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Things a Whistleblower Needs to Keep in Mind

Serial whistleblower Adam B. Resnick has written the attached piece on Huffington Post about the do’s and don’ts of whistleblowing. He’s got some perspective, having been on a wild ride first as a convicted white collar criminal and then twice as a successful whistleblower. He writes often about the power of redemption, and it seems he has now turned his focus to using the False Claims Act to stop healthcare fraud and other forms of theft against the taxpayers.

 

As whistleblower attorneys who have been at this awhile now, we don’t find much to quibble with Resnick’s top 10 list, except that oddly enough he’s got 12 items on it! Otherwise, it’s a good primer on how to approach the process and keep your head about you.

 

As we say to clients and prospective clients all the time, this is not for everyone. The decision to become a whistleblower is a deeply personal one, and contrary to industry perceptions, it’s usually not all about the money. Usually it’s about respect, dignity, and a need to set the record straight. The financial incentives in the False Claims Act and other whistleblower statutes are at times the “tipping point” that causes an otherwise hesitant person to go forward. Without those incentives, many meritorious cases would never come to pass.

 

But back to the “top 10” list. If you’re considering becoming a whistleblower or know someone else who is, this is a pretty good primer. Here they are, according to someone who has twice been through the cycle:

 

  1. Shut up and get a good lawyer fast. If you’re in a company and suspect fraud, get some advice from somewhere outside the company. And if you file a False Claims Act case, the law doesn’t even allow a whistleblower to bring the case without a lawyer. Before you make mistakes (like saying something you shouldn’t, or taking something you shouldn’t), get some legal advice.
  2. Make sure you have a case.  If it’s rumor and innuendo that is at the core of your suspicions, you won’t go far. Law enforcement expects whistleblowers to come armed with the “who, what, when, how, and why” of the facts – another reason you need to talk to a lawyer.
  3. Welcome hard questions and difficult truths.  Most attorneys working in this space work on a contingency fee basis, which means their time is at risk. Expect their evaluation to take awhile. They have to be satisfied that the case has merit, down into the details. They don’t want to waste anyone’s time: your, theirs, or the government’s.
  4. Get an honest lawyer who’s had some success in the whistleblower area. This is a highly specialized area of the law, and even a competent lawyer can be in over his or her head if not familiar with the nuances of the whistleblower laws. Ask what whistleblower cases they have taken all the way through trial or settlement. If they don’t have several they can cite to you, keep looking.
  5. Prepare for the long haul. These cases take a long time usually, long as in 4-10 years. Like the child in the backseat who asks “How much longer before we get there?” on the family trip, whistleblowers need to expect a long process – two years away from wherever you are now.
  6. Prepare to be outed.  Although whistleblower cases are filed under seal if pursuant to the False Claims Act, or confidentially if pursuant to the IRS or SEC whistleblower programs, there is no guarantee of indefinite anonymity. Usually we are able to keep our clients’ names out of sight until the end of a successful case, but sometimes defendants figure it out anyway (by educated guessing, or reading the tea leaves of what the government is asking for). So expect collateral consequences in your career and maybe even in your social life.
  7. Get another job. If you can’t keep your current job, find a new one, both for the income security but also because it will keep your mind on other things, which is critical. The most challenging clients for us are usually those whose entire life is wrapped up in this one case. This is too much pressure to put on yourself and on your legal team. In most whistleblower laws, the government is the real party in interest, which means their lawyers will have a substantial say in how well the case goes.
  8. Plan for success [and failure too]. We often advise clients to expect zero and be thrilled and surprised if the case comes in. Again: manage expectations. But once it becomes clear that there will be a financial reward, start planning before the money arrives. History is littered with examples of people who squander sudden windfalls. Don’t get on that list! Get some advice from people who have experience helping people manage this situation. Probably your attorney will have some recommendations.
  9. Don’t count your eggs before they hatch [and certainly don’t eat them].  Too obvious to require elaboration. There are many ways for a meritorious case to die, through no fault of you or your attorneys. You simply cannot assume the game is over until it’s over. Don’t make major financial decisions before the money comes in or even right afterwards. Put it somewhere safe, exhale, take a walk. Deal with it when life quiets down and after your friends (who’ve ignored you all this time) stop calling you.
  10. Find a friend. Court seals mean you can’t discuss the case with anyone except your lawyers (and maybe your spouse, but be careful!). Other whistleblowers are probably among the few people that could understand what you’re going through. You still can’t disclose the details of the case, but at least you can share your thoughts about what the process is doing to you.
  11. Be grateful.  Anger is toxic. And whistleblower cases will give you a lot to be angry about: the underlying fraudulent conduct, the way your career has suddenly changed, the stresses in your personal life, the lack of control over the case, to name the leading contenders. Choose gratitude instead. Choose to see the glass half full: you have a team of lawyers working on your case without charging you an hourly fee. They care about you and want you to win just as much as you do. Thank them for their hard work, and for focusing on your case when they have many other clients. You live in a country where whistleblowers are statutorily protected and financially rewarded.   In how many countries is that true?   Of course the case won’t be easy. But how great is this – to be in the hunt, on the side of the good guys, chasing some seriously bad actors? Take some satisfaction from the fact that, however this goes, you’re doing the right thing. And maybe there’s a book or movie to come of all this – or better yet – some change to the bad practices you exposed.
  12. Pay it forward. As Remnick points out, if you reach the finish line with vindication and financial remuneration, remember the people behind you, going through what you’ve just finished. Our friends at Taxpayers Against Fraud can help direct you to where help might be needed.

