Archive for November, 2015

Supreme Court May Soon Consider Liability Theory for Whistleblower Cases

Supreme Court To Consider Whistleblower Cases

Petitions for certiorari are before the Supreme Court of the United States asking that the Court resolve an important issue impacting False Claims Act liability for government contractors. The issue is whether implied certification of compliance with government contracts and regulations can be actionable in a qui tam lawsuit.

The two cases that prompted the petitions involve contractors who submitted claims to the federal government that were not facially false.  Instead, the claims were based on the theory that the defendants falsely implied certification with the law and the underlying government contract that provided the basis for the contractor to make the claim.

First, in United States ex rel. Badr v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir. 2015), the whistleblower alleged that the government was defrauded by the contractor because the company sought reimbursement for guards who did not have the marksman qualifications required by the contract between the government and the company. Second, in United States ex rel. Escobar v. Universal Health Servs., Inc., 780 F.3d 504 (1st Cir. 2015), the whistleblowers alleged that the hospital had been reimbursed for health services that their daughter had received from an unlicensed mental health professional. In both cases, the whistleblowers alleged that the company had “implicitly communicated” compliance with certain contracts and regulations each time it submitted a claim to the government.

At present, there is a split between the circuits as to whether the implied certification theory is viable. The majority recognize some portion of the theory but apply it differently. The Fourth Circuit takes the broadest view of the theory, which is important because this is where most government contractor cases are filed given the proximity to D.C. In that Circuit, any material breach of a contract, statute, or regulation that could be a prerequisite to payment can be the basis of whistleblower cases. Other circuits have applied the theory in a more limited fashion, requiring that there be an express prerequisite in the contract that the company comply with the provision or law in question in order to be paid.

The Seventh Circuit recently weighed in to reject the “so-called doctrine of implied false certification.” United States v. Sanford-Brown Ltd., 788 F.3d 696, 711-12 (7th Cir. 2015). This Circuit found that the action was more akin to a breach of contract than a false claim.

Given how powerful the False Claims Act has become in recent years, the Supreme Court’s opinion on whether the implied certification theory should be permitted will have a tremendous impact on government contractors in terms of how strictly they must comply with their contracts and the governing law. Hopefully the Supreme Court will adopt the majority view of the Fourth Circuit to allow whistleblowers to employ qui tams to protect taxpayer money when companies are being inappropriately reimbursed by the government.


James Hoyer Law Firm Named Whistleblower Lawyers of the Year

TAF Award Group Picture

The James Hoyer team at the TAF Awards Dinner

James Hoyer is honored to have been named Whistleblower Lawyers of the Year by the Taxpayers Against Fraud or “TAF.”  TAF is a national, nonprofit organization dedicated to combating fraud against the government and protecting public resources headquartered in Washington, D.C.

James Hoyer client Peggy Ryan, whistleblower in the off-label marketing case against Endo Pharmaceuticals, was also named Whistleblower of the Year. The Endo case resulted in a $192.7 million settlement for both criminal and civil charges that the company illegally marketed a pain treatment patch called Lidoderm.

“Together, Ryan and her legal team were instrumental in bringing a $193 million dollar case against Endo Pharmaceuticals to resolution, while notching an important victory in the battle for full, fair and justified whistleblower awards,” TAF wrote in its announcement of the award. (Click here to read details on the announcement on TAF’s website.)

Hoyer Accepting Award

Chris Hoyer Accepting Award

“This is an honor we are very proud to accept as advocates fighting to hold companies accountable when they commit fraud against the government,” said Chris Hoyer, founding partner of the James Hoyer law firm. “Too often, American citizens pay the price when companies try to game the system for profit. The False Claims Act gives whistleblowers the power to fight back on behalf of all taxpayers.”

Peggy Ryan was an Endo sales representative hired to sell Lidoderm, a pain patch approved to treat a shingles complication. She became concerned when the company pressured her to sell the drug off-label. Ryan took her concerns to the government in 2005 and assisted the investigation by turning over hundreds of documents and internal voicemails. She also agreed to wear a wire for the FBI, providing government investigators and prosecutors with more than 200 hours of recorded conversations, including incriminating statements by Endo management.

Ms. Ryan was humbled to receive this award. “It’s not an easy decision to become a whistleblower, but it’s even harder to look away when you know wrongs are being committed. Ten years was a long time to see this through, but it was important to do the right thing,” Ms. Ryan said.

“Peggy Ryan was a tireless advocate for the taxpayer,” Hoyer said. “The courage it takes for an

Adam, Chris & Jesse Hoyer

Adam, Chris & Jesse Hoyer

employee to come forward and risk her career to do the right thing is rare and something we all should celebrate.”

