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Michael Sullivan

Qui Tam Whistleblowers Awarded $140 Million Under False Claims Act in Medicare and Medicaid Fraud Cases in FY 2006

Whistleblowers and their attorneys filing suit under the False Claims Act helped federal authorities recover $2.2 billion in Medicare and Medicaid fraud cases in fiscal year 2006, according to a government report just released. The whistleblowers or “relators” received $140 million of the proceeds for their efforts, under the qui tam provisions of the False Claims Act.

As this whistleblower lawyer blog has written about extensively, the federal False Claims Act is the government’s “primary” weapon for combating fraud. As health
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Federal Subsidies and the False Claims Act

If an organization or individual is receiving a federal subsidy of any kind and makes false statements to the Federal Government with respect to such subsidies, such false statements could subject the receiver of the subsidy to liability under the Federal False Claims Act. In short, if a recipient of a federal subsidy makes false statements concerning eligibility for the subsidy and/or the amount of the subsidy sought or obtained, the recipient could be sued for fraud by a whistleblower with knowledge of the false
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New Whistleblower Law Provides Protection for Defense Contractor Employees

Two days ago on 1/28/08 President Bush signed into law the National Defense Authorization Act for the fiscal year 2008. This legislation includes a provision protecting defense contractor employees who blow the whistle on contracting fraud. 10 U.S.C. § 2409 has specifically been amended via Section 846 to protect employees for disclosing “information that the employee reasonably believes is evidence of gross mismanagement of a Department of Defense contract or grant, a gross waste of Department of Defense funds, a substantial and specific danger to
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Tax Fraud Prosecution Over Abuse of Offshore Transactions Leads to Convictions of CPAs and Attorney by IRS and Justice Department (from Whistleblower Lawyer Blog)

Our whistleblower lawyer blog has followed closely investigations of hedge funds and other offshore investors for tax fraud and other IRS violations. After investigating a tax fraud conspiracy involving offshore companies and offshore bank accounts, the Justice Department and the IRS have announced that an attorney and two certified public accountants have pleaded guilty to tax fraud and aiding the preparation of a false tax return.

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Whistleblower Qui Tam Case Result: “Big Dig” Settlement of $458 Million Announced

The “Big Dig” collapse has led to a $458 million settlement by contractors responsible for the Boston Central Artery/Tunnel highway project. Whistleblowers using the federal and state False Claims Acts helped bring about that result.

Of the $458 million settlement, $23 million is being paid to the United States under the federal False Claims Act, and $40 million will go to Massachusetts under its state False Claims Act, as a result of qui tam whistleblower litigation. (As we have written about extensively on
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Hedge Fund Tax Probes Expand to Congress Following IRS Hedge Fund Inquiries

Both the IRS Financial Services group (part of its LMSB Division) and the IRS Whistleblower Office have emphasized to me–as recently as yesterday–their strong interest in hedge fund abuses that violate the tax laws.

The tax whistleblower section of our whistleblower lawyer blog has followed the expanding probes and increased scrutiny of hedge funds, including our segments on “IRS to Scrutinize Derivatives–Do They Allow Offshore Investors to Avoid Withholding Taxes on U.S. Stock Dividends?” in July 2007, and on “(more…)

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IRS Whistleblower Progress: Kudos to These Tax Whistleblower Attorneys

The progress of the new IRS Whistleblower Program has been a subject of great interest of this whistleblower lawyer blog. I would like to congratulate two fellow tax whistleblower attorneys, Erika Kelton of Phillips & Cohen, LLP, and Paul D. Scott of the Law Offices of Paul D. Scott, for their contributions to its progress.

Last September, I had the pleasure of appearing with them, IRS Whistleblower Office Director Stephen Whitlock, and Professor Dennis Ventry in a panel discussion in Washington to
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Qui Tam Whistleblower Law Signed by New Jersey Governor

This whistleblower lawyer blog reported earlier that the New Jersey Assembly had passed the New Jersey False Claims Act, which provides incentives to whistleblowers (“relators”) to expose fraud affecting state funds–much like the federal False Claims Act does.

