Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

Today the U.S. Supreme Court handed another victory to the Graham County Soil and Water Conservation District, dealing a setback to whistleblower Karen Wilson's lawsuit. In the 7-2 decision, the high court agreed with the fraudsters that their own internal "audit report" and another report by a state agency counted as "public disclosures" which barred Karen Wilson from filing a qui tam lawsuit. The holding goes against the decision of the Fourth Circuit, and the recommendation of the U.S. Solicitor General.  The Solicitor General's brief had argued that the purpose of the "public disclosure" is to bar qui tam lawsuits when the federal government already knows about the fraud at issue.  State and local governments should not be able to protect themselves by writing their own report about their local fraud, put it in the file cabinet, and never tell the federal government about it. Noting that the False Claims Act (FCA) says "administrative" and not "federal administrative," the Supreme Court majority disagreed.  It is another example of Congress promoting whistleblower lawsuits, only to have the Supreme Court limit the advances as much as they can.  In this round of cat and mouse, though, Congress has the last word. This blog reported last week on the whistleblower provisions of the newly signed Patient Protection and Affordable Care Act. The Senate included in this law, on pages 2082 and 2083, a correction to the FCA. Now the FCA recognizes a public disclosure only if it is from a "Federal criminal, civil or administrative hearing in which the Government or its agent is a party . . .." Also, if the federal government objects to dismissal, then no public disclosure would bar the qui tam lawsuit.

Poor Karen Wilson.  First the Supreme Court took away her retaliation claim by denying her the benefit of the FCA's six-hear statute of limitations.  Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U. S. 409 (2005). By looking to the FCA too literally, and ignoring the law's purpose and effect, the Supreme Court has today allowed fraud-committing local officials to insulate themselves with their own self-serving "audits." Karen Wilson has suffered too much, and our legal system has failed her and the cause of public accountability. On remand, the lower court will now have to decide if Karen Wilson qualifies as an "original source."

Now, I must blow the whistle on myself. Last year when the Supreme Court accepted this case, I predicted here that Graham County did not have the same grounds for optimism as it did in its first trip up. I was wrong.  I failed to appreciate the Supreme Court's enduring hostility to the FCA, even in the face of the official U.S. government request to appreciate the need for citizen lawsuits against fraud. Thankfully, whistleblower supporters in the U.S. Senate saw the handwriting on the wall and fixed this law even before the Supreme Court announced today's decision.

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The Maryland Senate yesterday passed a state version of the False Claims Act (FCA) by a vote of 37 in favor and 8 against. Before passing this bill, however, the Senate watered it down with an amendment. The Maryland False Health Claims Act of 2010, SB 279, as amended, no longer allows the state (or a whistleblower acting on behalf of the state) to obtain compensatory damages. The amendment also requires a court to dismiss the action if the State of Maryland declines to intervene. The Senate's amendment also waters down the provision for attorney fees. It now provides that attorney's fees and costs "may" be allowed by the court, and that the court must consider the amount of penalties and damages recovered. This last provision is contrary to prevailing law that calls on courts to award attorney fees based on market rates, without regard to any proportionality to the amount of recovery. The Senate's bill also allows courts to reduce the amount of the whistleblower's recovery if the court finds that the whistleblower participated in the violation. A more enlightened view would have barred recovery only if the person caused the violation through actions other than following orders of a superior. Also, I mentioned before that Maryland could gain even more if this bill covered all frauds, and not just those arising in medical care programs. Perhaps the Maryland House will consider these shortcomings when its Judiciary and Appropriations committee conducts the bill at its first hearing on April 1. The Senate bill does include an anti-retaliation provision, Section 2-607, that would allow employees to sue if they suffer retaliation for participating in a lawsuit, objecting to a violation, or refusing to participate in a violation. According to a Baltimore Sun article, the state administration estimates that between 5 and 10 percent of the state's $6 billion in annual medical spending is lost in fraudulent claims. The article quotes a spokesperson for the hospital association as saying that the amendment would cost the state the extra 10% it would receive from federal false claims lawsuits in the state. This refers to the Grassley Amendment to the federal FCA which increases a state's share if the state's law meets certain minimum requirements.  Apparently, making hospital administrators happy is more important to Maryland's Senators than protecting taxpayer dollars.

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WBAL-TV of Baltimore reports that the Maryland legislature is moving forward with a bill to create a "Little FCA" in Maryland.  Modeled on the federal False Claims Act (FCA), and looking for the benefits of the Grassley Amendment, Little FCAs provide financial rewards to whistleblowers who file sealed complaints against fraud by government contractors. Under the Grassley Amendment, state and local governments with Little FCAs receive a higher percentage of the fraud recoveries in their states. The WBAL story reports that Virginia has recovered $228 million a year since adopting their Little FCA.

Who can say no to free money for the state treasury? WBAL reports that medical providers and the Chamber of Commerce have opposed the bill.  However, none would speak to WBAL.  What would they say? "We should be able to get away with fraud"? WBAL says critics have previously claimed that the reward provision would encourage frivolous lawsuit and put pressure on businesses to settle. The $228 million Virginia gets every year does not sound frivolous to me.  The pressure to settle, though, sounds pretty good. Indeed, the FCA's reward provision is the most effective tool ever in the detection and proof of frauds against the government.

The administration of Gov. Martin O'Malley said the bill is likely to be amended.  My suggestion: don't limit the bill to medical fraud. Maryland deserves to get the enhanced recovery for all frauds in the state.

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