In announcing this year’s award, TAF also pointed to the decision by Judge Robert Kelly to award Ms. Ryan close to the maximum reward for her contributions. She received 24% of the civil portion of the settlement, which amounted to $33.6 million. The judge sent a message with his decision as to how important the role of a whistleblower can be in stopping fraud and returning money to the taxpayers. The judge noted the contributions of Ms. Ryan and her legal team in the Endo case were “nothing short of extraordinary.”

An internal documentary produced by the James Hoyer law firm on the Endo case was instrumental in moving the case forward.  Watch the video below to see a video clip from the documentary.

More pictures from the awards dinner are below:

TAF Linclon

Al Scudieri & Elaine Stromgren

Al Scudieri & Elaine Stromgren

Chris Hoyer & Jillian Estes

Chris Hoyer & Jillian Estes

Chris Hoyer, Angie Moreschi, Jesse Hoyer, Jillian Estes & Adam Hoyer

Chris Hoyer, Angie Moreschi, Jesse Hoyer, Jillian Estes & Adam Hoyer

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James Hoyer Part of Global Whistleblower Settlement with For-Profit College EDMC

Jason Sobek - EDMC Whistleblower

Jason Sobek – EDMC Whistleblower

The Department of Justice announced it has reached a landmark, global settlement with Education Management Corporation, the 2nd largest for-profit education company in the country. EDMC agreed to pay $95.5 million to settle allegations that the company violated federal and state False Claims Act laws.

James Hoyer client Jason Sobek, a former EDMC Project Associate Director of Admissions, was one of several whistleblowers who came forward to expose issues regarding how the schools recruited students and reported job placement numbers.

EDMC was accused of using predatory techniques to lure students to sign up, misrepresenting its job placement statistics, and paying employees incentives based on the number of students recruited. EDMC runs several for-profit colleges, including South University, The Art Institutes, Arogsy University, and Brown Mackie College.

“We are gratified that information Jason provided helped lead to the resolution of this case with a landmark, global settlement,” said Chris Casper, James Hoyer Managing Partner. “We are hopeful this will prompt much needed change in practices used by the for-profit college industry.”

The Department of Justice news release explains:

The primary allegation was that EDMC unlawfully recruited students, in contravention of the HEA’s Incentive Compensation Ban (ICB), by running a high pressure boiler room where admissions personnel were paid based purely on the number of students they enrolled.  In addition to resolving these and other FCA claims, the global settlement also encompasses an investigation by a consortium of state Attorneys General, of consumer-fraud allegations involving deceptive and misleading recruiting practices.

In addition to offering information and help to federal investigators, Sobek shared his story with the public to help shed light on EDMC practices, warn students and bring about change.   Among those reports were a story with ABC Network News, WTAE TV in Pittsburgh, and WFTS TV in Tampa.

Sobek’s portion of the settlement amounts to $2.5 million which will be paid out over the course of several years. Under the False Claims Act, whistleblowers are entitled to a percentage of a settlement as a reward for bringing forward information that leads to the recovery of money on behalf of taxpayers.

Click here to read more on the settlement in the Pittsburgh Post-Gazette.

Click here to read more on the settlement in the Pittsburgh Tribune Review.

Click here to read more on the settlement from WTAE TV in Pittsburgh.

Click here to read more on the settlement from CBS News.


Rare Arrest In Big Pharma Whistleblower Case

A former executive with Warner Chilcott,  a division of Allergan, was arrested for allegedly directing employees to engage in illegal sales.  Forbes Magazine contributor Erika Kelton writes about how big of a deal that is, since executives are rarely held accountable for bad deeds by a company.

Here’s an excerpt from her article:

The arrest of former Warner Chilcott executive W. Carl Reichel for allegedly directing employees to engage in illegal sales tactics is big news – even bigger than the $125 million the pharma company paid the government to settle Medicare fraud charges recently.

Rarely has the Justice Department brought criminal charges against a top pharma or healthcare executive – no matter how egregious the Medicare or Medicaid fraud. And those cases haven’t always been successful.

One of the first times that a CEO for national healthcare company was prosecuted in connection with Medicare fraud was in 1992 when Robert E. Draper, president and chief executive of National Health Laboratories of La Jolla, Calif., pleaded guilty to two counts of submitting false claims and was sent to prison. His company paid $111 million for inducing doctors to order unnecessary blood tests, a scheme exposed by a whistleblower represented by my law firm.

Over the past two decades, however, prosecutions of CEOs of major corporations have been few and far between. More often, DOJ has charged mid- and lower-level healthcare company employees – district sales managers, sales reps, etc. – with crimes in connection with whistleblower cases, as they did in the case of Warner Chilcott, which was acquired by Allergan (formerly known as Actavis), in 2013.

Click here to read the entire article in Forbes.