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Now is a Time for Heroes

What Government Whistleblowers Can Do

 

We make our living representing whistleblowers.  It’s fascinating work, and not many days go by that we aren’t inspired by the courage of our clients to speak the truth when it would be easier not to, and the determination to stand up for something and to see it through.

 

We represent mostly whistleblowers under the False Claims Act or the relatively new SEC or IRS Whistleblower Programs.  They are usually insiders at private companies that cheat under government programs and contracts.

 

But there’s another universe of whistleblowers that we want to talk about — the government whistleblower.  The federal employee who is aware of something terribly wrong going on at his/her place of work and feels compelled to speak out.  What rights and protections do these people have?   While they may not be entitled to a “relator’s share,” in most situations, they do have legal protections, most notably under the Whistleblower Protection Enhancement Act (“WPEA”) of 2012.

 

The issue is a timely one, as the chaotic first weeks of the Trump Administration have seen an unprecedented disruption to the normal functioning of the government.  Just look back to the sudden rollout of the immigration order (now stopped by the courts) and think of the airport scenes, the confusion, the changing interpretations from the White House, and so on.  It is indeed a very new day.

 

In this intimidating environment, we know that many federal employees are wondering what to do when they are forbidden from communicating with the public or given an order from a superior that is, in their view, illegal. We hope this article will help.

 

Silence is not the only option.  Look at what’s happened already:

 

• In the National Park Service, alt government accounts have popped-up to oppose the President’s gag orders relating to climate-change and science, or to correct the President’s misinformation about the crowd size at his inauguration.
 

• Federal employees at several other agencies, including the embattled E.P.A., began posting similar alt government  sites on social media as a result of the President ordering the official agency sites down.
 

• Over 1000 State department officials signed a “letter of dissent” cable opposing the Executive Order barring immigration from seven predominantly Muslim countries.
 

• HHS employees rose up in protest and forced the White House to temporarily withdraw its order that the agency cease advertising the deadline to enrolle in Affordable Care Act.
 

• And most notably, Acting Attorney General Sally Yates notified all Department of Justice employees that as long as she was in charge of the department, it would not defend the President’s travel ban in court.

 

Sally Yates, as she surely expected, was fired immediately.  But the her actions had a powerful impact, reminiscent of the principled stand taken by Archibald Cox and Eliot Richardson during the Watergate crisis.

 

As these examples make clear, federal whistleblowers — at all levels — can have a real impact in fighting executive overreach. With one party in control of both the executive and legislative branches and an executive acting forcefully and bluntly, the need for government whistleblowers is real.

 

Blowing the whistle on wrongdoing in government is both part of our national history, and specifically protected under federal law.

 

I.  The History.  We have always relied on courageous government employees to come forward and expose wrongdoing by our government.  The Continental Congress enacted America’s earliest whistleblower law in 1787, declaring it “the duty of all persons in the service of the United States” to provide information of any “misconduct, committed by any persons in the service of these states, which may come to their knowledge.”   The law was prompted by an incident in which sailors and marines serving on board the warship Warren had secretly informed the Continental Congress of wrongdoing – including torturing prisoners of war – by Commander-in-Chief of the Continental Navy, Commodore Hopkins.  Hopkins eventually sued two of the whistleblowers, lieutenant Marven and midshipmen Shaw.  The Continental Congress, recognizing the importance of their actions and our young nation’s duty to protect whistleblowers, provided funds to successfully defend the suit.

 

In 1863, President Lincoln urged the passage of and signed the False Claims Act, incentivizing whistleblowers to come forward in response to rampant defense contractor profiteering during the Civil War.  In 1986, the statute was amended in substantial ways and has given rise to a bar of lawyers (of which we are proudly members) that has, with the aid of our whistleblower clients, returned tens of billions of dollars to the federal treasury.

 

In recent years, laws have been passed making it illegal for the federal government to try to silence employees who are speaking out about wrong-doing.  These laws will be getting a workout, we predict, in the years of the Trump Presidency.

 

II.  Current Protections.  Here are some resources for government whistleblowers, under current law.

 

Most government employees are protected from retaliation for disclosing violations of laws, mismanagement, waste, abuse or danger to health and safety. Employees are also protected against censorship of scientific research and analysis. Even inaccurate disclosures, if made in good faith, are protected.  See the following link for a list of the kinds of employment actions that are prohibited by the Office of Special Counsel – an independent government agency that that looks out for federal whistleblowers.  Examples include coerced political activity, nepotism, inappropriate recommendations, abuse of authority, and whistleblower retaliation.  The OSC also advises agencies on compliance with whistleblower protections, like the anti-gag rule.  See here and here.

