Posts Tagged ‘relator’s share’

Successful Whistleblowers Fined For Disclosing Case to the Media

top_secretAt the outset of every case, we explain and re-explain the concept that a False Claims Act complaint will be filed “under seal.” This is a basic tenant of False Claims Act law, yet is a unique concept to most individuals since most cases are filed in court and are immediately accessible to the public.  False Claims Act cases are different — they are filed confidentially and served only on the United States or any participating state, not on the defendant.

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James Hoyer Client Named Sole Whistleblower in $193M Settlement

A federal judge has ruled former Endo Pharmaceuticals Sales Representative Peggy Ryan is the sole whistleblower eligible for a portion of the company’s $193 million off-label marketing settlement, announced in February by the U.S. Justice Department.   Ryan is represented by the James Hoyer Law Firm.

The order was issued by Senior Judge Robert Kelly of the U.S. District Court for the Eastern District of Pennsylvania.  Judge Kelly granted Ryan’s motion for Relator’s Share and denied the requests of two other later-filed Relators, Max Weathersby and Gursheel Dhillon.

“Ryan supplied the Government with the initial notification of Defendants’ fraudulent activities and then proceeded to go to extraordinary lengths to provide further information to aid the Government in prosecuting the FCA (False Claims Act) action.  In light of this contribution and legal justifications presented by Ryan, it is our holding that Ryan is the sole Relator eligible to receive the settlement award.” Judge Kelly wrote.

Judge Kelly said his decision was based upon “the extensive role Ryan played” and serves to “promote the intent of the FCA” which is “to provide incentives to relators to ‘promptly alert the government to the essential facts of a fraudulent scheme.’”  He went on to say, “In the context of this objective, it is apparent that allowing multiple relators to share in the recovery for the same claim would drastically decrease the incentive for a ‘whistleblower’ to promptly bring a qui tam action.”

“In addition to filing the first Complaint in this matter, Ryan also provided extensive assistance in the investigation of Defendants’ fraudulent activities by serving as a confidential source in the Government’s covert criminal investigation of Defendants over a several year period beginning in 2005,” Judge Kelly also wrote in the Order.

He cited a statement submitted on Ryan’s behalf by the retired FBI agent with whom Ryan and the James Hoyer Law Firm worked closely throughout the investigation. “During the course of the investigation, Ryan provided the FBI with Defendants’ off-label sales and training materials, and with over two hundred (200) hours of recorded conversations with employees of Defendants concerning off-label sales.”

Click here to read Financial Writer Al Lewis’ story on Ryan and here for his article on The Wall Street Journal’s MarketWatch.

Returning Money to Taxpayers

Endo Health Solutions and its subsidiary Endo Pharmaceuticals, Inc. agreed to pay $192.7 million in February of 2014 to settle civil and criminal charges that stemmed from Ryan’s suit.  Ryan alleged the company illegally marketed a pain treatment patch called Lidoderm for ailments far beyond its approved use.

The off-label marketing led to hundreds of millions of dollars in improper Medicaid and Medicare payments.  This settlement serves to return a portion of that money to the taxpayer.  From the total settlement, $21 million is allocated to resolve the criminal charges, and $172 million will go to settle civil charges under the state and federal False Claims Acts.

The Whistleblower

Ms. Ryan was an Endo sales person hired in 2002 to sell Lidoderm.  She became concerned when the company pressured her to sell the drug off-label.  The pain patch was only approved to treat symptoms of postherpetic neuralgia, a rare disease which is a complication of Shingles.  “Lidoderm had not been proven safe or effective for other uses, but the company pushed me and all the other sales people to sell Lidoderm for everything from low back pain, to carpel tunnel syndrome to neuralgia, and I just did not feel comfortable doing that,” Ryan said.

After filing suit, Ryan was enlisted to aid the FBI in its investigation.  She turned over hundreds of documents, internal voicemails, and even wore a wire for the FBI, recording hundreds of hours of conversations with supervisors.

“Peggy Ryan was a tireless advocate for the taxpayer,” said Chris Hoyer, Founding Partner of the James Hoyer Law Firm.  “She worked closely with the FBI and Department of Justice for nearly a decade providing invaluable testimony and evidence.”

The Settlement

In addition to the monetary portion, the settlement also includes a deferred prosecution agreement, in which Endo admitted that it intended that Lidoderm be used for unapproved indications and that it promoted Lidoderm to health care providers for those unapproved indications, according to the Department of Justice.   As part of the settlement, Endo agreed to enter into a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General that requires the company to implement measures designed to avoid or promptly detect conduct similar to that which led to this resolution.

The False Claims Act

The False Claims Act allows private citizens to bring civil actions on behalf of the government in order to recover taxpayer money when fraud is suspected.    Under the law, the whistleblower is entitled to a 15-30% share of a civil recovery.  Ryan’s share of the settlement has yet to be determined.

