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Whistleblower Blog

OFF LABEL MARKETING: BIG PHARMA’S PRESCRIPTION FOR PROFITS

The Food, Drug and Cosmetic Act prohibits pharmaceutical companies from marketing or promoting a drug for uses that the FDA has not approved. This practice is known in the industry as “off label marketing”. Increasingly, pharmaceutical companies have purposely engaged in off label marketing in order to increase profits at the price of public safety. Practitioners in this area see this every day. Whether the public and even the medical profession is aware of the extent of this practice is unknown. Nonetheless, it appears that the False Claims Act remains one of the best tools available to address this deplorable practice.

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Retaliation Against Whistleblowers and Witnesses in Federal Proceedings

While there are many specific retaliation provisions unique to claims filed under the False Claims Act, with the Equal Opportunity Commission and/or arising out of Sarbanes-Oxley provisions, all of which protect informant employees from being retaliated against by their employer, a little known fact is that there is a general statute (42 U.S.C. § 1985) which makes it unlawful for two or more persons to conspire to “deter” a witness from testifying in Federal Court. This statute also makes it unlawful to “retaliate” against a
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Tax Whistleblowers Encouraged to Come Forward

Even though the Internal Revenue Service has had a Rewards Program for many years, until recently, there was very little encouragement for tax whistleblowers or informants to come forward concerning their knowledge of the under-reporting of taxes. While it is well known that income tax evasion costs taxpayers approximately $300 billion a year, the Internal Revenue Service in the past has failed to aggressively address this problem. While enforcement actions against criminals are designed to help deter tax fraud, the $300 billion annual figure is
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Accounting Firm Partners Indicted in Tax Fraud Case Over Tax Shelters Promoted by Ernst & Young

IRS whistleblowers and whistleblower attorneys take note: accounting firms participating in selling tax shelters were jolted by today’s announcement of the indictment of four Ernst & Young partners for tax fraud conspiracy and other federal criminal charges relating to tax shelters.

The four accountants were alleged to have marketed tax shelter transactions based on fraudulent factual scenarios, through which wealthy taxpayers could eliminate or reduce the taxes paid to the IRS, according to the government’s announcement. All four persons charged had worked in E&Y’s group
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New Whistleblower Law on Medicaid Fraud Signed Today by Governor of Georgia

I was excited to be invited to participate in today’s signing of the new Georgia “State False Medicaid Claims Act,” the newest state qui tam whistleblower law. The bill’s sponsor, Rep. Edward Lindsey, asked this whistleblower lawyer blog author to join him and representatives of the Georgia Department of Community Health in the Governor’s Office for the signing ceremony.

Having worked with legislators on this bill, I was very happy to celebrate the law’s passage today:Participating in the signing ceremony with Governor Sonny
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Addendum: IRS Whistleblower Office Is Off to a Strong Start . . .

I posted earlier today on this whistle blower lawyer blog about the comments of the Director of the new IRS Whistleblower Office, Stephen Whitlock, on how the IRS Whistleblower program is off to a good start, with credible claims and supporting evidence having been submitted by whistleblowers and their attorneys.

Since then, my partner commented that he believes one of our larger cases was referred to in the IRS Director’s comments about “knowledgeable insiders.” We also neglected to mention our IRS Whistleblower
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New IRS Whistleblower Director Says IRS Rewards Program Is Off to a Strong Start

The head of the new IRS Whistleblower Office, Stephen Whitlock, reports that the new IRS Whistleblower Rewards Program is off to a strong start.

Today’s Wall Street Journal quotes Mr. Whitlock as saying that the claims submitted to the IRS Whistleblower Office to date appear to have credibility and have evidence to support them.

Since the new IRS Whistleblower program was authorized by Congress in December, our firm has been working with the IRS in pursuing whistleblower claims in the Midwest,
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Whistleblower Case Victory in D.C. Bid-Rigging Trial

A qui tam whistleblower and his lawyer are very happy as a result of a $102 million jury verdict–to be shared by the whistleblower–in a False Claims Act trial that ended on May 14.

