Kansas City Whistleblower Lawyer Blog

At the beginning of February, the Department of Justice, in conjunction with the Department of Health and Human Services, released a number of statistics regarding qui tam cases filed under the false claims act. As of January 4, 2011 there were 1,341 qui tam actions under investigation in the United States; each of them awaiting a decision as to whether or not the government will intervene.

Qui Tam cases are filed "under seal" meaning that the case is filed in secret so that the public and even the defendant are unaware that the case has been filed. This allows the government to investigate the case prior to any allegations being made public.

Just of 66% of all qui tam actions currently on file allege some form of health care fraud. The whistleblowers who have brought these actions come from a wide variety of backgrounds and professions, from hospital administrators to pharmaceutical sales representatives. 98% of all sealed health care cases allege fraud against Medicare or Medicaid.

From October 1, 2006 to January 4, 2011, the government made intervention decisions in 1,644 cases and actually intervened in approximately 1 out of every 5 cases. Of the cases that have had intervention decisions in the past 5 years, the average time under seal is 13 months.

More than two dozen large U.S. companies including Google, Inc. and General Electric Co. have written letters to the Securities and Exchange Commission asking the agency to revise its proposed rules for awarding bounties to workers who report corporate fraud or wrongdoing. They want the SEC to require that workers report wrongdoing to employers in order to be eligible for payments under the agency's proposed "whistleblower" program.

Lawyers for whistleblowers contend that any requirement for internal reporting would kill the program because it would discourage a potential whistleblower coming forward for fear of being identified.

The bounty for whistleblowers program was created by the Dodd-Frank financial-overhaul law passed last year. The SEC has until April to finalize rules of implementation.

The SEC's draft rules proposed in November 2010 would not require whistleblowers to report suspected fraud or wrongdoing to their employers in order to participate in a bounty.

Some lawmakers may object to raising more hurdles to reward whistleblowers because of the SEC's initially brushing off warnings about Bernard Madoff's Ponzi scheme.

One Senator, Charles Grassley (R., Iowa), said whistleblowers should be entitled to "an independent and impartial review without putting a target on their backs".

Source:
Companies Prod SEC on Whistleblower Proposal, The Wall Street Journal, February 17, 2011

Health Care and Government contractor fraud can potentially bankrupt America's health care benefit programs and defense funds. These actions only enrich those commiting the fraud. The damages can be staggering and the ongoing actions of many perpetrators suggest that these damages are simply a cost of doing business in these industries. The major types of fraud include:

• Medicare and Medicaid Fraud
• Pharmaceutical Fraud
• Defense Contractor Fraud
• Federal Government Contractor Fraud

All of these types of fraud are violations of the False Claims Act. Businesses that provide services for which reimbursement may be sought from Medicare and Medicaid funds are subject to the False Claims Act. Likewise, businesses that enter into contracts with the Government for the procurement of equipment and services are also subject to the False Claims Act. Normally, these businesses are considered to be Government Contractors.

American taxpayers and consumers of medical and pharmaceutical services should pay particular attention to the associated billing for these services. Actions such as billing for services that are not provided, incorrect data on health care provider cost reports, the provision of substandard care, and fully charging for partially filled prescriptions could be violations of the False Claims Act. Other violations can include:

1. Kickbacks to a Medical provider in exchange for prescribing particular drugs.
2. Medicare or Medicaid patients that are charged a higher rate for the same prescription.
3. Substandard products and services that are intentionally provided.
4. Prescribing unnecessary drugs and treatments.
5. Marketing drugs for uses not approved by the FDA.

Equipment and services provided by defense contractors can include everything from computers and vehicle parts to multi-billion dollar weapons systems. Defense contractors provide these products and services via contract with the Government. These contractors can run afoul of the False Claims Act by supplying substandard parts and equipment and by participating in bidding schemes that involve price rigging, to name a few. Additionally, failing to adhere to the terms of the contract can also trigger violations. Contract terms can include billing and labor rates as well as contract performance requirements and provision of equipment and labor that meet federal statutes and regulations.

Today (February 3, 2011) The Wall Street Journal reports that the attorneys general in California and Virginia are investigating whether banks overcharged public pension funds by tens of millions of dollars for foreign-exchange transactions. Other states, including Florida and Tennessee, are also conducting investigations.

The states are looking into whether certain banks charged state pension funds the most expensive foreign-exchange price possible during the day when a trade took place, instead of the rate available at the time the trade took place. This also occurred when currencies were sold. Banks paid the state the lowest price possible for the day and not the rate available at the time of the trade.

The international foreign-exchange market is a $4 trillion-a-day exchange market.

U.S. investors trading in global stock markets must convert dollars into the currencies of the foreign countries in which they invest. For example, if an investor (pension fund) buys stock in a South Korean auto maker, it converts U.S. dollars to won, and reverses that exchange when selling the stock. Custodial banks facilitate this foreign exchange function.

The suits claim the banks didn't charge the pension funds the currency rates prevailing at the time of the trades, but consistently charged them the highest currency-conversion prices of the day, and kept the difference for their own account. The suits also say the banks similarly overcharged when the investors exited the trades.

Preliminary studies by university professors indicate custodial banks generally know the price they charge their clients and the bid-ask spread within a few hours of any transaction. Customers only learn later about the price they paid and never the bid-ask spread between what sellers are offering and buyers are willing to pay.

The California case was unsealed in 2009 and estimates the fraud at $56 million. The Virginia suit was unsealed last week and seeks $150 million in damages. Details of the matters indicate that some of the whistleblowers currently or previously worked at the defendant institutions.

About 30 states have statutes that allow whistleblowers to collect as much as 15% to 30% of any government recovery in cases in which they assist.

Source:
US States Widen Currency-Trade Probes, The Wall Street Journal, February 2, 2011