Archive for October, 2015

Are Federal Agencies Immune From Whistleblower Cases?

Whistleblower Case

Whistleblower CaseSome potential clients have asked: are federal agencies immune from whistleblower cases?

For example, a federal health agency employee may have witnessed what they perceive the be wasteful spending of Medicare dollars or in some cases outright fraud. As any taxpayer would, they’d like to report what they’ve seen done with taxpayer money, and if found to be true, be rewarded for their efforts.

Unfortunately, the answer to the question of whether they can bring a False Claims Act (FCA) whistleblower case against their federal employer is generally “no.”

This is because “federal agencies are not proper Defendants for a qui tam action under the FCA. Not only is this the equivalent of the United States suing the United States, but the United States has not waived sovereign immunity as to FCA claims.” Taxpayers of the U.S. v. Bush, 2004 WL 3030076, *5 (C.D. Cal. Dec. 30, 2004) (finding FCA contains no waiver of sovereign immunity); Juliano v. Fed. Asset Disposition Ass’n, 736 F. Supp. 348, 351-53 (D.D.C. 1990) (declining to expand FCA to allow a qui tarn suit against a federal agency where not provided for under the statute); see also Balser v. Dep’t of Justice, Office of U.S. Tr., 327 F.3d 903, 907 (9th Cir. 2003) (finding suits against federal agencies are suits against the United States and the United States is immune absent waiver of sovereign immunity).

The Ninth Circuit Court of Appeals has explained:

The Supreme Court has held that states are not “persons” subject to qui tam liability under the FCA. The Stevens Court did not reach the issue of sovereign immunity, construing the FCA to avoid that constitutional question. The Supreme Court did, however, rely on canons of statutory construction related to state sovereignty, such as (1) the presumption that the term “person” does not include the sovereign; (2) the rule that Congress must clearly state its intention to subject states to liability; and (3) the presumption against imposition of punitive (treble) damages on governmental entities. Relying on Stevens, we have held that “states and state agencies enjoy sovereign immunity from liability under the FCA.”

United States ex rel. Ali v. Daniel, Mann, Johnson & Mendenhall, 355 F.3d 1140, 1145 (9th Cir. 2004) (omitting several citations to Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765 (2000)).

So what can these potential whistleblowers do? Well, they are always free to report their allegations through one of various fraud hotlines that will look into the claims and hopefully recover any ill-gotten or wasted taxpayer money. Unfortunately, the whistleblowers can’t expect a relator’s share for their good deed.


James Hoyer Partner Speaks at Big Pharma Compliance Conference

Jillian Estes-Speaking at Pharma Congress 10-22-15-CROPPED

James Hoyer Partner Jillian Estes – speaking at 16th Annual Pharma Congress, Washington D.C.

James Hoyer Partner Jillian Estes joined other experts in qui tam litigation for a discussion of whistleblower cases against Big Pharma, at the 16th Pharmaceutical Compliance Congress and Best Practices Forum.

This summer, James Hoyer client Peggy Ryan was awarded close to the maximum percentage that a whistleblower can receive in a False Claims Act case against Endo Pharmaceuticals.  Ryan is a former sales rep for Endo and blew the whistle on the company for off-label sales of its Lidoderm pain patch.  Her award was a 24-percent share of the federal government’s civil settlement with Endo, amounting to a $33.6 million reward.

The Endo case was among the cases discussed by Estes at the Pharma Congress held in Washington D.C., the week of October 21st.  Her panel also discussed what a whistleblower law firm looks for when vetting a case– including what attributes make a person the strongest relator.  Other topics included: what factors are considered when deciding to proceed with a case if the government declines to intervene and a shift in the government’s focus from holding companies accountable to holding individuals accountable for their conduct.

The annual conference brings together top drug companies, regulators and watch dogs to discuss and improve best practices for compliance.  It featured presentations by leading government regulators, company compliance professionals, in-house counsel, prominent industry consultants, and whistleblower attorneys, like Estes.

Pharma Congress is sponsored by the Pharmaceutical Compliance Forum, a coalition of industry compliance professionals and legal counsel from more than 50 of the largest research based drug companies.


Millennium Labs Settles for $256 Million in Whistleblower Case

Tampa, FL— A James Hoyer law firm client is among several whistleblowers who came forward to expose wrongdoing by Millennium Health, formerly Millennium Laboratories, which led to a $256 million settlement with the United States government. The company was accused of violating the False Claims Act by billing Medicare, Medicaid and other federal health care programs for medically unnecessary lab tests and offering doctors inappropriate incentives for using its services.

The client worked for Millennium in 2012, as an internal auditor with more than 10 years of experience as a medical coder. As a compliance expert, the client quickly noticed discrepancies with the company’s billing practices. The client’s effort to correct the problems fell on deaf ears, which led to the client filing one of the eight False Claims Act whistleblower cases that ultimately led to the settlement.

