False Claims Act

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

Published on: July 16, 2008 | by Michael Sullivan

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

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

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

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Whistleblower Attorneys at NELA Conference Address “Strategic Thinking in Whistleblower Cases”

Published on: July 1, 2008 | by Michael Sullivan

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.

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

Published on: May 23, 2008 | by Michael Sullivan

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.
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Major Whistleblower Law Development: False Claims Act Correction Act Is Approved by Senate Judiciary Committee

Published on: April 3, 2008 | by Michael Sullivan

Today saw a major development that could affect every whistleblower, whistleblower attorney, and whistleblower case involving the False Claims Act, the nation’s primary whistleblower law. The U.S. Senate Judiciary Committee today approved new legislation to restore the False Claims Act to its originally intended strength, by eliminating a series of “loopholes” that dishonest government contractors had used to avoid liability.

Our whistleblower lawyer blog has written extensively about the False Claims Act, the qui tam statute that allows private citizens to report fraud as whistleblowers or “relators,” and to share in the government’s recovery of damages. We have followed the development of the new whistleblower law amendments, the False Claims Act Correction Act (S. 2041), since it was introduced last September by a bipartisan group of Senators (Grassley, Durbin, Leahy, and Specter).

The advocacy group Taxpayers Against Fraud (with which I am proud to be associated) describes the new law as “A Better Rat Trap” designed to put more “snap” into the False Claims Act, and summarizes its key provisions as follows:

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

Published on: March 16, 2008 | by Michael Sullivan

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

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

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

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“False Claims Act Correction Act” to Restore Qui Tam Whistleblower Law to Its Original Intent Goes Before Senate Judiciary Committee

Published on: February 26, 2008 | by Michael Sullivan

Tomorrow, the Senate Judiciary Committee will hold a hearing on a much-needed bill that will restore to its intended effectiveness the government’s primary law for combating fraud.

Our whistleblower lawyer blog has written previously about the “False Claims Act Correction Act.” The Act is one of the most significant developments in whistleblower law since the 1986 amendments that created the modern False Claims Act.

This is a bipartisan bill designed to restore the government’s “primary” tool for fighting fraud against taxpayers, the False Claims Act, to its intended usefulness. Several court decisions have weakened the False Claims Act and inhibited its effectiveness in fighting fraud.

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State False Claims Act Is Considered in Louisiana

Published on: February 20, 2008 | by Michael Sullivan

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.

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Qui Tam Whistleblowers Awarded $140 Million Under False Claims Act in Medicare and Medicaid Fraud Cases in FY 2006

Published on: February 19, 2008 | by Michael Sullivan

Whistleblowers and their attorneys filing suit under the False Claims Act helped federal authorities recover $2.2 billion in Medicare and Medicaid fraud cases in fiscal year 2006, according to a government report just released. The whistleblowers or “relators” received $140 million of the proceeds for their efforts, under the qui tam provisions of the False Claims Act.

As this whistleblower lawyer blog has written about extensively, the federal False Claims Act is the government’s “primary” weapon for combating fraud. As health care expenditures have grown as a share of the federal budget, health care fraud now accounts for more than 70% of the government’s annual fraud recoveries.

It was encouraging to see the new “Health Care Fraud and Abuse Control Program Annual Report For FY 2006.” This report by the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS), and the Department of Justice, summarizes both organization’s FY 2006 results in battling Medicare and Medicaid fraud and recovering money improperly obtained from these programs.

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Federal Subsidies and the False Claims Act

Published on: February 9, 2008 | by Michael Sullivan

If an organization or individual is receiving a federal subsidy of any kind and makes false statements to the Federal Government with respect to such subsidies, such false statements could subject the receiver of the subsidy to liability under the Federal False Claims Act. In short, if a recipient of a federal subsidy makes false statements concerning eligibility for the subsidy and/or the amount of the subsidy sought or obtained, the recipient could be sued for fraud by a whistleblower with knowledge of the false statements. In some cases, the recipient of a subsidy may not be legally entitled to receive it or even if they are, they may not be entitled to receive the amounts being sought. In short, false statements made in connection with an application for or receipt of federal funds are actionable under the False Claims Act and if someone receiving a federal subsidy is proven to have made such false statements, they can be liable for three times the amount of the subsidy received plus statutory penalties as set forth under the Federal False Claims Act.

The Cato Institute oftentimes blogs about government fraud, abuse and waste. There are many entries in that firm’s website about federal give-away programs and “unnecessary” or wasteful subsidies. Many federal subsidies are doled out without any follow-up accounting and/or audit of whether the entity or person applying for the subsidy is entitled to receive it and/or is entitled to receive a subsidy in as great an amount as is involved. This lack of administrative oversight, therefore, opens up virtually every federal subsidy program to fraud, waste and abuse.

Any person with knowledge of such fraud could qualify for a reward under the Federal False Claims Act if they blow the whistle on fraud in connection with federal subsidy programs. Since there is little federal oversight in many of the federal subsidy programs, it is apparent that fraud occurs in these federal programs, as in any other, and that whistleblowers would be doing all taxpayers a service if they came forward exposing it.

New Whistleblower Law Provides Protection for Defense Contractor Employees

Published on: January 30, 2008 | by Michael Sullivan

Two days ago on 1/28/08 President Bush signed into law the National Defense Authorization Act for the fiscal year 2008. This legislation includes a provision protecting defense contractor employees who blow the whistle on contracting fraud. 10 U.S.C. § 2409 has specifically been amended via Section 846 to protect employees for disclosing “information that the employee reasonably believes is evidence of gross mismanagement of a Department of Defense contract or grant, a gross waste of Department of Defense funds, a substantial and specific danger to public health or safety, or a violation of law related to a Department of Defense contract (including the competition for or negotiation of a contract) or grant.” Obviously, this new whistleblower protection encourages defense contractor employees to come forward if they have knowledge of such misconduct.

The new whistleblower law is intended to protect all defense contract employees to come forward in good faith so that they need not fear reprisal if they do so. If the employee who blows the whistle on contractor fraud is retaliated against, the affected employee may file a complaint with the Inspector General of the Agency and unless the complaint is determined to be frivolous, the Inspector General will conduct an investigation. If the employee is not satisfied with the Inspector General’s handling of the complaint, the employee may bring an action in federal court and is entitled to a jury trial. If the complainant is retaliated against for bringing legitimate good faith complaints of government contract fraud out in the open, then his or her remedies would include reinstatement, back pay, compensatory damages, attorneys fees and costs.

This new law is a giant step forward when it comes to protecting whistleblowers who are brave enough to come forward and expose defense contractor misconduct. By protecting such employees from retaliation, the law is intended to encourage their coming forward to expose waste, fraud and mismanagement. If the employee who does come forward is retaliated against as a result of blowing the whistle, this law is intended to make sure that they will be fully compensated for any damages sustained as a result of such retaliation including reinstatement of the job taken from them or reimbursement for wages and benefits lost as a result of any retaliation. As stated, the employee is also entitled to have his or her attorneys fees and costs paid should they be retaliated against for blowing the whistle.

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