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

Today, the Public Employees for Envirnonmental Responsibility (PEER) released a study and ranking of state whistleblower laws.  PEER found that more than 20 states have broadened their whistleblower laws since 2006.  Please click here to read the highlights of the study.

If you are looking for more information on state whistleblower laws please visit the new interactive map of the U.S. on the National Whistleblowers Center website.  The map shows the qui tam laws, whistleblower statutes, and common law remedies for each state.

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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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Two False Claims Act Settlements were reported yesterday, totaling approximately $280 million in fraudulently obtained government contract money that is now being returned to the US taxpayers.

• Health insurance giant Amerigroup has settled with the governments of the United States and the State of Illinois, agreeing to pay $225 million plus legal fees. Amerigroup was exposed by whistleblower Cleveland Tyson, who was the company's Government Relations executive. He brought the suit in 2002, which went to trial, where, according to a press release issued by his attorneys:
  
  "...the jury found that Amerigroup deliberately avoided enrolling recipients with costly health conditions or who were pregnant and in their third trimester. These actions were taken while Amerigroup received IDPA payments calculated on Amerigroup providing healthcare to all enrollees."
  
  
• CoxHealth, a large non-profit hospital chain in the Springfield, MO area, has announced a $60 million FCA settlement stemming from allegations of "improper Medicare billing and questionable business relationships."
  
  
  

The False Claims Act is the most effective whistleblower law on the books, as these settlements show, but it has been eroded in recent years by negative court decisions, such as  Allison Engine Co., Inc. v. United States, ex rel. Sanders. To counter these decisions, Senator Charles Grassley and other Congressional leaders have introduced a bill to amend the FCA. Most recently, the bill was approved by both the Senate and House Judiciary Committees.

 

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Yesterday the House Judiciary Committee approved legislation to amend the False Claims Act, sending the measure along to be voted on by the full House of Representatives. Companion legislation (S.2041) was passed by the Senate Judiciary Committee in April.


The False Claims Act Corrections Act will help undo some of the damage that has been done to the FCA in recent years by poor judiciary decisions, such as Allison Engine v. US.


I will post the full text of the approved language as soon as it becomes available.

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If you do the math on a Washington Post story yesterday it turns out the paper reported on what amounts to 225 scandals.

The Justice Department told the Post there is a backlog of approximately 900 False Claims Act cases, and that the backlog could take years to unclog. Obviously the time involved can damage the ability to pursue even the most meritorious cases. Justice also told the Post that they reject about 75% of all filed FCA cases, and most of those have little merit. I would bet that quite a few of the cases rejected have some merit but why quibble over that? If there are 900 cases in the system and a quarter represent cases that should be pursued, that means there are 225 good cases of fraud stuck in a black hole. That means we have not one scandal but as many as 225 scandals, because each such case deserves priority treatment the Justice Department simply does not have the resources to handle. These 225 cases have to be relatively big and they likely involve major contractors who can continue to commit fraud against the United States. Of the remaining 675 in which the Justice Department may investigate and see no merit, the inability to kick them back to private attorneys quickly does not help.

Private Attorneys would at least like to clear their own backlog but they would also like the chance to pursue some of those cases. Justice may have legitimate reasons not to pursue a case a private attorney might take a chance on, but if the case waited three years for an initial determination very few whistleblowers will still have the resources, time and ability to continue the fight even if they are right.

But the fact is, according to Justice there must be at least 225 cases that have merit. How can we let this continue? We know. We know by Justice's own procedures that there must be some 225 cases of major fraud and nobody can even get to deal with them. That's a pandemic of fraud and we are not fighting the disease. Within those 225 cases that means, important safety concerns and governmental functions are being undermined by unscrupulous contractors. The contractors who profit from fraud gain a competitive advantage and push out honest contractors who want to do good work. Fraud is very profitable and if you can get away with it provides a great competitive advantage. Right now you can get away with it.

These aren't small cases. Nobody takes the trouble to file a False Claims Act case these days if they can't find at least millions in damages because by the time the Relator gets their share, it does not leave much for what now appears to be years and years of legal work. Billions of dollars of fraud are lost this way. The whole point of the FCA is to punish and deter fraud. How do you deter fraudulent activity when it is clear to everybody that the Justice Department does not have the people power to stop it?

At least some of the fraud must compromise vital government activity. More and more contracts are being used to do what we used to think of as inherently governmental functions. The very mail room in the Justice Department where these cases arrive is run by a private contractor now. Its scary to think about how dependent national security is on private contractors who can commit fraud in this environment. It is also hard to think of anything that corrodes our basic faith in government more readily than the extensive nature of this fraudulent activity.

The Post story blew the whistle (if you will pardon the expression) on the problem, but who are we to blame? Certainly not the career Justice lawyers who are overworked beyond reason. Assistant United States Attorneys working on False Claims Cases have dockets of 60 cases. Open the file on each case and look at it and a whole week is gone. Main Justice has only 75 lawyers they can assign to these cases. The people trying to deal with these cases want to investigate the cases responsibly and they want to win even in a judicial environment hostile to whistleblowers. There are simply not enough attorneys and investigators to go around.

Justice has approximately the same number of attorneys working on these cases that they did in the early 1990s when far fewer cases were brought, far less government functions were handled by private contractors and when the kinds of cases were not generally as complicated or big. How do you investigate a fraud, which may have occurred in Afghanistan or Iraq? How does the same lawyer become an expert on Medicare regulations AND Defense contract procedures overnight?

Here's a starting suggestion. Hire all the lawyers. There has never been a better time. The only area of law experiencing growth right now besides fraud is bankruptcy, so there should be plenty of attorneys looking for work. I don't care if the Justice Department has to appoint special attorneys general to investigate one case or if they want to just take the first 750 resumes that come across the door, we have to do something. There are private law firms that have that many attorneys. Why is it so outrageous for the federal government to hire enough attorneys and investigators to deal with a serious issue of national importance, which would, if they did it save as opposed to cost tax money? We hear lots of talk about cutting waste fraud and abuse in an election year.

We don't hear much talk of a bill to specifically expand Justice by enough lawyers and more investigators to fight fraud. What else could the government spend money on which would certainly return money to the taxpayer directly and also improve the quality of work done for the government? Here is a law that actually gives investigators and lawyers at least some chance of fighting fraud in a courtroom. Now if we could only get enough people involved in bringing the cases there we might be able to find out what is going on in those 225 scandals sitting on a shelf in a Government office.

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As was widely expected, the FCA Corrections Act was quickly approved by the Senate Judiciary Committee yesterday, and will now face a fight on the Senate floor. Committee member Charles Grassley, who has been considered to be the father of the modern False Claims Act since resuscitating the law in 1986 , has shepherded the bill this far, with bi-partisan support. We can be sure, though, that the powerful healthcare and defense contracting lobbies will be fighting these reforms tooth and nail, in both the House and the Senate. (The House bill is HR.4854). 

• More info about the FCA Corrections Act
• Bill Text: S.2041

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According to the website of the Senate Judiciary Committee, that body will be voting to send the FCA Corrections Act (S.2041) to the Senate floor this Thursday, April 3rd, 2008 @ 10AM.

• Click Here for More information on S.2041
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