Whistleblower Blog

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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Where Is the Oversight?

Just before Christmas I read an article about a case in Texas where a doctor was sentenced to a lengthy prison term for a scheme to defraud Medicare and Medicaid in excess of $25 million. The doctor had been approached by individuals offering to pay him a kickback for supplying Certificates of Medical Necessity (CMN) approving a beneficiary to receive a motorized wheelchair. I have been watching TV and seeing these adds for sometime about scooters for disabled individuals and I was wondering how so

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The Most Significant Recent Qui Tam Whistleblower Cases Under the False Claims Act

This is the final section of my article. It discusses the most significant recent qui tam cases under the False Claims Act (as of December 2006).

B. Recent Significant Recoveries Under the False Claims Act:

1. Health Care Industry

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The Growing Importance of the Qui Tam Whistleblower Cases Under the False Claims Act

This is part 4 of my article on the False Claims Act. This part discusses the huge increase in federal dollars recovered in the past few years:

IV. Recent Recoveries and Other Developments In Qui Tam Litigation

A. An Explosion of Federal Dollars Recovered Since 1986, Under the False Claims Act

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How the Modern False Claims Act Works in Qui Tam Whistleblower Cases

This is part 3 of my article on how the False Claims Act works:

III. Brief Overview of How the Modern False Claims Act Works

A. Conduct Prohibited

The federal False Claims Act imposes civil liability under several different theories:

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History of the False Claims Act

This is the second part of my article explaining the False Claims Act–it addresses the history of the Act:

II. Background of the False Claims Act
While 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.7
According to one writer, “[i]n the early years of the Nation, the qui tam mechanism served a need at a time when federal and state governments were fairly small and unable to devote significant resources to law enforcement. As the role of the Government expanded, the utility of private assistance in law enforcement did not diminish. If anything, changes in the role and size of Government created a greater role for this method of law enforcement.” 8

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Health Care Fraud Strike Force Targets Medicare and Medicaid Fraud

With the nation’s health care costs growing, a DOJ and HHS initiative to combat health care fraud continues to show progress.

Building on past enforcement efforts, in May 2009 the government announced its Health Care Fraud Prevention and Enforcement Action Team (HEAT), as part of what is now a Cabinet-level battle against Medicare fraud. To date in FY 2009, the Department of Justice has recovered close to one billion dollars in health care fraud cases, and has obtained 300 convictions.

Last week, the government announced
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New False Claims Act Amendments Strengthen Enforcement of Health Care Fraud and Procurement Fraud Laws

Defrauding the government of taxpayer dollars has gotten tougher over the past five months.

Important changes to the nation’s primary anti-fraud statute, the False Claims Act, took effect on May 20, 2009, when the Fraud Enforcement and Recovery Act of 2009 became law.

Among the most significant changes, Congress clarified and corrected the False Claims Act by legislatively overruling certain court decisions that sought to limit the scope of the Act, including Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004), cert. denied, 544 U.S. 1032 (2005); and United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. 2005), rev’d, 562 F.3d 295 (4th Cir. 2009).

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Part 2: IRS Whistleblower Program Report by Treasury Inspector General for Tax Administration (TIGTA)

We wrote yesterday about the just-released report on the new IRS Whistleblower Program by the Treasury Inspector General for Tax Administration (TIGTA). The “rest of the story” should be told.

Some history is essential to evaluate how far the handling of whistleblower (or “informant”) claims has progressed since the newly created IRS Whistleblower Office was formed in early 2007, and what is still needed.

Although information provided by whistleblowers is extremely effective in exposing fraud, before 2006 Congress had not authorized an effective IRS whistleblower rewards program–and some in Congress affirmatively opposed one.

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IRS Whistleblower Program: Inspector General Urges Whistleblower Protection from Retaliation and Administrative Changes

Today the Treasury Inspector General for Tax Administration (“TIGTA”) released a Report on the IRS Whistleblower Program that urges Congress to protect IRS whistleblowers from retaliation by employers, and recommends various administrative changes to the Program.

