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

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Federal Judge Richard W. Roberts has denied a motion to dismiss a major suit claiming the Japanese manufacturer Toyobo sold millions of dollars of defective bulletproof vests.

Dr. Aaron Westrick filed the suit under the Federal False Claims Act in 2004, and the U.S. government formally joined the suit in 2005. The suit alleges that Toyobo conspired with Second Chance Body Armor, Inc. to sell defective body armor made of Toyobo's Zylon material.

Thousands of vests were sold to police departments across the United States and the federal government. One police officer was killed and others were injured as a result of the use of defective Zylon in vests. The suit alleges that Toyobo and the companies who sold these vests knew about Zylon defects and concealed this information from their customers. The full text of a press release by the National Whistleblowers Center (NWC), with links to key documents, follows in the continuation of this blog entry.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Pipe manufacturer JM Eagle is lashing out against whistleblower John Hendrix, claiming that he spoke to a prospective witness and offered that witness a kick-back. JM Eagle has made the claim in an interview with industry magazine PlasticsNews. Meanwhile, Hendrix's attorneys at the Washington, DC, law firm of Phillips & Cohen are denying the allegation, calling it a distraction.  Hendrix was an engineer with JM Eagle, and he claims that the company knowingly supplied pipe that lacked the required tensile strength. JM Eagle denies that allegation. Still, anyone who likes to have water arrive cleanly to their home, and not flooding their streets, will appreciate the value of good tensile strength. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Sen. Charles Grassley (R-Iowa) has introduced a bill that will make changes to the False Claims Act (FCA) in response to court decisions that limited the rights of whistleblowers.  The main features of S. 2964 (introduced January 28, 2010) would add administrative procedures designed to make it more difficult for crooks to set up phony medical providers to submit false bills to Medicare and Medicaid.  However, in a third branch of the bill, Sen. Grassley proposes to fix a writing error introduced last year to the anti-retaliation provision. Sen. Grassley also proposes a nationwide two-year statute of limitations for retaliation claims.  The national statute of limitations would address the Supreme Court's holding in Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409 (2005). The Supreme Court said that the FCA's six-year statute of limitations did not apply to the FCA's whistleblower protection claims.  Whistleblowers would have to respect the statute of limitations in their home state instead. (Karen Wilson's retaliation claim was then dismissed because she missed North Carolina's three-year statute of limitations.) Sen. Grassley also proposes to expand the definition of "original source" so that a whistleblower can still receive rewards if he or she has, "knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and has voluntarily provided the information to the Government before filing an action . . .." The Senate has referred S. 2964 to its Finance Committee.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. Department of Justice has announced a settlement with the University of Phoenix over its abuses in student recruitment.  The university will pay $67.5 million, of which $19 million will go to two whistleblowers, Mary Hendow and Julie Behn.  Hendrow and Behn were University of Phoenix employees.  They alleged that the university accepted federal student financial aid while in violation of statutory and regulatory provisions prohibiting post-secondary schools from paying admissions counselors certain forms of incentive-based compensation tied to the number of students recruited.

Notably, the government chose not to intervene in the case.  Hendrow and Behn pursued the case on their own, even after the trial judge dismissed the case for failure to state a claim.  They appealed and won.  U.S. ex rel. Hendrow v. University of Phoenix, 461 F.3d 1166 (9th Cir. 2006). The University of Phoenix, however, still would not settle until their appeal to the U.S. Supreme Court was rejected. Hendrow and Behn received a higher share of the settlement because of the government's decision to stay out of the case. "This settlement showcases how a working relationship between the Government and private whistle-blowers can bring about effective results in terms of protecting taxpayer dollars," said Benjamin Wagner, U.S. Attorney for the Eastern District of California. What the Justice Department's press release does not say is that the federal government would recover more money for taxpayers if it chose to intervene in more cases.

Congratulations to Hendrow, Behn and their lawyers, Nancy G. Krop of Burlingame, California, and Dan Bartley of Novato, California..

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

“Securities fraud,” said the state official and with that about 20 attorneys, all experts in False Claims Act litigation, fell off their chairs.

We were in a small room, down the hall in the last break out session of the annual meeting of False Claims Act attorneys sponsored by Taxpayers Against Fraud. 

Most of our colleagues chose to go to another session involving particular issues of pleading fraud. That issue comes up in every case: plead fraud with particularity. Having to plead with particularity so often, we knew enough about it to understand that is a big headache.

