Latest News and Efforts from the Government Accountability ProjectA Good Year For Whistleblowers

27 Feb 2003 21:15:01 -0000

A Good Year For Whistleblowers

For the third year in a row, the U.S. Department of Justice is reporting a banner year for fraud actions, with recoveries exceeding $1 billion in the last fiscal year. And that doesn’t include a whopping $881 million settlement tentatively reached in the current fiscal year with one company. The recoveries themselves are a testament to the Lincoln Law of 1863, which was dusted off in the 1980s and retooled by Congress into the powerful 1986 False Claims Act.

<i>ABA Law Review</i>
<br><br>
<i>by Molly McDonough</i>
<br><br>
<b>A GOOD YEAR FOR WHISTLE-BLOWERS</b><br><br>
False Claims Act Recoveries Exceed $1 Billion<br><br>

For the third year in a row, the U.S. Department of Justice is reporting a banner year for fraud actions, with recoveries exceeding $1 billion in the last fiscal year. And that doesn’t include a whopping $881 million settlement tentatively reached in the current fiscal year with one company. The recoveries themselves are a testament to the Lincoln Law of 1863, which was dusted off in the 1980s and retooled by Congress into the powerful 1986 False Claims Act.
 
Back then, the government recovered around $15 million a year in fraud actions. The government has since recovered a breathtaking $10 billion. More than $6 billion of that is attributed to the whistle-blower provision of the act. 
 
Whistle-blowers, known as relators, filed 33 suits in 1987. That number jumped to 533 the following year and has leveled off at about 300 per year since, according to the Justice Department.
 
Lawyers at Justice have embraced the act, which rewards whistle-blowers acting as "private attorneys general" when they sue companies for fraud on behalf of the government.
 
Click here to register for The 4th Annual National Institute on the False Claims Act and Qui Tam Enforcement. The program is Jan. 29-31 at the Park Hyatt Hotel in Washington, D.C.
 
Speakers include Robert D. McCallum Jr., assistant attorney general, civil division, U.S. Department of Justice.
 
But it’s not just that the government has gained a keener interest in prosecuting these cases. Most lawyers agree that False Claims Act cases are much more successful if the government intervenes as a plaintiff and sees a case through to fruition. But plaintiffs lawyers say another reason for the increase in government attention is that they are bringing bigger and better cases to the DOJ.
 
"There are fewer meritless cases brought," says John R. Phillips, a Washington, D.C., False Claims Act lawyer who helped revive the statute and draft the 1986 amendment that gave the act bite in the current business climate. Among other things, the law increased recoveries for successful plaintiffs and barred employers from retaliating against whistle-blower plaintiffs.
 
Phillips says whistle-blower lawyers are learning that they have to bring the government a case that’s carefully researched and backed up by the facts. "This is not a ticket to the lottery. It takes a lot of hard work," he says.
 
Michael F. Hertz, director of the Justice Department’s commercial litigation branch in the civil division, disputes that the numbers are higher because the whistle-blowers are bringing forward better cases. Instead, he attributes the higher numbers to a few cases each year that bring in large recoveries, in part because they have involved large hospital systems and chains where systemic fraud was uncovered. But the percentage of cases Justice takes from relators has remained at about 22 percent to 23 percent over the past 17 years.
 
"Cases are being filed where there has been more damage to those programs identified," he says.
 
Phillips has worked on some of those big-recovery cases. He was among 40 private attorneys who invested some 75,000 hours of work and $30 million in legal and accounting resources to investigate cost-report irregularities at HCA, formerly Columbia/HCA Healthcare Corp.
 
In December, the government announced it had reached a tentative $881 million settlement with HCA to end litigation over the company’s alleged overcharging on cost reports associated with Medicare and Medicaid. Combined with settlements reached between HCA and the government in 2000, the recovery could total $1.7 billion, the largest False Claims Act recovery from a single institution.
 
