Kansas City Whistleblower Lawyer Blog

Insurance Commissioner Dave Jones announced last week that California has joined a whistleblower lawsuit against Bristol-Myers Squibb Co., which alleges that the pharmaceutical giant bribed medical doctors to prescribe its drugs. This is described to be the largest alleged health care fraud case handled by the state to this day and has perhaps cost insurers millions of dollars.

The law suit was originally filed in 2007 by one current and two former employees of the company. The amended complaint, now including California, was filed by state insurance department lawyers in Los Angeles Superior Court two weeks ago. If the former employees and California win, the whistleblowers and the state would share damages.

Allegations claim that Bristol-Myers Squibb Co. salespeople offered physicians many perks, including paid speaking engagements, various gifts and trips, such as professional sports tickets, golf outings, meals, and luxury hotel accommodations in exchange for doctors prescribing large amounts of the company's drugs. These prescriptions were then allegedly billed to private insurers.

The current lawsuit alleges that by tracking prescription data, the company could identify low-prescribing doctors and then inform those doctors that they could lose perks. Additionally, salespeople at dinner events were allegedly instructed by the company to get physicians to prescribe for certain patient types and to then monitor new prescriptions by doctors.

Bristol -Myers Squibb has been the target of accusations involving kickbacks before. In 2007, the company agreed to a $515 million payout to settle federal whistleblower lawsuits in Massachusetts and Florida.

Source:
Calif Claims drug giant bribed docs to prescribe, The Wall Street Journal, March 18, 2011

Almost 2 years before Enron declared bankruptcy and created one of the largest financial meltdowns in history, a whistleblower tipped off the Internal Revenue Service (IRS) that the company was using illegal tax shelters to generate income.

After nearly 10 years, the IRS finally paid the whistleblower a $1.1 million reward. Ironically, if the IRS had pursued the information in 1999, when the whistleblower first came forward, the government may have realized the depth of Enron's problems and may have been able to avoid the financial disaster that ruined the portfolios of Enron investors.

The tax fraud reported by the whistleblower allowed Enron to evade taxes in amounts of more than $600 million and to report almost $300 million in false profits. The whistleblower estimates the numerous schemes he knew of and reported about involved over 10 billion taxable dollars.

The Enron whistleblower received a 15% reward for the money he helped the IRS to recover. However, the rates have increased since 1999. In 2006, the law was changed to allow whistleblowers to receive between 15% and 30% in cases involving more than $2 million.

In this case, the whistleblower received a significantly diminished amount because Enron declared bankruptcy in 2001, making the total amount the IRS could recover much smaller than the actual amount of tax fraud that occurred.

Source:
IRS pays Enron whistleblower $1.1 million, The Washington Post with Bloomberg Business, March 15, 2011

On Wednesday, March 9, 2011, congressional hearings revealed that officials at the Centers for Medicare and Medicaid Services (CMS) have developed plans for an increase in scrutiny for new providers joining these programs, as opposed to going after fraudulent behavior after the fact. Furthermore, these experts estimate that as much as $70 billion in savings could be achieved per year by going after fraudulent providers.

Peter Budetti, who is director of program integrity at the CMS, told the Senate Homeland Security subcommittee hearing, "We are going to keep out the bad guys without making things worse for honest providers, and cut off payments for things that should not be paid. We want to move from the pay and chase mode to preventing fraud."

The efforts could be cut short, however, due to lack of funding for new software that provides electronic screening that could aid in the identification of fraudulent providers. Much of the funding for the new software was included in the 2010 health care reform law, which is considered for repeal by many Republicans on Capitol Hill. On the other side of the argument regarding funding, Republicans report that the anti-fraud measures in the health care bill do not go far enough and that the Congressional Budget Office estimates that the efforts at fraud prevention would only eliminate $5.8 billion in improper payments over the next decade.

If left to continue, increases in Medicare fraud could limit the funding for the new health care reform law. Funding has also been sought for the special interagency task force that pursues and investigates fraudulent claims submissions and for receipt of kickbacks for referrals to billing for medical services that were never provided.

Source:
Medicare Fraud: A $70 Billion Taxpayer Ripoff, The Fiscal Times, March 10, 2011

The SEC (Securities and Exchange Commission) Whistleblower Office announced the appointment of a new leader on February 18, 2011. Sean McKessy will head the new whistleblower office in the Division of Enforcement. Administration of whistleblower provisions required by the Dodd-Frank Wall Street Reform and Consumer Protection Act will be performed by this office. Mr. McKessy was most recently corporate secretary at AOL Inc. and Altria Group Inc. Prior to that, he was senior counsel at the SEC's Division of Enforcement and Securities Counsel for Caterpillar, Inc.

Mr. McKessy said, "I am excited to return to public service and rejoin the dedicated staff of the Enforcement Division in this critical role. Whistleblowers often provide invaluable information that can help uncover securities fraud and protect investors."

Mr. McKessy's experience includes the development and supervision of internal compliance programs associated with federal securities laws. Additionally, he has been a corporate compliance officer and has been responsible for coordinating the reporting of violations to boards of directors.

"Sean is uniquely positioned to oversee the Commission's whistleblower program," said Robert Khuzami, Director of the SEC's Division of Enforcement. "The Enforcement Division and whistleblowers alike will greatly benefit from Sean's first-hand experience in bringing enforcement cases, handling whistleblower complaints and understanding the workings of internal corporate compliance programs."

Source:
Sean McKessy Named Head of Whistleblower Office, U.S. Securities and Exchange Commission, February 18, 2011