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Is There Fraud in That Blur of Paperwork?

As whistleblower lawyers, we spend a lot of our professional lives trying to get big companies to behave better when it comes to fraud and abuse matters.  Yes, we represent clients, many of them courageous individuals risking their careers and their personal lives to alert the government of ways the taxpayers are being defrauded.  Yes, some of those clients get paid well for doing the right thing, and when that happens, we get paid as well.  But that’s not the main reason we do this work.


We do this work in part because we’re offended by systemic patterns of cheating, and we’d rather spend our time exposing those patterns that coming up with excuses for them.


Over the years, one of the things we’ve noticed is how the bewildering complexity of our society’s rules, regulations, and laws have created an environment that actually encourages fraud by making it easier to hide things in the great morasses of paper or electronic data that no one actually reads.  Just bury the details in a massive amount of paper, and what are the chances anyone will ever notice that little — or not so little — scam?


There are so many examples.  A recent New York Times article detailed a phenomenon with which we are all familiar:  medical and health insurance paperwork can be utterly impossible to make sense of.


“Medical bills and explanation of benefits are undecipherable…, even for experts…”


The article quotes a professor of health law.  So we as consumers just shrug and do our best to live in a system that we don’t have time or ability to question.


How many of those bills contain errors that we can’t see?


As the article points out, we don’t accept this lack of transparency when we go to the grocery store, or when we get a credit card bill.


Would it be so difficult to have health care providers and insurers communicate with their patients with transparency?


The problem, of course, is not limited to health care.


Take a look at the home loan business.  There is a mortgage service company called OCWEN that has been the subject of many recent investigations and lawsuits, over a whole variety of allegations of misfeasance and non-feasance.  Recent settlements with state regulators in California and New York show that the company, which services millions of mortgages, is virtually incapable of providing homeowners with accurate information on their loans.


Here’s from a Consent Order with New York State, language that the company admitted:


“Ocwen regularly gives borrowers incorrect or outdated information, sends borrowers backdated letters, unreliably tracks data for investors, and maintains inaccurate records. There are insufficient controls in place— either manual or automated—to catch all of these errors and resolve them.”


How’s that make you feel as a homeowner?  (OCWEN paid $150 million to New York on behalf of defrauded homeowners in that state alone.)


One would never treat a customer this way in a face-to-face transaction.  But in a world of over seven billion people, and more daily transactions than can be counted, we are awash in data and quite blinded by the volume.  And in that smokescreen, there’s plenty of opportunity for mischief.


This is why insiders are so critical to the success of whistleblower statutes like the False Claims Act, or the SEC’s Dodd Frank whistleblower program.  In this vast, overwhelming chaos of data, there are people whose job it is to make sense of it all, to navigate through the mess.  When there’s fraud in that morass, only an insider can enable prosecutors and investigators to find it.

Blowing the Whistle on Environmental Law Violations

Scientists believe 2014 will likely be the warmest year on record; and now Christopher K. Warren, a third year law student at Boston College Law School and a former summer law intern with the Whistleblower Law Collaborative, has written a timely and excellent law review article: “Blowing the Whistle on Environmental Law_ How Congress Can Help“.




The Note will be published in Volume 42, Issue 1 of the Boston College Environmental Affairs Law Review and is also available online for download as a PDF.


Congress has a history of instituting whistleblower programs to protect and reward individuals who expose wrongdoing to the government, most notably the False Claims Act and more recently the Dodd-Frank Act.


In this article, Mr. Warren persuasively argues that the recent whistleblower programs instituted by the Securities and Exchange Commission and the Commodities Futures Trading Commission pursuant to the Dodd-Frank Act should be used as models for an Environmental Protection Agency whistleblower program to expose environmental statutory violations and crimes.


The major environmental laws such as the Clean Air Act and the Clean Water Act have been on the books for decades now, but the government needs the help of insiders to adequately address violations just as Congress decided in 1986 that the False Claims Act originally enacted during the Civil War needed to be modernized to address the growing problem of fraud against the government. The amended False Claims Act has been hugely successful resulting in the recovery of over $30 billion to the Treasury. The environmental crisis facing the United States and the world is even more daunting and we need all hands on deck. Let’s hope Congress will consider Mr. Warren’s idea.