 

What these points make clear is that for whistleblowers, attitude and expectations are everything, and for the whistleblower attorney, managing those client expectations and attitudes are a very large part of the attorney-client relationship. If the whistleblower goes into the process with these guidelines in mind, with a certain que sera sera approach, the process goes infinitely better.

 

We might add one other personal favorite: keep a copy of Rudyard Kipling’s poem “If” in your wallet and read it once a month. It’s a fabulous reminder of how to roll with the punches that life, particularly a whistleblowing life, can serve up.

In Closely Watched False Claims Act Case, First Circuit Weighs in on Fed. R. Civ. P. 9(b) But Avoids Important Issue of Interplay Between the FCA and FDA Law

Late last year,  we wrote about the False Claims Act qui tam case of United States ex rel. Ge v. Takeda Pharmaceuticals Company pending in the First Circuit, that raised a rather routine issue under Fed. R. Civ. P. 9(b) (pleading fraud with particularity) and an important and novel issue under Rule 12(b)(6) (stating a claim on which FCA liability could be based).  The First Circuit has now affirmed the district court’s dismissal of the case, but in doing so, the Court  reached only  the Rule 9(b) issue, and did not weigh in on the more intriguing question of if and when a violation of FDA laws can serve as the underpinnings of an FCA violation. See Opinion.

 

The Court’s opinion on the Rule 9(b) issue is hardly  surprising given how meager the details alleged by relator Ge were in comparison to what is required by well-established First Circuit precedent.  As the Court noted in dismissing her appeal, in a qui tam action such as this in which the defendant is alleged to have induced third parties to file false claims with the government, a relator can satisfy the Rule 9(b)requirement by providing factual or statistical evidence to strengthen the inference of fraud beyond possibility without necessarily providing details as to each false claim.  But, the complaint must nevertheless sufficiently establish that false claims were submitted to the government for payment as a result of the defendant’s alleged misconduct. Opinion at pp. 14-15.

 

“Dr. Ge has, however, alleged next to no facts in support of the proposition that Takeda’s alleged misconduct resulted in the submission of false claims or false statements material to false claims for government payment. Dr. Ge alleges a conclusion that numerous claims for the four subject drugs would not have been submitted for government payment but for Takeda’s misconduct, but alleges no more than that. What is missing are any supporting allegations upon which her conclusion rests and any particulars. Dr. Ge’s pleadings fall far short of what was found barely adequate in Duxbury I, see 579 F.3d at 29-30, and are far less particular than those there whose sufficiency was deemed a ‘close call,’ id. at 30.”

 

See Opinion at pp. 15-16.

 

The relator attempted to salvage her case under Rule 9(b) by  raising three new theories of FCA liability, but the First Circuit found these claims were waived because they were not raised in the district court. While not reaching the Rule 9(b) issue on these waived theories, the Court did note that it was “doubtful”  any of these theories under any subsection of the FCA would have added the needed specificity under Rule 9(b). Id. at pp.  17-18.

 

In doing so, the Court cited the Eleventh Circuit’s Clausen case and the Fourth Circuit’s Nathan case (which is the subject of a pending petition for a writ of certiorari to the Supreme Court), leading some to wonder if the First Circuit is signaling that it is becoming more restrictive on Rule 9(b) issues in whistleblower cases. We don’t think so. Rather, relators and their counsel must continue to look at Duxbury I cited in the Ge opinion as the floor for what must be alleged in a complaint to survive a defense challenge under Rule 9(b).

