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

Yesterday, the U.S. Supreme Court agreed to review a decision against the Graham County (North Carolina) Soil & Water Conservation District for the second time. In its first trip, the District persuaded the Supreme Court that whistleblower Karen Wilson had to follow North Carolina's three-year statute of limitations for her retaliation claims, and could not rely on the six-year time limit in the federal False Claims Act (FCA).  Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409 (2005). Now, the District is trying to evade liability altogether by asking the Supreme Court to say that state and local administrative proceedings bar whistleblowers from bringing fraud actions on behalf of the federal government.

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We are happy to announce that President Obama signed the Fraud Enforcement And Recovery Act of 2009 yesterday.  The House and Senate passed the bill with overwhelming majorities and the bill presented to the President included the best of the House and Senate versions.  The new law makes much needed improvements to the False Claims Act.   It is good to see Both Houses of Congress and the President have taken the very kind of action we have been advocating for years.

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Yesterday, I blogged about a pending multi-million dollar False Claims Act (FCA) lawsuit agains Pharm giant Wyeth. Today's news brings another example of how the FCA can be used to bring gross misconduct to light. This case, involving a western Pennsylvania psychiatric institution has settled for far less money than many of the more highly publicized FCA cases, but the shocking allegations are what really caught my attention.

The whistleblower in this case, Dr. Stefan Kruszewski, was a psychiatrist reviewing records of the Southwood Psychiatric Hospital. Southwood is a private facility that houses over 100 juvenile boys who are wards of the state. For the care of these kids, Southwood is paid through state and federal contracts. Dr. Kruszewski reported that Southwood, in order to inflate their government payments, "...held juveniles who did not require hospitalization, prescribed and administered unnecessary medication to increase government reimbursements, and billed the government for care that was not provided." (Pittsburgh Tribune Review)

The Department of Justice has settled this lawsuit and Southwood is paying $150,000 and is being forced to make necessary changes to raise its standard of care and clean up its act. Under the settlement, Southwood is not admitting any wrongdoing, but it is unthinkable that a hospital would take advantage of, indeed abuse,  vulnerable young children in order to make a quick buck off of the taxpayers. The story also shows how valuable the False Claims Act can be in bringing to light all kinds of misconduct when government money is involved. Congress should continue to work to pass current legislation which is designed to strengthen the FCA.

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The United States Government, along with the governments of 15 states and the District of Columbia, have joined with two whistleblowers who allege that drug manufacturer Wyeth bilked US taxpayers out of hundreds of millions of dollars. As reported in the Wall Street Journal and the FierceHealthcare website, Wyeth is accused of overcharging Medicare and Medicaid programs nationwide for purchases of it's acid-reflux drug Protonix. Under federal law, drug companies are required to offer prescriptions to federal aid programs at the lowest possible price. Wyeth, however, the suit alleges, was offering Protonix at a 90% discount to private hospitals, while charging the federal government much higher rates.

The lawsuit was filed under the False Claims Act, which has its roots in the civil war era, and remains  the United States' most powerful tool for rooting out fraudulent government contracts. President Obama's administration has recently expressed its support for strengthening the law, and legislation to do so is currently pending in Congress.

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If you haven't noticed, we have been really focused on passing stronger whistleblower laws in the economic stimulus bill. We had a major success when the bill passed the House of Representatives, and now we are moving on to the Senate. Although this legislation is the major whistleblower story this week, there are a few other stories on our radar, and I just wanted to share them with our readers.

First, and easily the second biggest whistleblower-related news story of the week, is the testimony of Harry Markopoulos, a financial analyst who tried to blow the whistle on Bernie Madoff's $50 billion fraudulent Ponzi scheme for over a decade. Markopoulos offered stunning testimony before the House Financial Services Committee this week, condemning the SEC for ignoring his reports and mismanaging the investigation. Markopoulos told lawmakers that he "gave them [the SEC] a road map and a flashlight to find the fraud, and they didn't go where I told them to go.”

Here are some articles detailing his testimony:

CBS NEWS: "Madoff Whistleblower is Finally Heard"
CNN MONEY: "Madoff Whistleblower Blasts SEC"
TIME: "A Madoff Whistleblower Tells His Story"

Now for some good news. Along with the legislative progress being made at the national level, two states are considering statutes to create and/or strengthen whistleblower protections.  This Minnesota Star-Tribune opinion piece explains the how Minnesota (and all states) can benefit from a False Claims Act. Minnesota's legislature is considering enacting an FCA modeled on the federal law.

North Dakota is also considering strengthening its whistleblower laws after recent retaliation against state employees revealed that the laws are inadequate.

Our last bit of news comes from Texas, where Marilou Morrison, a former employee of the Texas Commission on Human Rights was awarded a jury verdict of nearly $1 million after suffering retaliation for blowing the whistle on racial discrimination in the agency's hiring practices. The kicker is this: the Texas Commission on Human Rights is the agency that is supposed to enforce laws against discrimination. Ms. Morrison's attorney Gary Bledsoe summed it up nicely by saying, "The agency that is supposed to enforce civil rights is being hit with basically a million dollar judgment for violating the very statutes they are required to enforce."

Ok, now that you are up to date on whistleblower news from around the country, keep checking back for more information on the federal employee whistleblower legislation!

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The U.S. Supreme Court has granted a writ of certiorari in the case of Eisenstein v. New York. Eisenstein is a qui tam action brought by municipal employees in New York City. The complaint makes a rather unique argument, alleging that NYC is depriving the federal government of tax revenue by requiring city employees who are non-city residents to pay "a fee equivalent to the municipal income taxes paid by resident city employees." The non-resident employees then are permitted to take a federal tax deduction in the amount of the fee, which lowers their amount of taxable income, therefore lowering the amount of tax revenue going to the IRS.