“Whistleblowers, like Peggy Ryan, are to be commended for their bravery and perseverance,” Attorney Hoyer said.  “It’s very easy for a private citizen who sees wrong-doing to look the other way, but Peggy didn’t do that. She did the right thing, and with her help, the taxpayers will now receive restitution from Endo Pharmaceuticals.”

 

How Much Does the Relator Get? Factors That Are Considered In Determining Relator’s Share

When Congress amended the False Claims Act (FCA) in 1986, its goal was to increase private individual’s use of the qui tam provision of the FCA.  Previous amendments had made the FCA ineffective by eliminating any real incentives to whistleblowers to come forward, and failing to protect them when they did.  Along with several other changes, Congress’ 1986 amendments increased the percentage of the recovery that whistleblowers were eligible to recover upon completion of a successful qui tam lawsuit.

Section 3730(d)(1) of the False Claims Act enables a relator to recover anywhere from 15% to 25% of the award in a case where the Government intervenes.  When the Government chooses not to intervene in a case, Section 3730(d)(2) allows for a recovery between 25% and 30%.  The 15% share in an intervened case is viewed as the level in which the relator’s share cannot fall below.  It has been referred to as a “finder’s fee” and the relator is required to do nothing more than file the complaint in order to receive their share of the proceeds.  U.S. v. Stern, 818 F. Supp. 1521, 1522 (M.D. Fla. 1993).

The actual realtor’s share is most often determined by an agreement between the relator and the government.  But, if they cannot reach an agreement, the amount can be determined by the court, based upon the unique facts of each individual case. The Senate, in their deliberations over proposed amendments to the FCA, identified the following factors that should be considered in determining the relator’s share: the significance of the information provided by the relator, the relator’s contribution to the final outcome, and whether the Government previously knew such information. S.Rep. No. 99-345, at 28 (1986).

Since that time, the Department of Justice established guidelines to elaborate upon what factors would be considered in raising or lowering a relator’s share.  The factors which would tend to increase a relator’s share are:

  • The relator reported the fraud promptly.
  • When he/she learned of the fraud, the relator tried to stop the fraud or reported it to a supervisor or the Government.
  • The qui tam filing, or the ensuing investigation, caused the offender to halt the fraudulent practices.
  • The complaint warned the Government of a significant safety issue.
  • The complaint exposed a nationwide practice.
  • The relator provided extensive, first-hand details of the fraud to the Government.
  • The Government had no knowledge of the fraud.
  • The relator provided substantial assistance during the investigation and/or pretrial phases of the case.
  • At his/her deposition and/or trial, the relator was an excellent, credible witness.
  • The relator’s counsel provided substantial assistance to the Government.
  • The relator and his/her counsel supported and cooperated with the Government during the entire proceeding.
  • The case went to trial.
  • The FCA recovery was relatively small.
  • The filing of the complaint had a substantial adverse impact on the relator.

The Department of Justice’s guidelines also identify the following factors that could lead to a justifiable decrease in the relator’s share of the recovery:

  • The relator participated in the fraud.
  • The relator substantially delayed in reporting the fraud or filing the complaint.
  • The relator, or relator’s counsel, violated FCA procedure:
    • Complaint was served on the defendant or not filed under seal.
    • The relator publicized the case while it was under seal.
    • Statement of material facts and evidence was not provided.
  • The relator had little knowledge of the fraud or only had suspicions.
  • The relator’s knowledge was based primarily on public information.
  • The relator learned of the fraud in the course of his Government employment.
  • The Government already knew of the fraud.
  • The relator, or relator’s counsel, did not provide any help after filing the complaint, hampered the Government’s efforts in developing the case, or unreasonably opposed the Government’s position in litigation.
  • The case required a substantial effort by the Government to develop the facts to win the lawsuit.
  • The case settled shortly after the complaint was filed or with little need for discovery.
  • The FCA recovery was relatively large.

While the DoJ and Senate guidelines for determining the relator’s share of the recovery are not binding law, courts have shown a willingness to adhere closely to the recommendations.  In U.S. ex rel. Shea v. Verizon Communications, Inc., 844 F.Supp.2d 78 (D.D.C. 2012), the district court employed a piecemeal analysis based on the DoJ and Senate recommendations to determine that a relator’s share should be increased from 15% to 20% of the total recovery.  The court still has a wide degree of discretion on the percentage of the relator’s share, and these Guidelines are not absolutes.  But, by reviewing the factors laid out by the Senate and the Department of Justice, a relator can better understand where he or she may fall if a case is successful and a relator’s share is being determined.

If you believe you have information regarding fraud against the government and are considering bringing a False Claims Act case, please contact James Hoyer for an evaluation of your claims.  Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

Written by Jesse Hoyer and Brant McKown