Phillips says his 12-member firm, Phillips & Cohen, is responsible for one-third of the government’s recoveries in whistle-blower cases. While Phillips did not say how much his firm has earned in fees, most firms enter into contingency agreements in whistle-blower cases that entitle them to as much as 40 percent of a relator’s recovery.
 
The plaintiffs bar says some DOJ lawyers remain reticent despite escalating recoveries. "There is still some embedded resistance within the department to the notion that private attorneys can be private attorneys general," Phillips says.
 
According to Phillips, Justice works to keep whistle-blower compensation to a minimum. In the past fiscal year, Justice reported paying whistle-blowers $160 million. The False Claims Act allows whistle-blowers to recover 15 percent to 25 percent of any recovery reached with Justice’s help, or up to 30 percent on their own.
 
Justice keeps recoveries for relators around 16 percent, says James W. Moorman, a former assistant attorney general who is president of the Washington, D.C.-based False Claims Act Legal Center.
 
Moorman says it doesn’t make sense for Justice to fight private attorneys on this issue. Whistle-blower payments come from the offending companies, not taxpayers.
 
"To save a dime, they forfeit a buck," Moorman says. Instead of allowing whistle-blowers to receive larger rewards by amending complaints to include more allegations of fraud, "they will prevent whistle-blowers and their lawyers from adding value to a case which would [otherwise] bring the government far more money."
 
Southern Illinois attorney Ronald E. Osman says the government seems to be getting even more aggressive in this respect. He says the government now requires him and his clients to sign documents saying they will not amend their complaints to add value before the government shares information with them.
 
Hertz of the DOJ defended the 16 percent average, explaining that the figure is skewed lower because of cases in which the government and relators agree to lesser awards. He says there are sometimes real questions about whether the relator should recover at all under the statute. The government may push a 7 percent to 10 percent recovery when, for example, the relator alerts the government to fraud, but an investigation finds the fraud is different from the facts reported by the relator.

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A Good Year For Whistleblowers

For the third year in a row, the U.S. Department of Justice is reporting a banner year for fraud actions, with recoveries exceeding $1 billion in the last fiscal year. And that doesn’t include a whopping $881 million settlement tentatively reached in the current fiscal year with one company. The recoveries themselves are a testament to the Lincoln Law of 1863, which was dusted off in the 1980s and retooled by Congress into the powerful 1986 False Claims Act.

<i>ABA Law Review</i>
<br><br>
<i>by Molly McDonough</i>
<br><br>
<b>A GOOD YEAR FOR WHISTLE-BLOWERS</b><br><br>
False Claims Act Recoveries Exceed $1 Billion<br><br>

For the third year in a row, the U.S. Department of Justice is reporting a banner year for fraud actions, with recoveries exceeding $1 billion in the last fiscal year. And that doesn’t include a whopping $881 million settlement tentatively reached in the current fiscal year with one company. The recoveries themselves are a testament to the Lincoln Law of 1863, which was dusted off in the 1980s and retooled by Congress into the powerful 1986 False Claims Act.
 
Back then, the government recovered around $15 million a year in fraud actions. The government has since recovered a breathtaking $10 billion. More than $6 billion of that is attributed to the whistle-blower provision of the act. 
 
Whistle-blowers, known as relators, filed 33 suits in 1987. That number jumped to 533 the following year and has leveled off at about 300 per year since, according to the Justice Department.
 
Lawyers at Justice have embraced the act, which rewards whistle-blowers acting as "private attorneys general" when they sue companies for fraud on behalf of the government.
 
Click here to register for The 4th Annual National Institute on the False Claims Act and Qui Tam Enforcement. The program is Jan. 29-31 at the Park Hyatt Hotel in Washington, D.C.
 
Speakers include Robert D. McCallum Jr., assistant attorney general, civil division, U.S. Department of Justice.
 
But it’s not just that the government has gained a keener interest in prosecuting these cases. Most lawyers agree that False Claims Act cases are much more successful if the government intervenes as a plaintiff and sees a case through to fruition. But plaintiffs lawyers say another reason for the increase in government attention is that they are bringing bigger and better cases to the DOJ.
 