The Supreme Court, however, is not looking at the substantive facts of the case. The Justices will be ruling only on the following issue: Whether a qui tam plaintiff has 30 or 60 days to file an appeal in a False Claims Act case in which the government has not intervened.

The Federal Rules of Civil Procedure Rule 4(a)(1)(A) requires all civil appeals to be filed in 30 days unless the United States is a party to the lawsuit, in which case Rule 4(a)(1)(B) extends the appeals deadline to 60 days. The plaintiffs in the Eisenstein case reason that, since the US government always stands to benefit from a qui tam action, then they are a "party" to the case even if they have not chosen to enter into the suit. However, the Second Circuit Court of Appeals threw out the Eisenstein case, holding that: 

"...where the United States has declined to intervene in a False Claims action, the United States is not a party to the action...therefore a notice of appeal must be filed in 30 days."

This is an interesting case. We will keep you updated on it's progress and outcome. Briefs are due to be filed by the end of March. See the links below for more information.

• Second Circuit Opinion
• Petition for Certiorari
• Opposition Brief
  
• Petitioner's Reply Brief

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The Boston Globe is reporting that the Supreme Court is considering taking up a case that "might set new limits on whistle-blower lawsuits against drugmakers, biotechnology companies, and other businesses." The court has requested advice from the Department of Justice regarding the suit.

The case in question deals with the False Claims Act and specifically whether FCA cases can be based on allegations which have previously been made public in state government documents. Limitations have currently only been applied when the whistleblowers' allegations have previously seen light in Federal Government documents.

Industry groups support the new limitations, which is no surprise considering the FCA has been the most effective fraud-fighting law in history, netting over $1 Billion in fraud recoveries for American taxpayers last year alone. 

FCA-type laws are also helping uncover massive government contractor fraud schemes in countries like South Korea

Click here to DIGG this story

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Last week the Congressional Budget Office released this report on the revenue-creating potential of current proposed legislation in the to amend the False Claims Act. Similar bills are now pending in the Senate (S. 2041) and the House of Representatives (H.R. 4854). This marks a turnaround in opinion for the CBO on this issue. In April, the CBO released a report stating that the Senate version of the bill would not significantly increase government revenues, but this most recent report (which officially only deals with the House version of the bill) indicates that they have improved their assessment with regard to both bills.

This 2-page document offers a concise description of the legislation (H.R. 4854), and states that: 

"[The] CBO originally estimated that S. 2041 would not significantly increase revenues and collections. However, based on additional information, CBO now expects that either H.R. 4854 or S. 2041 could increase revenues and collections."

This is another promising sign for this much-needed legislation. For more blog posts about the False Claims Act, click here.

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Did you know that whistleblowers reporting under the False Claims Act have accounted for over $1 Billion in recovered federal and state taxpayer dollars this (fiscal) year alone?  This Marketwatch.com article details the biggest fraud recoveries in '08, including hundreds of millions of dollars from companies such as Amerigroup, Merck, Bechtel, CVS, and Pratt & Whitney. 

Despite these results, the False Claims Act (a civil war-era law that was last amended in 1986) is in need of some retooling. Senators Grassley and Leahy are pushing an amendment package (Bill # S. 2041) that would close the loopholes created by destructive Supreme Court decisions, such as Allison Engine Co. v. U.S. . this legislation should be enacted immediately. Further, because we know that the DOJ is letting hundreds of FCA cases languish without investigation, the DOJ needs to hire more civil fraud attorneys and focus more resources on ferreting out government contractor fraud.

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It's been a week since our last post, and a lot has happened in the world of whistleblower protection since then. Here are some of the high (and low) lights:

• ITS OFFICIAL! The CPSC Reform Act (HR.4040/S.2663) will contain strong whistleblower protections for private sector employees who report safety violations to their managers or through the Consumer Product Safety Commission. The President is expected to sign the measure within the next week, and it will protect over 20 million employees.
  
  The New York Times published this August 5 editorial calling for the President's prompt signature.
  
  
• David Welch, who was the first whistleblower to obtain protection under the Sarbanes-Oxley Act, was denied reinstatement by the 4th Circuit Court of Appeals in Richmond, VA this week. This is a terrible result for Welch, who has been battling his former employer for over 7 years, and a bad precedent for Sarbanes-Oxley whistleblowers. Of nearly 1,000 SOX whistleblower complaints, not one whistleblower has been victorious in court.
  
  More information can be found about this case at the Workplace Prof's blog.
  

• Here is an interesting story about Georgia Senator Saxby Chambliss and his rough treatment of a sugar plant whistleblower during a Senate hearing. It seems that Sen. Chambliss is blaming the whistleblower, company VP Graham H. Graham, for an explosion at his plant which killed  13 workers on February 7.
  
  Interestingly, it appears that Graham had only been working at the plant several weeks before the explosion, during which he had reported safety violations and was rebuffed by superiors. Also, the company, Imperial, is among Chambliss' campaign contributors.
  
  
• DoD contractor Pratt&Whitney has settled a False Claims Act suit, and over $52 million will be returned to US Taxpayers. The company was accused of manufacturing faulty engine parts for Airforce fighter jets which caused the june 2003 crash of an F-16. The company is also replacing parts for over 50,000 aircraft at its own expense. 
  

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