The defendants in this whistleblower case included Bill Harbert International Construction Inc.; Harbert Construction Services; Bilhar International Establishment; Harbert Corp.; and Harbert International. The case alleged bid-rigging on three U.S. government-funded construction contracts in Egypt in the 1980s and 1990s.

The jury found that defendants violated the False Claims Act and awarded $34 million in damages, which are “trebled” under the False Claims Act.

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“Lessons from Health Care Fraud in Medicare and Medicaid” to Begin on This Whistleblower Lawyer Blog

Because health care fraud in the Medicare and Medicaid programs is such a huge problem, this week our whistleblower lawyer blog writers (former federal prosecutors who are now whistleblower attorneys) begin a series of posts on “Lessons from Health Care Fraud in Medicare and Medicaid.”

We will discuss how whistle blowers in the medical services profession have been important resources in revealing and stopping health care fraud in hospitals, nursing homes, physicians’ practices, and the pharmaceutical or drug industry. We also discuss how the
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Texas Upgrades Its Qui Tam Whistleblower Statute–and Considers An Even Better Whistleblower Law

Just after Georgia, New York, and Oklahoma have passed new whistleblower laws similar to the federal False Claims Act to protect at least state Medicaid funds, Texas is poised to do even more.

We were pleased to see that, on May 4, Texas upgraded its already successful Texas Medicaid Fraud Prevention Act. The changes were designed to allow Texas to receive a greater share of Medicaid fraud recoveries, as we have written about previously on this whistleblowerlawyerblog. The Deficit Reduction Act of 2005 creates
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Whistleblowers Reporting Derivatives Fraud? Whistleblower Incentives Must Be Paid by CFTC Under New Financial Reform Bill

The new financial reform bill that awaits the President’s signature this week has something important for potential whistleblowers with knowledge of fraud in options, futures, derivatives and other financial products within the jurisdiction of the Commodity Futures Trading Commission (CFTC). The bill will modify the Commodity Exchange Act to provide whistleblower rewards and protections.

Similar to the new SEC whistleblower awards for persons who reports securities fraud, the rewards to whistleblowers will be available if the CFTC recovers monetary sanctions of more than $1 million because of the whistleblower’s information.

Like SEC whistleblowers, CFTC whistleblowers will have an enforceable right to 10-30% of what the CFTC recovers in substantial cases when the whistleblower has “voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action.” (Section 748 of Dodd-Frank Wall Street Reform and Consumer Protection Act, reprinted below).

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New SEC Whistleblower Program Approved by Senate in Financial Reform Bill

Since the SEC refused for years to heed Madoff whistleblower Harry Markopolis’ warnings that Madoff was running a Ponzi scheme, we have followed with great interest the efforts of those who sought to create the first meaningful SEC whistleblower program.

The Senate this week took an important step by authorizing a new SEC whistleblower program–one more potent than the SEC apparently wanted–as part of the Wall Street Reform and Consumer Protection Act.

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New IRS Procedures for Whistleblowers Should Encourage More Significant IRS Whistleblower Claims

This morning’s Washington Post quotes me, among others, in criticizing one aspect of the new procedures for IRS whistleblowers recently published in the Internal Revenue Manual. That one glaring defect aside, the new IRM procedures are welcome news that should encourage more IRS whistleblowers to come forward.

Today’s Post article by David Hilzenrath on the IRS whistleblower procedures makes the following point, among others:

“There’s apparently an institutional resistance to rewarding whistleblowers that will take some time to dissipate,” said Michael A. Sullivan
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TARP Fraud and Other Violations Alleged by SEC Against Chairman of Major Mortgage Lender

As we have written previously, the billions of “bailout” dollars to financial institutions through the TARP program inevitably would result in many fraud cases, including some by TARP whistleblowers.

Today, the SEC announced allegations of TARP fraud and securities fraud of more than $1.5 billion other violations against Lee B. Farkas, through his company Taylor, Bean & Whitaker Mortgage Corp. (TBW).