 

Employees who believe they have been retaliated against can file a grievance with their union, or a complaint with the Office of Special Counsel, or an appeal with the Merit Systems Protection Board.  Remedies include reinstatement, back pay, and attorneys’ fees.  No, you won’t be made rich as a federal employee whistleblower, but you do enjoy substantial legal protections, and vindication can sometimes be its own reward.

 

In short, “Federal Employees have the right to make disclosures of wrongdoing” and cannot be punished for doing so.  The WPEA passed both houses of Congress unanimously in 2012, and makes it clear that speaking up is legally protected activity.

 

We never say “never” to clients or prospective clients, but it would be very difficult for the President to abolish this law or this agency.  He might try to  staff it with do-nothing types to weaken it, but it seems highly unlikely that the OCS or the laws it enforces won’t still be on the books for the duration of his Presidency.

 

No, this is not a normal time.  It is a time of risk.  There are some things a President can do, and some that he/she cannot do.  It is a time for heroes to stand up when the circumstances compel it.

 

And there is precedent:  Shaw, Marven, Ellsburg, Yates.  The risks are as real as they always have been, and greater than any time since the 1970’s.  The law provides protection, and lawyers of conscience both inside and outside the government are available to help.

 

Spotlight on Nursing Home Fraud

There has been a lot of attention lately to nursing home fraud, which is heavily reimbursed by Medicare.  In January, the  U.S. Attorney’s Office for the District of Massachusetts and the U.S. Department of Justice reached a $125 million Medicare fraud settlement with Kindred/RehabCare, the country’s largest nursing home therapy provider. In February,  the Boston Globe reported on new efforts by the Commonwealth of Massachusetts to regulate nursing home providers, following an investigative series the Globe did last year about “how an out-of-state chain had assembled its string of nursing homes with scant attention from regulators. That company, Synergy Health Centers, has been beset by reports of substandard care — festering pressure sores, medication errors, poor infection control, inadequate training, and short-staffing.”

 
The DOJ settlement by contract therapy providers RehabCare Group Inc., RehabCare Group East Inc., and their parent, Kindred Healthcare Inc., resolved allegations raised by whistleblowers that the company violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred. RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in forty-four states to provide rehabilitation therapy to their nursing home patients.  In addition to the settlement with Kindred/RehabCare in January, the DOJ also settled claims with four SNFs for their role in submitting false claims to Medicare; those settlements totaled some $8.225 million. Previously, DOJ had reached settlements totaling over $500 million with a number of other SNFs who had contracted with RehabCare and allegedly submitted false claims to Medicare.

 
The list of allegations against Kindred/RehabCare is breathtaking, even for someone who may have become somewhat jaded or cynical about the depths of health care fraud in this country. Perhaps the most troubling one is “Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care).” Really?

 
Meanwhile, the Boston Globe series highlighted a different kind of concerns—substandard quality of care provided to patients, such as festering pressure sores, medication errors, poor infection control, inadequate training, and short-staffing. This too is a form of Medicare fraud—the patients are not getting the services Medicare is paying for. Worse yet, they are being injured. (See also earlier article in Globe exposé.)

 
Vigilance is needed by all of us to protect the lives and quality of care of our nursing home population as well as to protect our Medicare dollars. We applaud the whistleblowers, the government, and the media for keeping the focus on this industry.

Vermont Uses Its New False Claims Act to Reach Medicaid Fraud Settlement

Vermont joined the ranks of 29 other states when it enacted a state False Claims Act effective May 2015. Now this week the Vermont Attorney General announced what appears to be the first settlement under that law, for in excess of $460,000 with Keene Medical Products, a durable medical equipment supplier offers numerous services, medical devices, and medical supplies to patients.

 

According to the terms of the Settlement Agreement, the State accused Keene of  a variety of false billings to and overpayments from the Vermont Medicaid Program, including double billing and billing for services that were not medically necessary or reasonable. Under the settlement, Keene will pay the state for its past transgressions. To help ensure that Keene complies with the law going forward, the settlement also includes a Corporate Integrity Agreement with provisions requiring an independent review of Keene’s claims for the prior two years, and up to three years following the settlement. In addition, Keene will be required to return to Vermont Medicaid any overpayment identified by those reviews and must also establish an internal compliance program designed to prevent or limit future false claims.

