Whistleblower Qui Tam Law Blog

The Federal False Claims Act, formerly known as the Abraham Lincoln Act, was first passed in 1863 in response widespread corruption by defense contractors that were defrauding the Union Army. In 1987, the FCA was amended to provide financial incentives to whistleblowers who expose schemes defrauding the United States government.

Soon, states began to pass their own False Claims Acts to target healthcare fraud. The benefits of enacting state false claims statutes were the subject of a recent article. Over the last decade, more than 20 states have enacted state false claims statutes. These statutes, like the federal False Claims Act, allow states to join lawsuits filed by whistleblowers who expose fraud involving government programs.

Several states have tried - but failed - to pass such acts, including Pennsylvania, Ohio, and Kentucky. The primary criticism of the false claims statutes - on both the federal and state level - has come from the pharmaceutical and medical industries. Incidentally, of the $3 billion recovered by the government under the federal False Claims Act, $2.2 billion has come from fraudulent conduct in the pharmaceutical industry. Other opponents of state legislation fear to the cost-effectiveness of such statutes and emphasize the need to avoid litigation.

Despite these criticisms, state false claims statutes have proved to be instrumental to states in recovering moneys defrauded by unscrupulous corporations. Last May, for example, California announced a $241 million settlement of a False Claims Act lawsuit against Quest Diagnostics for alleged overcharges to the California Medicaid program. California's share of the settlement totaled $171 million.

In another example, New York, with one of the most powerful state FCAs in the country, recently intervened in a whistleblower lawsuit against the Bank of New York Mellon for defrauding investors in foreign exchange transactions. New York Attorney General Eric Schneiderman is seeking nearly $2 billion on behalf of public pension funds and other investors.

Continue reading "State Whistleblower Laws Have Huge Upside" »

The False Claims Act is a first-to-file statute. When a whistleblower brings an action under the FCA, other individuals are barred from bring a related action based on the facts underlying the previously filed lawsuit. 31 U.S.C. § 3730(b)(5).

Last month, the United States Court of Appeals for the District of Columbia upheld the dismissal of an FCA complaint under the first-to-file rule. In United States ex rel. Sheldon Batiste v. SLM Corporation, No. 10-7140 (D.C. Cir. Nov. 4, 2011), Relator Sheldon Batiste alleged that SLM, commonly known as Sallie Mae, defrauded the United States government through its administration of student loans under the Federal Family Education Loan Program ("FFELP"). Batiste alleged that from October 5, 2004 to the time of filing, SLM defrauded the government by unlawfully placing student loans in forbearance and presenting claims for funds to the government, each of which included a false certification that the data SLM submitted with the claims were correct and conformed to federal law. He filed his complaint on June 13, 2008.

Over two years before Batiste filed his complaint, Relator Michael Zahara filed an FCA lawsuit against SLM, alleging that SLM falsified loan records pertaining to delinquent FFELP loans held by Sallie Mae. His complaint focused on falsifying forbearance records and other fraudulent conduct regarding student loans.

Continue reading " U.S. Court of Appeals Dismisses Complaint Based on FCA's First-to-File Rule" »

The United States Attorneys' offices, with the Department of Justice, are responsible for enforcing and recovering civil and criminal debts owed to the United States and criminal debts owed to victims of federal crimes.

Loretta E. Lynch, the United States Attorney for the Eastern District of New York, recently announced that the office collected $75,540,770.04 in civil and criminal actions during fiscal year 2011. Of this amount, $49,418,991.52 was collected in criminal actions, and $26,121,778.52 in civil actions. The office also collected $177,959,332 in criminal and civil forfeitures.

In one case, the Eastern District of New York recovered over $50 million as part of the settlement of a civil forfeiture action involving two brokerage accounts belonging to Jacob "Kobi" Alexander, who is alleged to have orchestrated a massive stock option backdating fraud. The money collected was returned to the victim, Comverse Technology, Inc., which, in turn, used the funds to settle investor and shareholder lawsuits.

In the announcement, Lynch emphasized the importance of these collections during the economic downturn. "The U.S. Attorney's Office is dedicated to protecting the public and recovering funds for the federal treasury and for victims of federal crime. We continue to hold accountable those who seek to profit from their illegal activities."

Nationwide, the 94 U.S. Attorneys' offices collected a total of $6.5 billion in criminal and civil actions this year. Of the $6.5 billion total, $1.3 billion was collected in shared cases in which multiple U.S. Attorneys' offices or Department of Justice divisions were involved in the recovery. This marks the second straight year that over $6 billion has been collected. The $6.5 billion represents over three times the appropriated budget of the 94 U.S. Attorneys' offices for 2011.

To read the press release, click here.

Continue reading "U.S. Attorneys' Offices Nationwide Collects $6.5 Billion in Civil and Criminal Actions in 2011" »

Just over a month after agreeing to pay over $22.6 million to resolve allegations of fraud in the procurement of a government contract to provide support services for the National Center for Critical Information Processing and Storage at the Naval Oceanographic Major Shared Resource Center, Science Applications International Corporation ("SAIC") reported that its third-quarter profit has been wiped out by a $232 million charge against earnings relating to allegations of fraud in a contract with New York City.

Several years ago, the City of New York hired SAIC as the prime contractor to develop and implement a time and billing software program called CityTime to track employee time, generate payroll, and manage the City's workforce. At the end of 2005, SAIC had about 150 consultants working on the program. Two years later, that number more than doubled.

The United States Attorney's Office for the Southern District of New York and the City of New York have been investigating the program and have alleged "a massive and elaborate scheme to defraud the city" has corrupted the program. Two former SAIC employees, including the program leader, Gerard Denault, have been charged with conspiring to defraud the City of New York by receiving about $40 million dollars in illegal kickbacks; inflating hourly rates and the number of consultants without City approval; using offshore companies to receive payments as subcontractors and launder money; and delaying the implementation of the program through fraudulent means.

In October, SAIC removed three of its top executives: Deborah Alderson, president of SAIC's defense solutions group; John Lord, her deputy; and Peter Dube, general manager of the enterprise and mission solutions business. It also began an internal review of the program.

On December 6, 2011, SAIC reported a loss of $89 million (27 cents per share) in the quarter ending October 31, 2011, compared to a profit of $173 million (46 cents per share) for the same period in 2010. SAIC issued a statement in which it stated that it "believes that a loss related to the outcome of the CityTime investigations is probable and now estimates that the loss will be at least $232 million," but added that the amount could grow.

To Read the Washington Post article about the fraud, click here.

Fraud in the procurement or performance of government contracts is one of the most fertile areas for False Claims Act litigation. If you have information regarding a government contract fraud, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse, LLP in Washington, D.C.

Recently, the U.S. Department of Health and Human Services estimated there to be $60 billion in Medicare fraud each year. According to Donald M. Berwick, the now former Administrator of the Centers for Medicare & Medicaid Services ("CMS"), 20 percent to 30 percent of healthcare spending is "waste" with no benefit to patients.

Dr. Berwick was appointed to head CMS by President Obama on July 7, 2010 through a recess appointment. In an interview he gave on December 1, 2011, one day before he left his position, Dr. Berwick stated that such an "extremely high level of waste" is caused by fraud, the overtreatment of patients, failure to coordinate care, administrative complexities, and burdensome rules. Dr. Berwick stated that "much is done that does not help patients, and many physicians know it."

According to the New York Times, Medicare and Medicaid could save $150 billion to $250 billion a year by eliminating waste.

To read the New York Times Article, click here.

The False Claims Act is a key tool in combating waste in government healthcare programs. While the government recovers billions in settlements and judgments under the FCA each year, it is only a fraction of the undetected fraudulent schemes. The government relies heavily on the assistance of whistleblowers to detect, uncover, and report fraud.

Successful whistleblowers are entitled to receive significant financial awards for their role in recovering ill-gotten gains. If you have information regarding a healthcare fraud, contact Andrew M. Beato, an experienced whistleblower attorney with Stein, Mitchell & Muse, LLP in Washington, D.C., to memorialize your claim.

Medicare fraud costs the United States government hundreds of millions of dollars each year.

For fiscal year 2011, the Centers for Medicare & Medicaid Services recently reported that it has collected a total of $797.4 million in overpayments (compared to returning $141.9 million in underpayments). According to the report, the Medicare Recovery Audit Program made payment corrections totaling $939.4 million this year - an increase of almost 10 times the total payment corrections made last year in 2010 ($92.3 million). To view the report, click here.

Whistleblowers play an essential role in uncovering and reporting fraud, thus enabling Medicare to recover the fraudulent proceeds. One common scheme is based on billing Medicare for medically unnecessary services or procedures to patients. In fact, there have been a number of recent settlements centered on billing for medically unnecessary procedures or services:

Hill-Rom Company. On September 27, 2011, Hill-Rom Company, Inc., a durable medical equipment supplier, agreed to pay the United States $41.8 million to resolve allegations that it knowingly submitted numerous false claims to the Medicare program for medically unnecessary equipment and certain specialized medical equipment for patients who did not qualify for the equipment and for patients who had died or were no longer using the equipment.

LHC Group. On September 30, 2011, LHC Group, Inc., a home health provider, agreed to pay the United States $65 million plus interest to resolve allegations that between 2006 and 2008, LHC improperly billed Medicare, TRICARE, and the Federal Employees Health Benefits program for services that were not medically necessary and for services rendered to patients who were not home bound. The whistleblower, Judy Master, will receive over $12 million for her role in uncovering and reporting the fraud.

If you have information regarding a fraud that affects the Medicare program or another federal health care program, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse, LLP, to memorialize your claim.

The False Claims Act was enacted in 1863 by Congress and President Abraham Lincoln in response to widespread corruption and fraud by defense contractors during the Civil War. At the time of enactment, the FCA, then known as the "Lincoln Law," made it illegal to present false statements or claims to the United States government for payment to which the claimant is not entitled.

Today, the FCA continues to be an invaluable tool in combating government contractor fraud. The United States government commits billions of dollars of its discretional spending budget to defense contractors. In 2010 alone, Lockheed Martin - which recently agreed to pay $2 million to resolve bid-rigging allegations - earned over $16.7 billion in revenue from government contracts.

Procurement fraud is not limited to large defense contractors. The United States contracts with third parties in a number of areas, including historical and environmental preservation. For example, Katherine Knapp brought a qui tam lawsuit under the False Claims Act against Calibre Systems, Inc., a government contractor providing environmental and archaeological services at the Ft. Irwin National Training Center.

Knapp is a former employee of Calibre Systems and worked at the Ft. Irwin site as an Analyst member of the Environmental Program Management Directorate. She alleged FCA claims under the false certification and worthless services theories of liability.

Continue reading "Procurement Fraud Is Not Limited to Defense Contractors " »