According to the SEC, Farkas “sold more than $1.5 billion worth of fabricated or impaired mortgage loans and securities to Colonial Bank. Those loans and securities were falsely reported to the investing public as high-quality, liquid assets. Farkas also was responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a prerequisite necessary to qualify for TARP funds. When Colonial Bank’s parent company – Colonial BancGroup, Inc. – issued a press release announcing it had obtained preliminary approval to receive $550 million in TARP funds, its stock price jumped 54 percent in the remaining two hours of trading, representing its largest one-day price increase since 1983.”

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New IRS Whistleblower Claim Procedures for Determining Awards to Whistleblowers Announced

Today the long-awaited IRS Whistleblower Office procedures for determining awards to tax whistleblowers were announced in an update to the Internal Revenue Manual.

The new provisions for IRS Whistleblower claims address many details of how tax whistleblower claims will be handled. The full provisions are reprinted below:

Part 25. Special Topics
Chapter 2. Information and Whistleblower Awards
Section 2. Whistleblower Awards

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Offshore Tax Violations: Sen. Grassley Calls For Accounting of Use of UBS Information Provided by Tax Whistleblower

Offshore tax evasion is a great priority for the IRS, and thus also the IRS Whistleblower Program.

Today, the leading advocate for robust whistleblower laws has called for the Treasury Department and the IRS to account for their use of information provided by the “UBS whistleblower,” Bradley Birkenfeld.

Sen. Chuck Grassley issued a press release today summarizing his letter to Treasury Secretary Tim Geithner and IRS Commissioner Douglas Shulman. Grassley commented on Swiss legislators’ move today to “unravel a U.S.-Swiss treaty that would allow for the disclosure of more client information to allow U.S. officials to review cases for potential enforcement of U.S. tax laws.”

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Health Care Industry and 2009-2010 Changes to False Claims Act

The health care industry is adjusting to major changes to the nation’s major “whistleblower” law, the False Claims Act.

Both in 2009 and 2010, Congress has removed obstacles to whistleblowers’ use of this anti-fraud statute to address Medicare and Medicaid fraud, as well as fraud affecting every other federal program. As we have written about previously, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) overruled key judicial decisions that had undermined the the False Claims Act’s effectiveness.

This year, the landmark health
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Offshore Tax Evasion Scheme to Defraud IRS Alleged in Indictment of Miami Beach Developers

A high priority for IRS Whistleblower cases is the abuse of offshore “tax havens” or offshore financial centers to conceal income from the IRS that is subject to U.S. taxation. Over drinks in Miami Beach recently with IRS agents who worked the massive UBS matter, I discussed some of the recent announced cases the IRS has made involving offshore abuses.

Using shell corporations and “nominee” entities established in the Cayman Islands, Switzerland, or a host of other countries that market “secrecy,” those looking to conceal income from the IRS, or assets from potential creditors, have made offshore tax havens a booming business.

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More Details of UBS Whistleblower Birkenfeld’s Prosecution Explained in Washington Post

The Sunday, May 15, 2010 Washington Post will include more details on a perplexing question we have written about: how did UBS whistleblower Bradley Birkenfeld get himself prosecuted for a felony, and earn a prison sentence, while he sought to become an IRS whistleblower?

The story by David S. Hilzenrath explains more of the “dance” between Birkenfeld and prosecutors as he apparently partially told the government what he knew about wrongdoing at UBS.

Birkenfeld blew an opportunity to avoid prosecution for his
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Should SEC Whistleblowers Have Right to Share in Recoveries That They Cause?

Congress is at a crossroads in deciding whether there will be a meaningful SEC Whistleblower Program–for the first time.

At this morning’s Offshore Alert conference in Miami, we heard from the SEC Chair’s Senior Advisor Stephen Cohen on this subject, as well as insight from IRS Whistleblower Office Director Steve Whitlock on how the IRS Whistleblower Program is now designed to encourage whistleblower claims.

As we have observed previously about the bills that would create an SEC Whistleblower program, past experience shows that an enforceable right to a meaningful reward is essential to cause whistleblowers to come forward.

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