Governor Jon Corzine signed the new bill into law yesterday, which makes New Jersey the 20th state to enact a state False Claims Act with qui tam whistleblower provisions similar to those of the federal False Claims Act. (Click here
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Durable Medical Equipment (DME) Fraud Crackdown by CMS Announced–to Combat False Claims Act Violations of Types Often Exposed by Whistleblowers and Their Attorneys

Some of the many types of health care fraud that this whistleblower lawyer blog has followed involves “durable medical equipment” (DME). The sale of wheelchairs, walkers, oxygen supplies and equipment, hospital beds, orthotics, prosthetics, and various medical devices is yet another opportunity for dishonest suppliers to defraud taxpayers.

This week, the Centers for Medicare & Medicaid Services (CMS) announced an initiative designed to improve care, save $1 billion annually, and lower Medicare beneficiaries’ out-of-pocket costs–by promoting competition in the sale of durable medical
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IRS Tax Whistleblower Procedures Continue to Take Shape

The new IRS Whistleblower Office’s Rewards Program that we have followed closely on this whistleblower lawyer blog made further progress this week. The IRS gave notice on January 9 that it intends to create a proposed new system of records–“Whistleblower Office Records.”

The purpose is to allow the new IRS Whistleblower Office to administer the IRS Whistleblower program more effectively, in contrast to the “old,” decentralized procedures that the IRS used before Congress authorized the new IRS Whistleblower Rewards in December 2006.

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New IRS Offshore Account Disclosure Program Takes Shape

As the IRS continues its increasing focus on international tax issues, a new IRS offshore disclosure program announced in December continues to take shape. While the IRS has not made public a full description of the program, details have emerged in comments of IRS officials over the past weeks.

Using the 2009 IRS voluntary disclosure program as a template, the IRS is apparently tweaking the approach that generated approximately 15,000 disclosures in the 2009 effort.

The IRS Criminal Investigative Division (“CI”)–already quite busy
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Long-Awaited IRS Whistleblower Rule “Fix” Is Released for Comment

We have written previously about Senator Grassley’s pointed criticisms of aspects of the IRS whistleblower rules proposed in June 2010. The IRS’s delay in finalizing those rules is a principal reason why the IRS has not yet paid whistleblowers who have come forward since the December 2006 creation of the new IRS Whistleblower Program.

Today, the IRS took a large step to correct one major flaw that Grassley urged be corrected: re-writing a bizarre rule that would deny rewards to valuable whistleblowers who prevent improper refunds, or reduce a credit balance by a taxpayer. From what we can tell, that nonsensical rule was not the creation of the IRS Whistleblower Office, but of others within the IRS.

The IRS today announced a new IRS whistleblower rule to correct that anomaly, to be published for comment in the Federal Register.

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Activities of IRS Large Business and International Division Earn Its Commissioner Recognition As “Tax Person of the Year”

Citing many developments in the IRS Large Business and International Division in 2010, Tax Analysts this week named IRS LB&I Commissioner Heather Maloy as its “Tax Person of the Year.”

Among those developments that we have followed previously are the international focus of the restructured LB&I division (formerly known as the Large and Mid-Size Business Division (LMSB)), and the creation of the new Global High Wealth Industry Group within LB&I. That group within LB&I is already is working some very significant IRS Whistleblower cases.

Also mentioned by Tax Notes was one of my favorite IRS professionals who assisted the new IRS Whistleblower Program in its infancy, Stuart Mann:
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New SEC Whistleblower Program to Benefit from SEC’s Appointment of New Enforcement Official?

The SEC has just announced that current senior advisor to SEC Chairman Mary Schapiro, Stephen L. Cohen, has been named an Associate Director of the Division of Enforcement.

We hope this is good news for the nascent SEC Whistleblower Program. The SEC recently announced that its delaying creation of an SEC Whistleblower Office for budget reasons.

Steve Cohen has advised Chairman Schapiro on a number of issues including the SEC Whistleblower program, which I have discussed with him briefly earlier this year.