 

The most watched issue in the case, and the one on which the United States had filed an amicus curiae brief, was the important emerging question of whether FCA liability can ever hinge on failure to comply with the FDA’s post-approval reporting requirements (such as adverse events) FDA and whether alternative administrative remedies (such as those available through the FDA) preclude FCA liability. Opinion at pp. 12-13 n. 3.

 

We will have to wait for another day to learn the First Circuit’s view on this theory of FCA liability.

What Will the New Year Bring for the False Claims Act and other Whistleblower Programs?

So here we are in the first full week of January and it’s natural to reflect a bit on what the past year brought and what the New Year will bring.  Will fraud slow down?  Will enforcement keep up its run of ever-bigger settlements?  Will the IRS and SEC whistleblower programs gain traction or maintain their not-quite-a-contender posture as the year goes on?

 

There are definitely some trends to watch.

 

The Department of Justice (“DOJ”) released its annual tally sheet in late December touting the federal recovery of some $3.8 billion from False Claims Act cases in fiscal year 2013.  Of this amount, $2.6 billion related to heath care fraud.  (An additional $443 million was collected by state attorneys general, bringing the tally for health care alone to over $3 billion.)  $860 million was recovered in the procurement fraud arena, primarily defense contracts, also trending upward.  Health care and defense have always been the biggest sources of contract fraud in the federal system; one can safely predict that this will not change in 2014.

 

Of course, there are so many different ways to slice and dice these multi-variable statistics.  The DOJ’s calculations count only civil recoveries, not criminal fines, forfeitures and restitution awards.  Since many health care fraud prosecutions also include criminal pleas, the government’s numbers are under-stated to a fairly large degree, excluding, for example almost half of the Abbott Labs $1.5 billion settlement for off-label promotion of the drug Depakote to elderly nursing home patients.  ($700 million of that total was a criminal fine, excluded in the government’s calculations.)   Similarly, because of the government shut-down in 2013, the much anticipated $2.2 billion Johnson & Johnson Risperdal settlement was booked after the close of the fiscal year (but still in calendar year 2013).

 

And as we noted above, none of these DOJ figures factor in the state Medicaid recoveries that often accompany these large global settlements.  So in reality, one has to look at longer-term trends rather than annual numbers.  And on that basis, the trends are quite clear:  the number of False  Claims Act cases filed is going up; the recoveries are getting bigger; and whistleblower awards are going up as well (although DOJ has been tougher lately in negotiating percentages with relators).

 

Where is all this headed?  In the False Claims Act arena, one would have to say “more of the same.”

 

Because so many sectors of our health care and defense industries are profit-driven, there is a never-ending push for higher and higher revenue numbers, to meet the expectations of investors (as the companies set those expectations).  Growth is the mantra, not cost-cutting or savings to consumers.  There is money to be made, for example, in selling products that treat or cure disease, not so much in the prevention of disease.  The same is true in the military sector.

 

In so many different ways, companies try to meet these expectations of growth with business plans (some would say schemes) that either seek to take a larger slice of a given pie (increase market share) or by expanding the pie (making the market bigger).  The problem, of course, is that the temptations to violate the law are too numerous and too easy to get away with to entirely hold back illegal behaviors, no matter how seriously many companies tout their compliance systems.  So kickbacks will still be paid to increase market share, and drugs will still be promoted off label to expand the markets for those drugs.  (No, off-label is not dead; far from it.)  The problems are systemic to our health care industrial complex and our military industrial complex.   The schemes will change in subtle ways from case to case and from decade to decade, but the patterns are clear.  This time next year, DOJ will be issuing another press release touting similarly large prosecutorial results to those achieved in FY 2013.  It’s about as big a prediction as saying that football teams with elite quarterbacks will do well in the playoffs.

 

More difficult to predict will be the fate of the SEC and IRS whistleblower programs.  Both are newer than the False Claims Act, and both have a critical difference:  the whistleblower does not have a private right of action if the government does not prosecute the case.  So in the SEC or IRS arenas, the whistleblowers are very much at the mercy of the investigating agencies with respect to investigative diligence.  There is simply no avenue for grabbing the ball from them and running with it oneself (as there is under the False Claims Act).  So far, there are early signs of life at the SEC, as a few small settlements have been announced under the whistleblower program and one large one.  Most important, the agency seems to want to encourage whistleblowers to come forward.