The Report’s title, “Deficiencies Exist in the Control and Timely Resolution of Whistleblower Claims,” is misleading to this writer, who has followed the progress of the new Program since its inception. Before Congress created the new IRS Whistleblower program in December 2006, the Inspector General had observed
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IRS Whistleblower Office Issues Latest Annual Report to Congress

The IRS Whistleblower Office has released its Annual Report to Congress, for the fiscal year ended September 30, 2008. Some highlights are below:

First, the IRS Whistleblower Program has experienced explosive growth since Congress authorized these new IRS Whistleblower rewards in December 2006.

According to this Report, “the initial results suggest that whistleblowers with significant knowledge are coming forward as a result of the changes to the award program. We received claims that appear to meet the section 7623(b) criteria on 46
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Health Care Fraud Lawyers to Analyze Recent Amendments to False Claims Act

At the “Advanced Health Law” seminar on October 9, attorneys prosecuting and defending cases of alleged health care fraud will discuss the important new amendments to the False Claims Act. I am honored to be the panelist who will discuss these important new provisions from the perspective of representing whistleblowers (known as “relators”) who bring qui tam whistleblower cases under the False Claims Act.

These significant changes to the False Claims Act took effect on May 20, 2009, when the Fraud Enforcement and
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Federal Contractor Fraud Laws To Get Tougher? ACORN Controversy Casts Spotlight on Larger Contractors That Violate False Claims Act

Outrage over misuse of public funds is a healthy reaction to those who cheat taxpayers. It can also create interesting bedfellows, as newly-introduced legislation in the House demonstrates.

HR 3571, aimed at “de-funding ACORN,” would ban federal contracts and most federal funds to any organization that “has filed a fraudulent form with any Federal or State regulatory agency,” among other things. (Complete bill is below.)

As. Rep. Alan Grayson (D-FL) observed correctly, fraud by those who receive government funds involves much “bigger fish” than ACORN–and bigger dollar amounts of alleged fraud.

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Calls Continue for a “False Claims Act” for Wall Street Whistleblowers

Since the Madoff and Stanford scandals, we have written about the calls for the Securities and Exchange Commission (SEC) to establish a meaningful whistleblower rewards program. Currently, no adequate incentives exist for whistleblowers to speak up when they might have a chance to stop large scale fraud and prevent the next Madoff or Stanford debacle. How much better off would so many Americans be if someone had exposed Madoff before he defrauded so many investors?

Forbes has run interesting column by Bill Singer, calling for a statute that apples “False Claims Act” whistleblower remedies to Wall Street. Why not protect investors from the massive losses that so many incurred? The current system obviously failed to do so. Harry Markopolis has described eloquently how the SEC could do so much better, and new SEC whistleblower rewards should make a huge difference.

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New IRS Group to Address Offshore Accounts and Other International Tax Abuses by Wealthy Taxpayers

Offshore tax abuses and tax evasion have kept the IRS quite busy of late. The fast-approaching September 23 deadline for its “voluntary disclosure program,” and its agreement with UBS that will allow it to identify thousands of American taxpayers with offshore accounts, have added momentum to its efforts to combat offshore tax abuses by high net worth taxpayers.

Now, the IRS is creating a new group to “focus on examinations involving webs of entities and arrangements controlled by the high wealth taxpayer segment.” It will
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Protecting Whistleblowers from Criminal Prosecution: The Mystery of the UBS Whistleblower’s Prison Sentence

In one of two prominent whistleblower cases in the news this week, whistleblower John Kopchinski will be awarded more than $50 million for his role in exposing improper “off-label marketing” of the drug Bextra by Pfizer. Other whistleblowers also will be rewarded because of this settlement. That settlement of $2.3 billion is the largest in history ($1 billion to settle False Claims Act allegations, and $1.3 billion in criminal fine and forfeiture).

As large as the Pfizer settlement is, the other whistleblower’s actions seem likely to lead to recovery of dollars that could dwarf this $2.3 billion settlement. UBS whistleblower Bradley Birkenfeld has lifted the shroud of secrecy from thousands of American taxpayers’ offshore accounts at UBS. He has given the IRS a foothold into recovering potentially many billions in unpaid taxes owed.

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