 

Vermont’s new False Claims Act (FCA) contains a qui tam or whistleblower provision that like the federal FCA and most other state FCAs enables a whistleblower to commence a FCA suit and collect a reward if the suit is successful. Like these other FCAs, it also has a provision protecting whistleblowers from retaliation. Here, it appears there was no whistleblower, probably because the Vermont FCA is so new and Keene’s misconduct largely predated the law. But going forward, whistleblowers who know about misconduct in Vermont now have a remedy. And as more and more companies doing business in Vermont adopt (voluntarily or not) internal compliance programs as Keene agreed to here, the more potential whistleblowers should become aware of the law, their employer’s obligations, and the employee’s rights and options.

Hold Them Accountable

Well, it’s the day of the Iowa caucuses, as the never-resting machinery of American Presidential politics kicks into high gear.  Many people,  understandably, are tired of it already.

 

Yesterday, though, an article in yesterday’s New York Times caught my eye.  It was an op-ed piece by our Massachusetts Senator Elizabeth Warren.  She reminds us of the many ways in which elections matter, emphasizing that the personnel appointments at federal agencies–made by the President–have substantial influence on how well laws are enforced, or whether they are enforced at all.

 

Warren’s staff just released a short little report, called Rigged Justice: 2016, How Weak Enforcement Lets Corporate Offenders Off Easy, and it does a nice job of summarizing some of the high profile cases where companies doing serious damage to the public have simply bought their way out of trouble by paying some (seemingly) hefty fine or penalty, often with no admission of guilt or liability, and no individual corporate actor being held responsible civilly or criminally.  You can read the report here.  Many of them are False Claims Act cases, i.e., the kind of cases we work on.

 

The theme of lack of individual accountability is one we’ve touched on many times in this blog, and for good reason.  Until individual corporate officers are held individually accountable, companies will continue to pass these penalties off on to shareholders.  When a company has $10 billion in revenue, how much does it really deter misconduct to pay a $100 million fine?  And if that $100 million is paid by shareholders only, does it really slow down the bad conduct at all?  In an unusually candid admission, one CEO of a corporate offender, apparently said that “it remains to be seen” whether the company’s  recent multi-million dollar settlement for paying kickbacks would actually change the company’s behavior.  Wow, he really sounds chastened, doesn’t he?

 

As whistleblower lawyers, we care deeply about how well or how poorly laws are enforced.  It not only affects our livelihoods, but it has enormous personal consequences to our clients who are risking so much to do the right thing.  And of course lax enforcement breeds contempt and cynicism from the public at large.

 

So yes of course Presidential elections matter.  They determine what kind of Supreme Court we end up with; they determine whether we go to war or not; they determine to a large extent whether the Executive Branch pushes government to work better or go into hibernation.

 

Professionally speaking, we hope that the country elects a President who understands that “rigged justice” is not justice at all.  Why should whistleblowers take personal and professional risks if the investigators, prosecutors, and agencies heads don’t really believe in vigorous enforcement of the laws?

Happy Fourth of July from Boston

The patriots who signed the Declaration of Independence over 235 years ago, concluded the Declaration with these words:

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor“.

Had their bold experiment failed, they would have lost everything, including their lives.

 

As the long 4th of July holiday weekend is unfolding, let us remember the vision, sacrifice, faith, and hard work that have preserved our democracy, and appreciate the many acts, large and small, that contribute to the common good.

 

Among these are the courageous whistleblowers who at great personal cost come forward to tell “the government”, our government, that it is being cheated, by a defense contractor, a health care company, a bank, or others.   Sometimes they succeed, sometimes they fail, but regardless they are doing their part as citizens in a democracy.

 
In just the past month, we have already seen the largest settlement involving alleged violations of the Anti-Kickback Statute by skilling nursing facilities in the United States, Trinity Industries was ordered to pay 463.4 for defrauding the Federal Highway Administration, and UPS agreed to pay for False Claims Act violations.  All due to the contributions of whistleblowers.  Their bravery, and the dedication of the public servants who work the cases, inspire us.

 
We wish everyone a safe and happy Fourth of July from Boston!

Fraud in Small Business Innovation Research Yields Settlement

Recently the U.S. Attorney’s Office for the Western District of Washington announced a False Claims Act settlement stemming from fraud in the Small Business Innovation Research (“SBIR”) program. nLight Photonics, Inc. (nLight), a privately-held, Vancouver, Washington-based manufacturer of high performance diode and fiber lasers, agreed to pay $420,000 to resolve allegations that between 2004 and 2013, it received multiple government grants and contracts for which it did not legitimately qualify under the SBIR because of its ownership structure. For the purposes of the SBIR program, the term “small business” is defined as a for-profit business with fewer than 500 employees, owned by one or more individuals who are citizens of, or permanent resident aliens in, the United States of America.