Coincidentally, the announcement came on yesterday’s deadline for comments on the SEC’s proposed rules for SEC whistleblowers, which must be substantially revamped so as not to defeat Congress’ purpose by discouraging meaningful whistleblowers from coming forward. We have submitted our own comments to the SEC on its proposed whistleblower rules, and will discuss later others’ comments here. See our comments

The SEC’s press release is reprinted below:
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IRS Whistleblower Claims Reporting Tax Evasion and “Overlooked” Returns

Tax whistleblowers using the new IRS Whistleblower Program have reported many instances of tax evasion involving domestic and foreign corporations, partnerships, and trusts, in addition to abusive offshore transactions about which we have written previously. These tax whistleblowers will allow the IRS to reduce the more than $300 billion “tax gap”–the difference between what tax cheats owe, but refuse to pay.

Tax evasion generally entails taxpayers understating taxes in the returns they file. In many cases evasion also entails taxpayers failing to file returns, especially information returns (as opposed to tax returns).

For example, partnership returns (Form 1065) are information returns and as such do not report tax payable. Cases of partnership tax evasion sometimes arise where filing Form 1065 is “overlooked.” In many of these cases, the partners continue to file their own income tax returns, which typically understate taxable income and tax payable, as there are no K-1’s to report.

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Special: Article Explaining the 2010 False Claims Act and State False Claims Acts

Three years ago, our whistleblower lawyer blog presented an in-depth article discussing the nation’s major whistleblower law, the False Claims Act, and the wave of new state False Claims Acts.

Since then in 2009-2010, Congress has amended the False Claims Act three times to remove obstacles created by courts, which had limited the law’s effectiveness. To reflect those important and needed changes in the law, I have updated this article to present at the 2010 Fraud and Compliance Forum sponsored by the American Health Lawyers Association and Health Care Compliance Association.

That detailed article is excerpted here to explain the False Claims Act, with its 2009-2010 amendments. For ease of reading, it is divided into six parts:

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Part 1: Introduction: What You Should Know About the False Claims Act And New State False Claims Acts After the 2009-2010 Amendments

This is Part 1 of an updated explanation of the major qui tam whistleblower statutes, the federal False Claims Act and the new state False Claims Acts. This Part 1 provides an introduction to the False Claims Act.

In 2010, more than ever, it is essential for lawyers to understand their clients’ potential liabilities under the federal False Claims Act (“FCA”). The health care industry increasingly has become the major focus of the federal government’s enforcement efforts, and usually pays at least two-thirds of the money recovered each year under this anti-fraud statute.

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Part 2: The False Claims Act and the Increasing Number of State False Claims Acts

This is Part 2 of an explanation the federal False Claims Act and the new state False Claims Acts with qui tam whistleblower provisions. This Part 2 discusses the sound policy reasons underlying the False Claims Act.

I. Why Have A “False Claims Act”?

Fraud is perhaps so pervasive and, therefore, costly to the Government due to a lack of deterrence. GAO concluded in its 1981 study that most fraud goes undetected due to the failure of Governmental agencies to effectively ensure accountability on the part of program recipients and Government contractors. The study states:

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Part 3: The False Claims Act: Background & History

This is Part 3 of an updated explanation of the major qui tam whistleblower statutes, the federal False Claims Act and the new state False Claims Acts. This Part 3 explains the history of the False Claims Act and why effective whistleblower laws are important.

II. Background of the Federal False Claims Act

Although the False Claims Act may be the best known qui tam statute, it is far from being the first. Qui tam actions date back to English law in the 13th and 14th Centuries. This tradition took root in the American colonies and, by 1789, states and the new federal government had authorized qui tam actions in various contexts.

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Part 4: How the False Claims Act Works After the 2009-2010 Amendments (with Comparisons to Some State False Claims Acts)

This Part 4 of a six part summary explains how the federal False Claims Act works, after Congress amended it three times in 2009-2010. It also discusses similar provisions of some state False Claims Acts.

This is an update from a previously published article by whistleblower lawyer blog author Michael A. Sullivan.

III. Overview of How the Modern False Claims Act Works (with Comparisons to Some State False Claims Acts)

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