"There are fewer meritless cases brought," says John R. Phillips, a Washington, D.C., False Claims Act lawyer who helped revive the statute and draft the 1986 amendment that gave the act bite in the current business climate. Among other things, the law increased recoveries for successful plaintiffs and barred employers from retaliating against whistle-blower plaintiffs.
 
Phillips says whistle-blower lawyers are learning that they have to bring the government a case that’s carefully researched and backed up by the facts. "This is not a ticket to the lottery. It takes a lot of hard work," he says.
 
Michael F. Hertz, director of the Justice Department’s commercial litigation branch in the civil division, disputes that the numbers are higher because the whistle-blowers are bringing forward better cases. Instead, he attributes the higher numbers to a few cases each year that bring in large recoveries, in part because they have involved large hospital systems and chains where systemic fraud was uncovered. But the percentage of cases Justice takes from relators has remained at about 22 percent to 23 percent over the past 17 years.
 
"Cases are being filed where there has been more damage to those programs identified," he says.
 
Phillips has worked on some of those big-recovery cases. He was among 40 private attorneys who invested some 75,000 hours of work and $30 million in legal and accounting resources to investigate cost-report irregularities at HCA, formerly Columbia/HCA Healthcare Corp.
 
In December, the government announced it had reached a tentative $881 million settlement with HCA to end litigation over the company’s alleged overcharging on cost reports associated with Medicare and Medicaid. Combined with settlements reached between HCA and the government in 2000, the recovery could total $1.7 billion, the largest False Claims Act recovery from a single institution.
 
Phillips says his 12-member firm, Phillips & Cohen, is responsible for one-third of the government’s recoveries in whistle-blower cases. While Phillips did not say how much his firm has earned in fees, most firms enter into contingency agreements in whistle-blower cases that entitle them to as much as 40 percent of a relator’s recovery.
 
The plaintiffs bar says some DOJ lawyers remain reticent despite escalating recoveries. "There is still some embedded resistance within the department to the notion that private attorneys can be private attorneys general," Phillips says.
 
According to Phillips, Justice works to keep whistle-blower compensation to a minimum. In the past fiscal year, Justice reported paying whistle-blowers $160 million. The False Claims Act allows whistle-blowers to recover 15 percent to 25 percent of any recovery reached with Justice’s help, or up to 30 percent on their own.
 
Justice keeps recoveries for relators around 16 percent, says James W. Moorman, a former assistant attorney general who is president of the Washington, D.C.-based False Claims Act Legal Center.
 
Moorman says it doesn’t make sense for Justice to fight private attorneys on this issue. Whistle-blower payments come from the offending companies, not taxpayers.
 
"To save a dime, they forfeit a buck," Moorman says. Instead of allowing whistle-blowers to receive larger rewards by amending complaints to include more allegations of fraud, "they will prevent whistle-blowers and their lawyers from adding value to a case which would [otherwise] bring the government far more money."
 
Southern Illinois attorney Ronald E. Osman says the government seems to be getting even more aggressive in this respect. He says the government now requires him and his clients to sign documents saying they will not amend their complaints to add value before the government shares information with them.
 
Hertz of the DOJ defended the 16 percent average, explaining that the figure is skewed lower because of cases in which the government and relators agree to lesser awards. He says there are sometimes real questions about whether the relator should recover at all under the statute. The government may push a 7 percent to 10 percent recovery when, for example, the relator alerts the government to fraud, but an investigation finds the fraud is different from the facts reported by the relator.

If you no longer wish to receive these e-mails, please send an email with the word "unsubscribe" in the subject line. To one of the addresses below.
If you are recieving these emails from <a href=mailto:gap-general-list-request@whistleblower.org>gap-general-list@whistleblower.org</a>
If you are recieving these emails from <a href=mailto:gap-media-request@whistleblower.org>gap-media-list@whistleblower.org</a>