So, looking for something different, a few of us went to a seminar on State Cases.  We were experts. We all had filed a lot of federal cases. There are only so many people who specialize in this area, so by the end of the conference we were acting a little smug.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A whistleblowers' lawsuit has prompted the State of California to sue State Street Bank for over $200 million.  The suit alleges, and California's Attorney General has confirmed, that State Street cheated California pension funds by overcharging for foreign exchange transactions.  State Street Bank slyly used the trading day’s highest possible exchange rate to charge the pension funds, instead of the agreed upon interbank rate at the time of the trade. To avoid scrutiny, the bank hid the timestamps when reporting to the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.  The Attorney General's investigation confirmed the overcharges, and has intervened in the suit.  The Superior Court for Sacramento has now unsealed that lawsuit. The Attorney General's press release provides a copy of the lawsuit. Hannah Grove, State Street spokeswoman, responded to the Boston Business Journal, “We categorically deny any allegations of wrongdoing and we will defend ourselves against any litigation.”

Intern Tommy Leung contributed to this blog post.  He imagines that State Street probably engaged in the same practice for its other clients, including every other state and local government that used them for their investments.  Tommy and I share an appreciation for the unnamed whistleblowers who brought State Street's overcharges to light, and we wonder if there are others out their who could come forward in any of the other 25 states that have false claims acts and and reward whistleblowers.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In 2003, John Kopchinski was earning $125,000 a year selling the drug Bextra for Pfizer.  He had a baby son, and his wife was pregnant with twins.  The Gulf War veteran says that, "In the Army, I was expected to protect people at all costs."  At Pfizer, though, he was expected to sell Bextra, even though it raised the risk of heart attacks and strokes.  After Kopchinski expressed his concerns about Bextra's safety, Pfizer fired him.  He eventually got a new job paying $40,000 a year.

Kopchinski hired attorney Erika Kelton of Phillips & Cohen.  In 2005, Pfizer withdrew Bextra from the market.  Now Pfizer is pleading guilty to felony charges of promoting Bextra for unapproved uses.  Pfizer will pay penalties of $2.3 billion, and Kopchinski will get a $51.5 million share for filing the "qui tam" lawsuit under the False Claims Act (FCA) that helped the government collect these penalties.  Kopchinski is one of five whistleblowers sharing in the settlement.  He says that he does not expect his life to change much now, according to a news account of this settlement available from Reuters.

Attorney Dean Zerbe, senior counsel to the National Whistleblowers Center, told Reuters and the ABA Journal that he hopes publicity of this settlement will encourage other whistleblowers to come forward with information about fraudulent marketing. "The use of whistleblowers has really opened up the keys to the kingdom in terms of what's going on in these companies," said Zerbe, who is also a partner at the law firm of Zerbe, Fingeret, Frank and Jadav in Washington. "You'd never find out what's happening without this kind of reward structure." 

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

In a victory for the right of whistleblowers to seal, temporarily, their claims of fraud against the government, U.S. District Court Judge Liam O'Grady late yesterday dismissed a case brought by the American Civil Liberties Union (ACLU), OMB Watch and the Government Accountability Project (GAP). The case, filed in Alexandria, Virginia, asked the court to declare that the "seal" required by the False Claims Act is unconstitutional. The case is known as ACLU v. Holder.  If successful, this suit would have required whistleblowers to disclose their identities and their claims to the whole world while the government investigates the claim to determine if criminal, civil or no charges should be pursued.  Such disclosure would tip off the crooks to the government's investigation against them, and could subject whistleblowers to retaliation.

This case divided whistleblower advocacy groups. Taxpayers Against Fraud (TAF) and the National Whistleblowers Center (NWC) opposed the suit. Despite concerted efforts to educate the ACLU, OMB Watch and GAP to the whistleblowers' need for confidentiality, the groups decided to proceed with their suit.  They claim the the public's right to know about lawsuits as soon as they are filed should trump the government's need to investigate, and the whistleblowers' need for confidentiality. Lawyers Marc Vezina, Cleveland Lawrence and Zach Kitts filed an amicus brief for TAF's Education Fund. Judge O'Grady cited this amicus brief in his decision.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

U.S. District Judge Clay Land, of Athens, Georgia, issued an order yesterday compelling the U.S. Environmental Protection Agency (EPA) to provide their employee Madolyn Dominy for deposition in a whistleblower's scientific fraud case.   Madolyn Dominy was the EPA's Regional Biosolids Coordinator from 1998 to 2004.  In his whistleblower lawsuit, Dr. David L. Lewis (pictured) and dairy farmers Andy McElmurray and William Boyce claim that researchers at the University of Georgia (UGA) conspired with EPA employees to make false statements as part of a grant application to justify land application of sewage sludge. The law firm of Hallman & Wingate of Marietta, Georgia, represents Dr. Lewis, McElmurray and Boyce in this case. The EPA tried to use is "Touhy" regulation to prevent Hallman & Wingate from deposing Dominy.  Yesterday, Judge Land rejected this attempt, and ordered that EPA make Dominy available for deposition by September 11, 2009. A copy of the order is available at this link.

• Email This
• Print
• Comments
• Trackbacks
• Share Link