 

The SBIR program was established by Congress in 1982, and amended several times since. Currently eleven federal agencies participate in the program, awarding millions of dollars of grants and contracts each year. It is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. Id. Government funding is available because many early-stage innovation are still too high risk for private investors, including venture capital firms.

 
The fraud was discovered by an employee of the Department of Energy, one of the government agencies from whom SBIR funding was obtained. Apparently, the employee who was overseeing both an nLight SBIR grant as well as an SBIR grant awarded to a company that nLight had acquired, made an inquiry of nLight which brought its ineligibility to light. Indeed, nLight had successfully sought funding from the Army, Navy, Air Force, NASA and Department of Energy to further develop its laser technology, which has military and related applications of interest. Each of these agencies participated in the investigation, along with the Department of Justice, to reach the settlement. According to one news report, by 2011 the privately-held company nLight had secured $110 million in equity financing from Silicon Valley investors and was on a steady growth trajectory that led to speculation that it would initiate a public stock offering.

 
It is encouraging to see a False Claims Act case made “the old-fashioned way”—through discovery by agency contracting personnel and investigation by government law enforcement working together with DOJ. It reminds us all that without the benefit of a whistleblower, there are plenty of FCA cases the government can and should make.  To be sure, there are many cases of complicated fraud where a whistleblower is needed, and one wonders how much sooner the fraud here would have been uncovered if a whistleblower had come forward.  In addition, while so much of the attention of the FCA these days is on health care fraud cases, we would all do well to remember how many billions of dollars the federal government spends each year procuring other goods and services, from research as here, to military equipment for our soldiers.

Medicaid Fraud Highlighted in HHS-OIG Reports on Dental Services for Children

Sometime ago we wrote about the use of the False Claims Act to address the problem of fraud by dentist or oral surgeons who serve children covered by Medicaid. This week the Office of the Inspector General of the Department of Health and Human Services issued its third report on this problem; this report focused on fraud in the Louisiana Medicaid program, while prior reports focused on problems in New York and New York City.  This week’s report chronicles past FCA settlements and  Congressional hearings as well as the OIG’s earlier reports, and promises that further reports addressing the issue on a nationwide scale are forthcoming. See report at pp. 1-3 ; Law 360 article.

 

The federal-state Medicaid program is designed to assist low income persons obtain medical care, and among the benefits is dental coverage for children under the age of 18. According to the OIG, Medicaid is the primary source of dental coverage for children in low-income families and provides access to dental care for approximately 37 million children.  “Medicaid dental services must include diagnostic and preventive services, as well as needed treatment and follow up care. Diagnostic services may include x-rays of the mouth; preventive services may include cleanings, topical fluoride applications, and dental sealants. Dental treatment covers a wide range of services such as fillings; tooth extractions; and pulpotomies, which are often referred to as ‘baby root canals’.” Report at p. 1.  Among the OIG’s concerns are providers who are billing for dental procedures that are medically unnecessary or were in fact never even provided.   These concerns in turn implicate the quality of care these children are receiving or indeed the possibility of patient harm among a particularly vulnerable population. Id.

 

It appears from the OIG Reports that the government has so far been relying primarily on claims data and statistics to identify fraudulent providers. This approach has its limitations, however,  as reflected by the fact that the OIG readily acknowledges that it “ did not include pediatric dental specialists because the wide variation in their billing behavior made it difficult to analyze them as one peer group. Some pediatric dental specialists provide services that make them similar to general dentists, while others provide more complex services.” Report p. 4.  Moreover, at p. 6 the Report notes that the claims data simply identifies providers who may warrant further scrutiny, but it does not show they committed fraud. No doubt the taxpayers would benefit from whistleblowers who work in the dental sector of health care coming forward with real time information and cooperation to assist the government’s attempt to crackdown on fraud in this part of the Medicaid program.

DOJ Weighs in on Circuit Split on False Claims Act First-to-File Issue

A key provision of the False Claims Act is the so-called “first-to-file” bar which prevents a case from proceeding if there is a “related” action “pending” at the time the case is filed. After the United States Court of Appeals allowed a whistleblower’s case to proceed despite the fact that another related case had at one time been filed, the Supreme Court has been asked to grant a petition for a writ of certiorari to review this question.

 

Recently, DOJ filed an amicus brief expressing its view that the Fourth Circuit correctly interpreted and applied the FCA’s first-to-file provision and the issue does not merit review by the Supreme Court.  The Fourth Circuit held that  once a case is no longer “pending” (e.g., has been dismissed and there is no pending appeal), the first-to-file provision does not bar a relator from filing a related case.