“Being a whistleblower is never easy,” said James Hoyer Partner Elaine Stromgren, “It takes courage and conviction to come forward, but it is always gratifying to see those efforts lead to a successful resolution for taxpayers.”

A Department of Justice news release, explained the key allegations against Millennium:

“Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. This practice violated federal healthcare program rules limiting payment to services that are reasonable and medically necessary for the treatment and diagnosis of an individual patient’s illness or injury. The United States also alleged that Millennium’s provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing—violated the Stark Law and the Anti-Kickback Statute. The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.”

The head of DOJ’s Civil Division said this case should send a message to companies who violate the rules. “We will not tolerate practices such as the ordering of excessive, non-patient specific tests and the provision of inducements to physicians that lead to unnecessary costs being imposed upon our nation’s health care programs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer.

As part of the settlement, Millennium, which is one of the largest drug testing laboratories in the country, has entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services-Office of Inspector General.

Under the False Claims Act, whistleblowers who expose problems which lead to a successful recovery on behalf of U.S. taxpayers can receive a portion of the recovery as a reward.


DOJ To Whistleblower Attorneys: Go After Individuals!

DOJ Whistleblower Attorneys

DOJ Whistleblower AttorneysLast month, Deputy Attorney General Sally Q. Yates issued a memorandum on behalf of the Department of Justice (DOJ) that should help whistleblowers nationwide. The memorandum instructs DOJ attorneys investigating criminal and civil corporate misconduct to zero-in on the individual wrongdoers rather than just the corporate entity.  The guidance will hopefully lead to larger, quicker settlements of False Claims Act qui tam cases brought by whistleblowers and their attorneys.

Yates identified six key steps to bring about her goal of providing “effective enforcement of the civil and criminal laws that protect our financial system and, by extension, all our citizens.”  The key steps’ common thread is a focus on individual accountability for the people who actually perpetuated the fraud.  According to Yates, such accountability “deters future illegal activity, … incentivizes changes in corporate behavior, … ensures that the proper parties are held responsible for their actions, and … promotes the public’s confidence in our justice system.”

The six steps in full are:

  1. In order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct;
  2. Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
  3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
  4. Absent extraordinary circumstances or approved departmental policy, the [DOJ] will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
  5. DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
  6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

The aforementioned guidance applies “to all future investigations of corporate wrongdoing” so whistleblowers considering whether to come forward should be able to rely on the might of the DOJ to be behind them seeking to hold individuals accountable for corporate misconduct.

Each step should help qui tam cases brought by whistleblowers.

In explaining the first step, the DOJ states its position that “‘full cooperation’ under the False Claims Act, 31 U.S.C. § 3729(a)(2), will be that, at a minimum, all relevant facts about responsible individuals must be provided,” in order to get any “cooperation credit.” The DOJ attorneys are further encouraged to be proactive in the discovery process — one that is usually fraught with obstacles and objections that whistleblowers often have to overcome on their own.

Second, the memo recognizes that because “a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct.” For years, whistleblower attorneys have attempted to bring individuals into the fray in order to hold them accountable for their corporation’s misdeeds.  Having skin in the game often enhances an officer or director’s motivation to resolve the issue.  Naturally, whistleblowers should be encouraged by the DOJ advocating the same tactic.

Third, whistleblower attorneys have seen cases stalled for years while the civil and criminal DOJ attorneys take turns investigating, sometimes to the case’s detriment as facts become stale over time. Here, Yates advocates for full cooperation between the civil and criminal divisions in order to promote the “most thorough and appropriate resolution in every case.”

The fourth and fifth steps combine to require attorneys to not release individuals from liability as a part of a corporate whistleblower settlement unless it has been “personally approved in writing by the relevant Assistant Attorney General or United States Attorney.” Further all decisions to not pursue individuals must be explained in writing.

This is perhaps the most significant portion of the memo as it should decrease the possibility of individual officers and directors escaping liability based on the company’s willingness to cut a small check. Barring individual releases and requiring DOJ attorneys to explain why they didn’t pursue an individual may change the way qui tam lawsuits are defended and will hopefully lead to better results for whistleblowers and their attorneys.

Finally, Yates emphasizes that an ability to pay should not compromise the pursuit of individuals. The memo explains that short term monetary returns can be far outweighed by the “significant long-term deterrence” of individual accountability. This step will likely prompt officers and directors to authorize larger payouts in order to attempt to provide both a short term monetary return for the Government and the deterrence that the DOJ seeks in the memo.

In sum, Yates is directing the attorneys charged with prosecuting whistleblower cases to hotly pursue the individuals responsible for corporate misconduct. Hopefully, we will see an increased willingness for companies to come to the settlement table with generous offers for whistleblowers to try to avoid the individual liability advocated by DOJ attorneys.