 

The same has not been true of the IRS.  The agency has awarded one significant award to a whistleblower that it then turned around and prosecuted criminally, hardly the kind of opening bell one would hope to use to recruit more whistleblowers.  Moreover, the reports of internal hostility to the program from some quarters of the agency are too numerous to ignore.  We continue to hold our breath to see if the IRS’ whistleblower program is anything more than a black hole into which good leads go to die.

 

The important thing, though, is the long view.  “The moral arc of the universe is long, but it bends towards justice.”  It may take awhile for the SEC and the IRS to realize that the tools Congress have given them are powerful indeed, or to notice DOJ’s twenty-six year successful track record of working with whistleblowers to see what is possible.

 

We’re not predicting any breath-taking new developments from either agency.  But fraud isn’t taking a holiday and never will.  The leads will keep coming.  And eventually, if for no other reason than political self-preservation, the SEC and IRS will get the message and do the right thing with the information courageous whistleblowers are putting right before their noses.  How soon that will happen is the more difficult prediction.

What Documents Can a Whistleblower Take?

One of the most tricky questions to surface – routinely – in the representation of False Claims Act whistleblowers is the extent to which the whistleblower or “relator” may make use of company documents, including confidential or even privileged documents.  We are often asked this question and wish that there were a simple answer.  There is not.  There are some general guidelines based on the case law and the positions the United States Department of Justice has taken in cases, but this is one of those questions where the lawyer’s response should not include the words “always” or “never.”

 

Let’s take the paradigm case.  Employee starts with a company and as part of the orientation process typically gets a number of packages to review and/or sign.  Here’s the 401(k) plan, here’s the health insurance list of choices, here’s the key to the men’s room, here’s the phone directory, and oh yes, here’s our confidentiality agreement which you should review and sign and get back to us… Let us know if you have any questions.

 

Of course it’s a bit of a buzzkill to start your first day at this great new job saying “Ah, excuse me, but this document is a bit one-sided and I don’t think I’m comfortable with it.”  So employees routinely sign these employer-drafted confidentiality agreements, with about as much review as you would give the fine print on the back of a ski ticket.

 

It’s usually only later, if a problem ensues, that the employee actually takes a hard look at what he’s agreed to.  Usually, these agreements state explicitly that all documents, in whatever form, are the property of the company and are not to be removed from the premises except with permission, and may not be retained for any purpose after the employee leaves employment at the company.  Many such agreements go on to say that the employee understands he may be sued if he retains any such documentation, and that he agrees to all sorts of draconian relief if he misbehaves:  flogging, defenestration, stockades, and – worst of all – fee shifting provisions saying the employee must pay the exorbitant legal fees of its counsel in bringing all this pressure to bear.

 

Most qui tam whistleblowers go through an evolutionary process before deciding to sue their employer or former employer.  Usually, these people had no plan whatsoever to cause trouble for their company; usually, they are just normal people trying to do their jobs.  But somewhere things went awry and the employee started to notice a problem that might be fraud-related, and all too often, the company doesn’t like the message he is delivering.  We don’t hear about the cases where companies do this right (we’re sure they’re out there), but often companies punish the messenger rather than correcting the problem.  Even then, often these employees are still undecided about what they should do, even when they know that they’re “on the bubble.”

 

Coming back to the question of documents, the reality is that the employee has access all through this period of employment and devolution of the relationship to massive amounts of data (email, company memos, and the like) the company would consider confidential, and all of which can fit on a thumb drive.  The worried employee usually starts to make a mental inventory or a more specific inventory of problematic documents as he sorts through his options.  Ultimately, if the employee decides to become a False Claims Act whistleblower, he has a statutory obligation to turn over to the government (the real party in interest) everything he knows about the fraud.  So he copies the key documents onto a thumb drive and turns it over to the feds, right?

 

Probably.  But there are some important caveats.

 

Caveat One:  You can’t bring a qui tam suit without an attorney, and one of the first things you’d better do is go over with your attorney what you have in your possession that a) you think is relevant to the fraud and b) documents the company would think are its property.  Some sorting needs to be done, and should not be done without the counsel of an attorney.