 

While this outcome would seem obvious given the plain language of the FCA provision and the meaning of the word “pending,”  the defendant in the Fourth Circuit case is arguing that the recent contrary decision by a panel of the United States Court of Appeals for the D.C. Circuit creates a split in the circuit courts that merits Supreme Court review and resolution.

 

In response, the Solicitor General and DOJ argue that the Fourth and Seventh Circuits are in agreement with DOJ’s view, that the Tenth Circuit has agreed (albeit in dicta),  and that the D.C. Circuit decision was a panel decision only with a vigorous dissent with a petition for rehearing en banc now pending.

 

As such, DOJ views the split as the a narrow one that may well be resolved by the D.C. Circuit itself, and thus Supreme Court review is not merited. Brief at 25-29  (pdf pages, not brief pages).

 

We expect the D.C. Circuit will hear the case en banc and will ultimately agree with the other Circuits, rather than give the FCA a tortured reading. We also expect the Supreme Court will not grant certiorari to hear the Fourth Circuit case.

 

Nevertheless, the case is a good reminder of the many potential pitfalls or land mines a relator and his or her counsel may encounter as well-funded defendants lob myriad arguments and defenses into the courts.  Both the whistleblower and their counsel should expect significant (and often unforeseen or unknown) risks anytime a qui tam case is filed.

U.S. Scores Big Win Against Bank of America and Countrywide for Bank Fraud

The U.S. District Court Judge has ordered that Bank of America, Countrywide and one individual pay a bank fraud penalty of $1.3.  In his opinion, Judge Rakoff adopted the United States’ interpretation (see brief 1 and brief 2) of the penalty provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1833a  (“FIRREA”), and rejected the argument by defendants.  FIRREA is a powerful weapon passed by Congress in response to the savings and loan crisis of the 1980’s. Using a tip from a whistleblower, prosecutors dusted off the law and used it to great success in this case.  Under FIRREA, a successful whistleblower shall be entitled to a reward of “20 percent to 30 percent of any recovery up to the first $1,000,000 recovered, 10 percent to 20 percent of the next $4,000,000 recovered, and 5 percent to 10 percent of the next $5,000,000 recovered.” 12 U.S.C. § 4205.  In calculating that award, the Attorney General may consider the size of the overall recovery and the usefulness of the information provided by the whistleblower. Id.  This means that in this case, the whistleblower is entitled to an award of between $850,000 to $1.6 million of the government’s $1.3 billion recovery. Unlike the False Claims Act, FIRREA caps the whistleblower’s reward; in other words, he or she only shares in the first $10 million of any recovery.  Presumably the defendants will appeal the jury verdict on liability and the judge’s order on penalty so this saga is not yet over.

Tuomey Healthcare Faces $238 Million Judgment In False Claims Act and Stark Law Whistleblower Case

After two jury trials and one appeal, a federal district court judge lowered the boom on Tuomey this week, ordering it to pay over $277 million for False Claims Act violations predicated on its breaching the federal Stark Law which prohibits certain referral practices by health care providers. The judge subsequently lowered the amount to $238 million after the Department of Justice filed a motion to correct an error in how the judge calculated the penalties portion of the judgment.

 

The judgment shows the risk companies take when they roll the dice and “bet the company” to go to trial in FCA cases; Tuomey reportedly may not have enough assets to satisfy the judgment, and there is talk of a post judgment settlement. See Modern Healthcare article.

 

Along the way Tuomey’s defense lawyers pulled out many arguments only to see each one shot down by the jury and/or the judge. The court’s opinion makes for very instructive and interesting reading as the judge: upholds the jury’s finding that the company violated the Stark law by paying physicians (gastroenterologists) in excess of the fair market value of their services in return for their referrals of patients to Tuomey for their endoscopies (Opinion at pp. 8-11); refuses to overturn the jury’s decision rejecting the company’s “advice of counsel” defense (Opinion at pp. 11-14); and rejects the company’s arguments that damages were not adequately proven by DOJ and its expert witness, and that the mandatory treble damages and penalties under the FCA violate the Excessive Fines Clause (Eighth Amendment) and Due Process (Fifth Amendment) clauses of the United States Constitution (Opinion at pp. 14-36).

 

For the whistleblower, a doctor who objected to the conduct and filed his qui tam complaint in 2005, it has been a long and winding road that is not over yet. He and his lawyers are to be commended as are the lawyers and others at DOJ and the United States Attorney’s Office who have committed tremendous resources to see this case through. Finally we should not forget the two juries and the two district court judges and the hours they have devoted to rendering justice.