In our experiences as attorneys representing whistleblowers in False Claims Act cases, we often find that our clients have a number of questions before becoming plaintiffs in such cases. Because of this, we find it helpful to offer a post that answers some of the threshold questions that worry potential whistleblowers.
Sometime ago we wrote about the use of the False Claims Act to address the problem of fraud by dentist or oral surgeons who serve children covered by Medicaid. This week the Office of the Inspector General of the Department of Health and Human Services issued its third report on this problem; this report focused on fraud in the Louisiana Medicaid program, while prior reports focused on problems in New York and New York City. This week's report chronicles past FCA settlements and Congressional hearings as well as the OIG's earlier reports, and promises that further reports addressing the issue on a nationwide scale are forthcoming. See report at pp. 1-3; see Law 360 article.
Korean electronics manufacturer Samsung has made its mark in the mobile device and television markets, becoming a staunch rival to companies such as Apple and Sony. With great achievement comes some missteps, as Samsung became embroiled in a fraud suit with the U.S. government. Samsung was sued under the False Claims Act, for allegedly allowing federal agencies to purchase products from Samsung resellers in countries that did not have a trade agreement with, even though Samsung claimed that the vendors were properly venued.
When people think about the False Claims Act, they may consider it to be a consumer protection law of some sort that protects unwitting customers from false or misleading promises in advertisements. This misconception, and others like it, led us to devote a post to the basic tenets of the False Claims Act, including its history and trends regarding litigation under the Act.
Why have a False Claims Act? – Essentially, the federal government needs the help of its citizenry to help ferret out fraud. Originally called the “Lincoln Law” since it was enacted during the Civil War to prevent fraud against the Union Army, the Act encourages and rewards people (known as “whistleblowers”) who sue entities who commit fraud on the government.
There’s a reason why many whistleblowers are ambivalent about alerting the government about fraud and corporate misdeeds against the government. They may be banished to the basement, figuratively and literally.
A recent WashingtonPost.com report highlighted the plight of a VA whistleblower in Phoenix whose office was suddenly and inexplicably moved…to the basement, of course. The relocation was made to seem benign on paper; a simple decision to relocate an employee. But the underlying intent was arguably meant to send a message to the employee who spoke out, as well as any other employees who may think about raising concerns.
Congress has departed for a five-week break. After which, it is widely expected that legislators will retreat to their traditional partisan based positions in the midst of midterm election races. However, as we wrote about earlier this month, before its latest adjournment, Congress took testimony on potential changes to the False Claims Act.
The Act essentially is the primary tool by which the federal government uses to combat fraud. It allows for whistleblowers to be rewarded for reporting fraud by companies and individuals who do business with the government.
According to the New York Times, Bank of America has raised its offer to the Justice Department to settle charges stemming from its part in the Great Recession. As the article notes, much of Bank of America's legal exposure stems from its acquisition of Countrywide Financial, a large subprime lender, in early 2008. Nevertheless, as Judge Rakoff's ruling shows, Bank of America is nevertheless on the hook for the misconduct. If an overall deal is reached, Bank of America would be the most recent large bank to reach such a settlement with the Justice Department.
In a case we first wrote about in November 2012 and have followed since, the U.S. District Court Judge has ordered that Bank of America, Countrywide and one individual pay a bank fraud penalty of $1.3 billion. In his opinion, Judge Rakoff adopted the United States' interpretation of the penalty provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1833a ("FIRREA") (see U.S. brief and reply brief) and rejected the arguments by defendants (see BoA brief). As we have written before, FIRREA is a powerful weapon passed by Congress in response to the savings and loan crisis of the 1980's. Using a tip from a whistleblower, prosecutors dusted off the law and used it to great success in this case. Under FIRREA, a successful whistleblower shall be entitled to a reward of "20 percent to 30 percent of any recovery up to the first $1,000,000 recovered, 10 percent to 20 percent of the next $4,000,000 recovered, and 5 percent to 10 percent of the next $5,000,000 recovered." 12 U.S.C. § 4205. In calculating that award, the Attorney General may consider the size of the overall recovery and the usefulness of the information provided by the whistleblower. Id. This means that in this case, the whistleblower is entitled to an award of between $850,000 to $1.6 million of the government's $1.3 billion recovery. Unlike the False Claims Act, FIRREA caps the whistleblower's reward; in other words, he or she only shares in the first $10 million of any recovery. Presumably the defendants will appeal the jury verdict on liability and the judge's order on penalty so this saga is not yet over.
Bob Thomas to speak at the American Bar Association's Section of Public Contract Law meeting on August 8, 2014 regarding Recent Cases Interpreting the False Claims Act and Consequences for Conducting Internal Investigations.
Here is a message from the National Whistleblower Center which works to protect whistleblowers in all endeavors, not just False Claims Act (or SEC or IRS) whistleblowers. We thought our readers would enjoy their message: