Michael Sullivan

Why States Are Passing Their Own Qui Tam Whistleblower Laws

I looked into the experiences that states have had with their own False Claims Acts, because almost every state is considering passing its own. I have tried to provide a brief summary that I hope is useful to you.

To encourage states to enact their own False Claims statutes with qui tam whistleblower provisions that are at least as effective as the federal Act, Congress created a large financial incentive when it passed the Deficit Reduction Act of 2005. States that have or enact such acts become eligible as of January 1, 2007, for a 10% increase in the state’s share of Medicaid fraud recoveries.

Many states, therefore, will consider whether to follow suit by enacting their own False Claims Act as early as 2007. Thus, it is important to consider other states’ experiences with their own state statutes governing false claims.

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Will Your State Have a State False Claims Act?

Finch McCranie, LLP has recently learned that many state government officials, including Governor Perdue of Georgia, have received a proposed State False Claims Act for consideration to be enacted in 2007. Even though the Bill has been drafted and is on his desk, at present, the Bill has not been submitted to the Legislature for consideration. Obviously, this raises a serious question as to why it is that the Governor is delaying action on this important piece of legislation.

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Significant 2006 Verdicts and Settlements of Qui Tam Whistleblower Cases Under the False Claims Act

In our multi-part explanation of the federal False Claims Act previously posted, we have summarized the most recent verdicts and settlements of qui tam whistleblower cases (as of December 2006).

We will continue to update you on additional verdicts and settlements of significance.

The Whistleblower Statute: The Text of the False Claims Act

We have tried to explain what readers may want to know about how the whistleblower statute works, in our article explaining the False Claims Act. Here is the current language of this law that creates rewards for qui tam whistleblowers:

FALSE CLAIMS ACT
TITLE 31. MONEY AND FINANCE
SUBTITLE III. FINANCIAL MANAGEMENT
CHAPTER 37. CLAIMS
SUBCHAPTER III. CLAIMS AGAINST THE UNITED STATES GOVERNMENT

3729. False claims

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No More Gifts For Doctors

The International Federation of Pharmaceutical Manufacturers and Associations revised its Code of Ethics on January 1 of this year for the first time in a decade. Under the newly revised Code of Ethics, members of the trade group which represents pharmaceutical companies worldwide may no longer provide “expensive gifts” or paid trips to physicians. While the code allows members to provide physicians with gifts that are related to prescription drugs that are inexpensive such as pens, paperweights, stethoscopes and other de mini’s gifts, the new

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New Compliance and Education Reforms Take Effect

In February, 2006, President Bush signed into law the Deficit Reduction Act of 2005 (DRA). An obscure provision within this Act mandates that entities receiving greater than $5 million per year in Medicaid payments must educate their employees about “whistleblower” claims under the Federal False Claims Act. Under the DRA, effective January 1, 2007, as a requirement of continued eligibility for the receipt of Medicaid payments, any entity receiving annual payments of $5 million or more in Medicaid funds must have mandatory compliance and education programs in place for its employees to provide detailed information about the Federal False Claims Act. This education must include information provided to employees about administrative remedies, state laws pertaining to civil or criminal penalties, whistleblower protections, and the role of such laws in preventing and detecting fraud, waste, and abuse in federally funded healthcare programs.

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Tax Whistleblower Rewards Increase

We are excited that, in December 2006, Congress dramatically increased the “rewards” to whistleblowers under the IRS Whistleblower rewards program. Whistleblowers now can receive up to 30% of the taxes, interest, and penalties that the IRS recovers based on information furnished by a whistleblower in large tax cases.

For years, the Internal Revenue Service has been authorized to pay informants reporting tax fraud a percentage of any back due taxes collected. Usually the maximum percentage was approximately fifteen (15%) percent of the back tax recovered.

The new whistleblower reform provisions passed by Congress have changed this maximum, and now allow the Internal Revenue Service to consider not only the back tax amount, but also interest and penalties. Given the amounts of money involved, and depending on the passage of time, the fines, penalties and interest in addition to the tax could be significant.

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Will Whistleblower Tax Reforms Produce Results?

The Federal False Claims Act has been recognized as the government’s most effective tool for combating fraud and waste in government programs. According to the Justice Department, false claims act recoveries for the fiscal year 2006 exceeded 3 billion dollars. Unfortunately, the whistleblower reward program utilized by the Internal Revenue Service can hardly be characterized as being so successful. Since new IRS reward reform measures were enacted by Congress, we have been giving thought to the crucial question of whether the IRS will be successful in implementing its new informant reward program. Statistics available from the IRS are hardly encouraging.

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Addressing Contractor Fraud and Abuse in Iraq

According to the Congressional Research Service, the United States has spent to date over $437 billion on the Iraq War. An additional $100 billion is estimated to be spent this year. While much of the money, obviously, goes for troops, a great deal of these amounts has gone to civilian contractors involved in reconstruction efforts in Iraq. But where has the money gone and who is accounting for its proper use?

According to Senator Patrick Leahy of Vermont, “Eventually we’re going to have a bill

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The CMS Clarifies the Mandatory Whistleblower Reforms

The salutary intent of the Deficit Reduction Act was to require that employers educate employees about the Federal False Claims Act and, hopefully, address fraud and abuse by employer entities receiving $5 million dollars or more in federal funds under the Medicaid program. When the Deficit Reduction Act was passed in 2005, a debate emerged about whether the DRA education provisions mandating employee education about the Federal False Claims Act applied directly to healthcare providers and/or whether states receiving Medicaid had to pass implementing legislation to make the provision effective. In December of 2006, the Centers for Medicare and Medicaid Services (CMS) set the record straight. An “entity” includes a government agency, organization, unit, corporation, partnership or other business arrangement (including any Medicaid managed care organization, irrespective of the form of business structural or arrangement by which it exists) whether for profit or not for profit, which receives or makes payments under a state plan approved under Title XIX or under any waiver of such plan, totaling at least $5 million annually. In short, states do not have to implement legislation to make the provision effective and any entity receiving $5 million or more annually in Medicaid benefits must implement the mandatory education provision.

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Major False Claims Act Victory for Whistleblowers in Iraq Fraud Case: Fourth Circuit Reverses Custer Battles Decision

In a major victory today for whistleblowers reporting fraud in the Iraq reconstruction effort, the Fourth Circuit Court of Appeals reversed a trial court’s decision that took away a jury verdict from the whistleblowers or relators in this qui tam case under the False Claims Act.

The Custer Battles case has been a hard-fought one, which until this decision had produced one of the odder results found.

With hundreds of billions of U.S. dollars spent on the Iraq War and Iraq reconstruction, and with the False Claims Act supposedly protecting U.S. taxpayer funds from fraud, the whistleblowers filed a qui tam case under the False Claims Act that alleged fraud in certain contracts that addressed, among other things, replacing Iraqi currency in the Iraq reconstruction effort.

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Iraq Whistleblowers Coming Forward, as Special Inspector General for Iraq Reconstruction Estimates Billions in Fraud and Waste

Whistleblowers reporting fraud by contractors in Iraq reconstruction are coming forward, reports Stuart Bowen, the Special Inspector General for Iraq Reconstruction. The relatively calmer conditions in Iraq apparently are a factor in more whistleblowers coming forward, he believes.

From the $21 billion Iraq Relief and Reconstruction Fund, billions have been lost, according to Bowen.

“Thirty-two billion dollars later, we don’t know a whole lot about what’s happened to that money,” Bowen said.

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The AIG Whistleblowers Begin to Speak About Its Credit Default Swaps?

The facts about how the AIG Financial Products unit took down AIG begin to emerge more clearly, as AIG whistleblowers begin to speak.

Former AIG auditor Joseph St. Denis described his concerns about AIG’s Financial Products unit–and how AIGFP’s Joseph Cassano refused to let him investigate:

“Mr. Cassano shouted at me for several minutes, and then said, as previously noted: ‘I have deliberately excluded you from the valuation of the Super Seniors because I was concerned that you would pollute the process.”

More to
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Appreciating Harry Markopolis, the Madoff “Whistleblower” to the SEC

I had the pleasure of seeing again and speaking last week with Harry Markopolis, the “whistleblower” now renowned for his excellent work in recognizing and reporting to the SEC that Bernie Madoff was running a huge Ponzi scheme. Harry was in Washington attending the “IRS Whistleblower Boot Camp” sponsored by Taxpayers Against Fraud.

Harry Markopolis exemplifies the whistleblower who works diligently to “do the right thing.” His appearance on 60 Minutes gave us a taste of his frustration over the years in attempting to
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IRS Whistleblower Attorneys Join IRS Whistleblower Office Director and Other IRS Officials for “IRS Whistleblower Boot Camp”

I spent a very productive day today with IRS Whistleblower Office Director Steve Whitlock, former IRS Commissioner Margaret Richardson, IRS Special Counsel Tom Kane, and other senior IRS officials working with the IRS Whistleblower Office, in helping stage the most comprehensive legal education program yet about the new IRS Whistleblower Program–the “IRS Whistleblower Boot Camp.” The day-long event was sponsored by Taxpayers Against Fraud.

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False Claims Act Amendments Approved by Senate Judiciary Committee As Part of FERA (Fraud Enforcement and Recovery Act) Today

Today, we were excited to hear that the Senate Judiciary Committee has sent long-needed amendments to the False Claims Act to the full Senate, as part of the “bailout” and “stimulus” inspired “Fraud Enforcement and Recovery Act” (FERA).

Where there are taxpayer funds being spent, there will be attempts to engage in fraud to cheat the public. As hundreds of billions of dollars are poured into federal and state programs through the “economic stimulus” package, the continuation of the Troubled Assets Relief Program
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Whistleblower Attorneys to Discuss Qui Tam Cases Under False Claims Act, IRS Whistleblower Program, and Sarbanes-Oxley Whistleblower Cases at Annual “Whistleblower Law Symposium”

I am very excited about co-chairing the Annual “Whistleblower Law Symposium” once again this week.

From Atlanta, Boston, Chicago, New Orleans, San Antonio, and Washington, D.C., many of the country’s leading attorneys in whistleblower cases under the “qui tam” statute, the False Claims Act, the Sarbanes-Oxley statute, and the IRS Whistleblower Program will gather in Atlanta on March 4 to discuss some of the more challenging aspects of representing whistleblowers (or defending against whistleblower claims) under these laws.

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UBS Agrees to Pay $780 Million & Identify Customers in IRS Tax Fraud Case

Off-shore tax evasion and international tax avoidance schemes are priorities of the IRS and the IRS Whistleblower program, which rewards tax whistleblowers. Our whistleblower lawyer blog has followed the ongoing investigation of UBS for its activities, which took a major turn today.

Today, the government announced that UBS AG, Switzerland’s largest bank, has admitted to helping U.S. taxpayers hide accounts from the IRS. UBS has agreed to identify its customers and to pay $780 million, as part of a “deferred prosecution agreement” on charges of conspiring to defraud the United States by impeding the IRS.

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Pharma Manufacturer in Medicaid Fraud Case Ordered to Pay Millions by Wisconsin Jury

Hidden schemes to defraud Medicare and state Medicaid programs of scarce taxpayer dollars are at the heart of many whistleblower cases under the federal and state False Claims Acts.

This morning, Wisconsin Attorney General J. B. Van Hollen announced that a Dane County, Wisconsin jury has just declared that a pharmaceutical manufacturer defrauded the Wisconsin Medicaid program by reporting grossly inflated and fraudulent prices.

Pfizer was on the receiving end of the health care fraud verdict, which may result in more than $153
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Wall Street Financial Industry “Bailout” Whistleblowers Sought by–Michael Moore?

Taking a brief break from “substantive” writing on this whistleblower lawyer blog, I could not help but briefly note this story today:

Filmmaker Michael Moore is seeking whistleblowers in the financial industry for his next film. He concludes “if you work for a bank, a brokerage firm or an insurance company — or if you have seen things or heard things that you believe the American people have a right to know — please contact me” via the email address posted on his blog.

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