fraud in Texas have grabbed the attention of the Texas Legislature–which apparently recognizes how powerful state False Claims Acts can be.

Today’s Houston Chronicle reports that Texas is working through a “backlog” of Medicaid fraud cases, the top 20 of which could bring another $700 million to the State (and presumably a significant amount to whistleblowers).

Whistleblower cases have been so effective that the legislators asked what more could be accomplished with more resources provided to pursue these fraud
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Watching the New IRS Whistleblower Procedures Take Shape

February 19, 2007
Michael Sullivan

We are excited to see the new IRS Whistleblower Office’s procedures being developed. We obtained a copy of a recent letter from IRS Commissioner Mark W. Everson, describing how the new Whistleblower procedures are taking shape, to Senator Charles Grassley.

Senator Grassley has been instrumental in pushing for effective whistleblower laws, both in qui tam litigation under the False Claims Act, and now in the new IRS Whistleblower Program. Here is an excerpt of Commisioner Everson’s January 29, 2007 letter describing the implementation of the new IRS Whistleblower Program:

“The IRS has already taken steps to establish the new Whistleblower Office, which will report directly to the Deputy Commissioner for Services and Enforcement. This places the new office on par with other Operating divisions at the IRS. It will be headed by an IRS executive who has experience with IRS operations as well as with whistleblower operations in other government agencies. This executive should be assigned to the new position by February 4, 2007 [and our Whistleblower Lawyer Blog readers can learn about the new Director here] and will be available to attend your bipartisan roundtable discussion to obtain first-hand input from key stakeholders.

“The IRS Chief counsel and Assistant Secretary for Tax Policy are responsible for issuing the guidance required by the Tax Relief Act of 2006. Both offices are currently studying the legislation to identify areas and issues to be addressed in the guidance. They will obtain input from all interested parties, including the new executive in charge of the Whistleblower Office, to determine issues needing guidance. We are hopeful that the roundtable discussion will provide an opportunity to receive additional input. Chief Counsel and Tax Policy plan to issue this guidance within the one year timeframe required in the legislation.”
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Potential Whistleblowers: IRS Offers Program for Employers “Back-Dating” Stock Options

February 14, 2007
Michael Sullivan

We are encouraged that the IRS is taking action in response to the fraudulent practice of “back-dating” of stock options. Potential whistleblowers may wish to see the IRS’ description of its program to deal with an aspect of this problem.

Here is an excerpt from the IRS’ announcement of how it is permitting employers to “step forward” and pay a penalty, and a related IRS Release can be read here:

(From IRS Release:)

IRS Offers Opportunity for Employers to Satisfy Tax Obligations of Rank-and-File Employees with ‘Backdated’ Stock Options

IR-2007-30, Feb. 8, 2006
WASHINGTON – Internal Revenue Service officials today announced an initiative aimed at providing relief for rank-and-file employees affected by their companies’ issuance of backdated and other mispriced stock options. While the program will be available to help these employees who may be unaware that they held backdated options, the opportunity will not be available for backdated options exercised by most corporate executives or other insiders.

If an employee exercised a ‘backdated’ stock option in 2006, the employee may owe an additional 20-percent tax, plus an interest tax, under the Federal tax laws governing deferred compensation. If the option had been properly priced, the employee normally would only have owed income tax on the difference between the value at the date of grant and exercise.
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With Wall Street Bailout, Whistleblowers to Reveal Fraud and Abuses Through IRS Whistleblower Claims and Qui Tam False Claims Act Cases?

October 10, 2008
Michael Sullivan

Will the IRS Whistleblower Program and the False Claims Act be powerful weapons in redressing the fraud and abuse that led to the current financial crisis–and to the future fraud and abuse that is certain to target the “bailout” billions of taxpayer funds?

Fraud and abuse have never been in short supply. The ongoing financial crisis points to staggering amounts of past financial abuses that now threaten to wipe out Americans’ savings, if not undermine the world economy.

Now, the federal government’s stated
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1st Annual Report on New IRS Whistleblower Program Issued by Secretary of the Treasury

September 30, 2008
Michael Sullivan

When Congress authorized the new IRS Whistleblower Program in December 2006, it required annual reporting to Congress about how the new whistleblower provisions have been used, what results were obtained, and what recommendations to improve the program should be considered.

The Secretary of the Treasury has recently issued the first such Report, which summarizes the first 12 months of the new IRS Whistleblower Office.

For those who follow the IRS Whistleblower Program, the Report provides a look into the substantial progress made in a short time by this very small group within the IRS. These developments have been followed on this whistleblower lawyer blog since the infancy of the IRS Whistleblower Office.

