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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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…)

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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False Claims Act Passed in New Jersey Continues Trend of New State Qui Tam Whistleblower Statutes

The wave of new state False Claims Acts with qui tam whistleblower provisions has been a frequent topic of this whistleblower lawyer blog. In 2007, New York, Georgia, and Oklahoma joined the 16 other states that have enacted versions of the federal False Claims Act, the government’s primary weapon for fighting fraud against taxpayers.

Today, New Jersey’s Assembly unanimously passed the New Jersey State False Claims Act, which upon signature by the Governor will make New Jersey the 20th state to have a state version of the venerable qui tam whistleblower statute.

We congratulate New Jersey for taking the prudent action of passing a state False Claims Act. As we have written about extensively, Congress through the Deficit Reduction Act of 2005 has created financial incentives for states that pass such qui tam whistleblower laws that are at least as effective as the federal False Claims Act.

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IRS Tax Whistleblowers & False Claims Act Qui Tam Cases–2007 Year in Review by Whistleblower Lawyer Blog

2007 has been a most significant year for whistleblowers. The whistleblower lawyer blog attorneys look back on some of the milestones:

1. As soon as Congress authorized the first meaningful IRS Whistleblower Rewards Program to pay tax whistleblowers 15-30% of IRS recoveries from those who violate the tax laws by statue effective on December 20, 2006, beginning in January our whistleblower lawyers submitted some of the first IRS Whistleblower claims in the nation under the new law. Our IRS Whistleblower cases have continued
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IRS Whistleblower Instructions for Filing Tax Whistleblower Claims Issued by IRS–and Are Reprinted Here on Whistleblower Lawyer Blog

The IRS a few hours ago issued the long-discussed “interim” guidance on pursuing Tax Whistleblower claims under the new IRS Whistleblower Program. This IRS Notice 2008-4 on filing claims under the IRS Whistleblower Program is effective January 14, 2008, and appears at https://www.irs.gov/pub/irs-drop/n-08-04.pdf.

Our whistleblower attorneys who work with the IRS in representing Tax Whistleblower clients will be continue their discussions of how the new IRS Whistleblower program is operating. The IRS Notice is reprinted below for convenience of whistleblower lawyer blog readers:
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Tax Whistleblowers: IRS Whistleblower Office Issues Long-Awaited Guidance for Tax Whistleblower Claims

Our whistleblower lawyer blog has followed closely the evolution of the new IRS Whistleblower Program, which celebrates its one-year anniversary on December 20, 2007/ Late today, on the eve of that anniversary, the new IRS Whistleblower Office issued long-awaited interim “guidance” for filing Tax Whistleblower claims–which should help tax whistleblowers and their attorneys.

Until now, whistleblower lawyers and their clients had to learn the procedures from reports of various public statements and discussions with IRS officials. I had the pleasure of getting to know how the IRS Whistleblower Office’s Director Stephen Whitlock intends to approach these claims, through appearing on a panel discussion with him in September in Washington to explain how the new IRS Whistleblower Program operates.

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False Claims Act Litigation Attorneys Gather in Atlanta to Explore Whistleblower Issues

At a conference on False Claims Act Litigation on November 30, attorneys representing the government, relators or whistleblowers, and defendants gathered to discuss whistleblower law issues. The conference was organized by the law firm of Balch & Bingham LLP.

This whistleblower lawyer blog writer had the pleasure of appearing on a panel with the Chief of the Civil Division of the U.S. Attorney’s Office in Atlanta, Amy Berne, and with Balch & Bingham’s John Markus.

Amy Berne opened with an overview of
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