 

Caveat Two:  It’s best to limit your copying to things that were fair game for you to have access to during the course of your employment.  Courts tend to react very differently to fact patterns where the employee has gone on a widespread search throughout the company than to fact patterns where the employee simply made copies of things coming through his inbox.  Compare U.S. ex rel. Cafasso v. General Dynamics in which the court allowed the defendants’ counterclaims to proceed, condemning the relator’s “wholesale” collection of documents, and U.S. ex rel. Grandeau v. Cancer Treatment Centers of America, in which the government robustly defended the relator’s right to bring to its attention all the evidence of fraud she had come across.  So while there’s no problem thinking “how broad might this problem be?” or even talking to other people about that question, there may be a risk in searching for files beyond your scope of employment.  (And note:  companies can and routinely check the computers of departing employees to determine forensically what documents have been forwarded or copied to thumb drives.)

 

Caveat Three:  Understand that attorney-client privileged documents, or trade secret documents, or patient privacy (HIPAA) implicating documents represent special situations – even if they are directly relevant to fraud.  Some documents, quite appropriately, deserve the utmost care.  The last thing the government or your attorney wants is to taint the government team or cause unintended consequences to a third party that could have been avoided.  So before turning anything over to the government, your legal team has to go through the documents with care, flagging these categories of documents, withholding some, redacting others.  It’s painstaking work, but the government will greatly appreciate your team’s careful approach, and you will have saved yourself from major headaches down the line.

 

Caveat Four:  If you are an attorney and thinking of being a relator against your client or your former client (e.g., former in-house counsel), understand that courts can’t stand this fact pattern.  Judges typically view your exalted status as an attorney as carrying with it certain key obligations of secrecy, confidentiality and privilege, and they will in most instance find a way to bar you from trading on the client’s confidences.  See, e.g., U.S. ex rel. Fair Laboratory Practices Associates v. Quest Diagnostics and Unilab Corp.

 

To sum it all up, generally the statutory obligation to produce relevant information to law enforcement trumps the company’s interest in not having the information shared with any third party including law enforcement.  See e.g., Town of Newton v. Rumery, 480 U.S. 3.86, 392, 207 S. Ct. 1187, 1191 (1987) (a promise is unenforceable if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.)  See also XCorp. v. John Doe, 805 F. Supp. 1298, 1310 n.24 (E.D.Va. 1992) (observing in an FCA case brought by defendant’s attorney that confidentiality agreements that prevent an individual from disclosing evidence of fraud to the government are void as against public policy).  So you’re on o.k. ground to start off.

 

The tricky part comes if the government declines the case and you decide to go forward anyway.  As surely as night follows day, counterclaims will come, asserting breach of contract, conversion, misappropriation, and the like.  In discovery, it will come out what was turned over to the government, and anything else that was taken from the premises.  See e.g., U.S. ex rel. Wildhirt v. AARS Forever, Inc., et al, 2013 WL 5304092 (N.D. Ill. 2012)(sorting through counterclaims and categories of documents, and determining which were relevant to an FCA prosecution and which were not and therefore unprotected).

 

When the government wins the case, these issues almost always go away.  The case is settled, and defendants usually don’t want to look retaliatory by suing the relator after the settlement for doing something the law says is protected.

 

But if there’s no settlement and the employee goes forward anyway, the gloves will come off.  And it’s best to have anticipated this reality, by:

 
• Copying only what you reasonably had access to
• Taking only copies, not originals, of documents
• Reviewing with your attorney prior to disclosure all of the issues shown in the documents
• Staying away from privileged and trade secret documents, or segregating them
• Redacting, as necessary, patient information protected by privacy laws

 

With these basic guidelines in place, the employee stands a much better chance of defending the fact that company documents were turned over to the government.

 

Simple, right?

U.S. Intervenes in False Claims Act Suit Against USIS For Faulty Background Checks

Last month we wrote about the civil and criminal investigation of USIS, the government contractor who did the background checks on Edward Snowden and Aaron Alexis.  Yesterday,the United States announced that it has intervened in the FCA whistleblower lawsuit accusing the company of defrauding the Office of Personnel Management with whom it had a contract to perfrom background security investigations.

 
The qui tam FCA complaint was filed by whistleblower and former employee of USIS, Blake Percival, who accused the company of violating its contract since at least 2008.  The United States has asked the court to allow it until January 22, 2014 to file its own complaint in the case; at that time, we can expect to see much more detail about what the investigation has revealed about the nature and extent of the fraud.  No further word on the criminal investigation at this time, but we will stay tuned to see how that develops as well.