The whistleblower who filed a qui tam False Claims Act suit and the United States who joined that suit in 2013 scored another victory in court this week. The district court sided with them and against Armstrong, ruling that the UCI in Switzerland must produce documents in the case alleging that Armstrong's doping activities amounted to fraud under his sponsorship contract with the US Postal Service. Many have long claimed that the UCI helped shield Armstrong from detection so the documents could be highly relevant. Still to come in the case is much more discovery with the judge yet to rule on how many depositions the parties will be allowed to take. It is also possible that the UCI documents will pave the way for requests for documents from other foreign entities. As we have previously written, if Armstrong is ultimately found liable under the FCA he could be liable for treble damages and penalties. The ultimate damages figure will depend on the proof at trial as well as the theory of damages the court adopts, but the liability could reach $100 million or higher.
A number of our posts have focused on the financial rewards that whistleblowers can realize for being part of a False Claims Act case. Essentially, whistleblowers can earn 15 percent of the amount recouped by the government if the Department of Justice joins in such a case. A recent settlement between the federal government and Boeing Corporation is a prime example of how people who come forward to expose fraud can be compensated.
According to a recent Wall Street Journal report, the Seattle-based airplane manufacturer allegedly defrauded taxpayers by improperly billing for maintenance work completed on C-17 transport planes. Those who reported the fraud claim that Boeing directed subcontractors to overcharge on labor costs related to the repairs. Boeing is also accused of changing workers’ classifications so that it could charge additional amounts for work that was supposed to be billed at a fixed amount.
One of the important questions to be answered in litigating False Claims Act cases is how much should the offending entity know about the false billing in order to trigger liability under federal law. Under 31 U.S.C. §3729(b), “knowing” is defined in three instances. This post will highlight these definitions.
Actual knowledge – Section 3729(b)(1) is very straightforward. If someone has actual knowledge that a false or fraudulent claim has been submitted, that knowledge can create liability for the offending entity. In these instances, a signature from the person sending the fraudulent information is sufficient.
Whistleblower Attorney Bob Thomas is once again leading a law school seminar on "Health Care Fraud and Abuse" at Boston University, with second and third year students digging into the False Claims Act, the Anti-Kickback Act, Stark I and II, and "off-label," misbranding and adulteration under the Food Drug and Cosmetic Act ("FDCA"), as well as many of the strategic and practical questions that come up for attorneys practicing in this area. The course offers law students a view into this dynamic area of the law, where new case law is made every week, and where one can start to imagine a variety of different career options within the field. Each week for the first half of the seminar, students are given a short writing assignment to answer a bothersome question that comes out of the reading - usually one that arises from one of Mr. Thomas' qui tam cases. In addition, each student will do at least one class presentation on a subject matter area.
As Attorney General Holder prepares to leave the Justice Department, questions about his commitment to prosecuting executives of banks continues. An insightful recent report shows the stark contrast between the way the Justice Department handled the savings and loan crisis of the late 1980's and how it handled the banks' role in the financial crisis that nearly brought down the U.S. economy in 2008-2009. The report also highlights how the recent multi-billion dollar settlements with banks are not really so big, and are largely subsidized by the shareholders, bondholders, and the taxpayers, with the responsible executives facing no jail time and indeed not even facing civil penalties or exclusion from working in the industry.
Yesterday the federal district court handling the False Claims Act case U.S. ex rel. Martin v. Life Care Centers of America, issued two important decisions that endorsed the government's proposed use of statistical sampling to prove Life Care's liability under the FCA. The court denied Life Care's summary judgment motion and upheld the government's ability to use statistical sampling in a complex FCA case involving the provision of unnecessary therapy at 82 different skilled nursing facilities run by Lifecare throughout the country. The court also denied Life Care's motion to exclude the testimony of the government's expert statistician. After conducting an extensive survey of the law in this area, the court concluded:
The whistleblowers we represent are courageous, determined individuals who seek to right wrongs against the government. However, being a plaintiff in a False Claims Act case or initiating a qui tam case is not easy; especially given the possibility that one might lose their job. The specter of being fired may prevent a number of people from coming forward to expose wrongdoing. After all, these workers may be breadwinners for their families, and if they lose their job, their financial situation could be severely compromised.
However, there are protections granted to whistleblowers under state and federal law. Specifically, section 3730(h) of the False Claims Act allows an employee who is fired, harassed, demoted or otherwise discriminated against because of lawful acts performed in furtherance of a False Claims Act claim.
In a number of our posts, we have highlighted the potential monetary benefits that can come about for whistleblowers who take the initiative to report fraud against the government. But while a majority of False Claims Act cases are civil in nature, the U.S. Department of Justice recently reported its intent to pursue criminal penalties in certain instances.
The recent announcement formalizes a process that has been developing for several years. According to Justice Department policy, the Civil Division joins in qui tam cases where potential damages may exceed $1 million. When the Justice Department is involved in that capacity, it may refer the case to the Criminal Division for possible prosecution.
Physician owned distributorships (PODs) have grown in the last decade. A number of reasons are behind this trend, including the ability to bring to market and sell products for less compared to traditional medical device providers, such as Medtronic and Johnson & Johnson. The cost benefit is attractive to hospitals that may end up billing the federal government, and the surgeons that perform procedures using the products may even receive compensation from the companies in which they are investors.
One of the key questions in qui tam cases is whether the services the federal government was billed for were “worthless.” Essentially, the question examines whether the entity at issue provided services that were worth less than they should have cost, or whether they had no value whatsoever. This is a question that has vexed a number of appeals courts that have grappled with qui tam cases involving a worthless services theory.