Much-anticipated data about recoveries and rewards paid under the IRS Whistleblower Program is included in the Report. In FY 2007, the IRS paid $13 million in rewards to “informants” (whistleblowers), but those rewards were based on the lower percentages that applied before the IRS Whistleblower statute was amended effective December 20, 2006, to double the size of rewards available to 15-30% of the government’s recovery. Rewards for IRS Whistleblower claims submitted after December 20, 2006 should be much greater, especially since the new Program has generated a wave of submissions.

The IRS’s priorities for the Whistleblower Program in FY 2008 include revising old policies and procedures concerning whistleblower rewards, developing the criteria to be used in making reward decisions, soliciting feedback to help guide the new Program, and testing and then deploying a new case management system. (Some of the same information will be discussed in an upcoming article on “best practices” in pursuing IRS Whistleblower claims that I was requested to write for the TAF Quarterly Review, based on my interview of IRS Whistleblower Office Director Stephen Whitlock in early September.)

We congratulate the very capable staff of the IRS Whistleblower Office for all of their progress to date. For those interested in reading the full Report, the body of the Report is reprinted below:
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IRS Whistleblower Office Director and Tax Court Judge Gather with Whistleblower Attorneys

September 11, 2008
Michael Sullivan

For the second time since the new IRS Whistleblower office was created in early 2007, IRS Whistleblower Office Director Stephen A. Whitlock addressed questions from whistleblower attorneys at the Taxpayers Against Fraud annual conference yesterday in Washington. Joining him as panelists were U.S. Tax Court Special Trial Judge Lewis R. Carluzzo; Professor Dennis J. Ventry, Jr. of American University’s Washington College of Law; Erika Kelton of Phillips & Cohen LLP; and as moderator Paul D. Scott of the Law Offices of Paul D. Scott.
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Dismissal of Fraudulent Tax Shelter Charges Against Former KPMG Partners Is Upheld by Appellate Court

August 28, 2008
Michael Sullivan

As this whistleblower lawyer blog has discussed before, accounting firms that promote fraudulent tax shelters are prime targets of IRS enforcement efforts (often assisted by IRS tax whistleblowers).

In a decision last week, the prosecution of 13 former KPMG partners and other executives for their alleged involvement in fraudulent tax shelters was thwarted–again. A panel of judges from the Second Circuit Court of Appeals affirmed the trial judge’s dismissal of the charges against these KPMG defendants.

The court did not find the
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Attorney Assisting Offshore Tax Evasion Is Rewarded With Prison Sentence and Judgment to PAy of $2.7 Million

August 24, 2008
Michael Sullivan

As this whistleblower lawyer blog has written about often, abuses of offshore transactions have increasingly become a target of IRS enforcement efforts. A Utah attorney learned this lesson last week when he was sentenced to ten years in prison, and was ordered to pay $2.7 million, for his role in an offshore tax evasion scheme that deprived the government of more than $20 million in taxes.

Attorney Dennis B. Evanson of Sandy, Utah, was convicted of conspiracy to commit mail and wire fraud,
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New Jersey Medicare Contractor Settles Health Care Fraud Case under False Claims Act

August 16, 2008
Michael Sullivan

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
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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
Michael Sullivan

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
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New Whistleblower Law Promotes Consumer Product Safety

August 5, 2008
Michael Sullivan

On July 31, Congress enacted a new Whistleblower Law designed to promote consumer product safety. The new federal legislation specifically was enacted to protect public and private sector employees who disclose to their employers, a regulatory agency or a state Attorney General any perceived violation of the Consumer Product Safety Commission. The law also provides protection for employees who refuse to participate in violations of the Consumer Product Safety Commission Act. Obviously, the purpose of this legislation was to protect employees who, in good faith,
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IRS Announces Process for Review of Whistleblower Claims by IRS Large and Midsize Business Division (LMSB)

August 1, 2008
Michael Sullivan

As another step toward the further development of the new IRS Whistleblower Program, our friends at the IRS Large and Midsize Business Division (LMSB) in Lower Manhattan have announced a three-step process for IRS Whistleblower claims that are eligible for the new “rewards” authorized by Congress in December 2006.

IRS Commisioner Frank Ng describes it as a “process for analyzing informant information and disseminating it to the field” for claims with at least $2 million in question, which is the threshold amount for whistleblowers
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Judges Address New State False Claims Act in Georgia

July 30, 2008
Michael Sullivan

At the annual “Continuing Judicial Education” conference in St. Simon’s Island, Georgia this week, I was honored to be invited to speak to the assembled judges about the new state False Claims Act in Georgia, the State False Medicaid Claims Act.

As this whistleblower lawyer blog has written about extensively, there is a wave of new state False Claims Acts across the country, as Congress has urged states to replicate the dramatic successes of the federal False Claims Act in stopping those
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