Health Care Fraud & Abuse Gets First Person Account

Students in the Health Care Fraud and Abuse seminar led by whistleblower attorney Bob Thomas were treated to a fascinating retrospective from a successful whistleblower, Elin Baklid-Kunz, the former employee of Halifax Hospital, which recently settled False Claims Act accusations against it for $85 million. Ms. Kunz and her attorney Marlan Wilbanks spoke to the students by telephone connection, and answered a variety of excellent questions from the students.


Having covered the most important areas of health care fraud law (the False Claims Act, the Anti-Kickback Act, the off-label/misbranding/adulteration prohibitions of the Food Drug & Cosmetic Act, and the Stark Laws) earlier in the semester, the students are being exposed in the final four weeks of the seminar to the thoughts of different participants in this dynamic field. Last week, they visited Cambridge biotech Ironwood Pharmaceuticals to hear from its chief compliance officer. Yesterday they heard from a whistleblower and her attorney (concerning a case they had studied previously in the course with respect to the Stark law). In the following two weeks, they will be hearing from two former Assistant U.S. Attorneys, who will be addressing the prosecutorial and defense perspectives.


In preparation for the class on “the whistleblower perspective,” the class read a number of articles about people who had gone through the experience, as well as a study of the collective experiences of all whistleblowers, published in the New England Journal of Medicine in December 2010. That study corroborated what most whistleblower lawyers will tell you: that the process is difficult and long, that the whistleblower must be prepared for personal and professional isolation, and that only those whose motivations are primarily principle-based (as opposed to purely monetary) will have the stomach to ride out the unpredictable turns of a False Claims Act case.


Which brings us back to Elin Baklid-Kunz. Ms. Kunz worked in finance at the Halifax Hospital in Florida. She noticed that neurosurgeons and oncologists at the hospital were being accused of conducting unnecessary medical procedures and that their compensation packages were heavily weighted towards a bonus based on number of patient referrals brought in, a highly circumspect arrangement under the Stark law. Her attempts to ascertain the legitimacy of these arrangements were not well-received, particularly by the doctors themselves, some of whom were earning close to $2 million per year. An in-house attorney at Halifax seemed to substantiate her claim, however, drafting a legal memo concluding that the Hospital was in fact violating the Stark law and that the physician bonuses could be legally challenged by the government. Discovery would later reveal that the hospital sought a second opinion (from the firm that ultimately tried unsuccessfully to defend it in court), which said that the arrangement did not violate Stark. The judge presiding over the case ruled that the hospital improperly withheld the first legal memo from the government in discovery, under the “crime-fraud exception” to the attorney-client privilege, making the opinion discoverable and presumptively admissible at trial. Needless to say, the hospital had little wiggle room at that point, and eventually cuts its losses by settling the case for $85 million (plus the tens of millions it paid its law firm, the same law firm that had issued the questionable second opinion).


Ms. Kunz reflected on the ultimate take-away from the case and her experience. She noted that when the settlement was announced internally at the company, there was great applause because the amount of the settlement was much lower than expected. None of the company management has been forced to resign or face litigation or indictment; indeed, several have been promoted and been given raises and kept their lucrative pension plans. Most disappointing, she said, is that the culture of the hospital seems not to have changed, based on what she hears from her former colleagues.


One particularly interesting side note to all of this. Ms. Kunz, who is originally from Norway, reported that her Norwegian friends, who learned of the case through media reports in that country, were astounded by two things in particular: 1) that there was such a huge discrepancy in compensation for certain types of doctors over others, related to how much business they brought in, which was quite different from how doctors are paid in Norway and elsewhere in Europe, and 2) that a whistleblower who turned out to be right would be subject to retaliation. In Norway, she was told, the emphasis would be on fixing the problem, and thus the whistleblower would be appreciated for having alerted the company to what needed to be fixed.


Equity and integrity. Not unreasonable principles from which to ground a medical practice.

Health Care Fraud and Abuse Seminar at BU Law School

Whistleblower Attorney Bob Thomas is once again leading a law school seminar on “Health Care Fraud and Abuse” at Boston University, with second and third year law students digging into the False Claims Act, the Anti-Kickback Act, Stark I and II, and “off-label” misbranding and adulteration under the Food Drug and Cosmetic Act (“FDCA”), as well as many of the strategic and practical questions that come up for attorneys practicing in this area.  The course offers law students a view into this dynamic area of the law, where new case law is made every week, and where one can start to imagine a variety of different career options within the field.


Each week for the first half of the seminar, students are given a short writing assignment to answer a bothersome question that comes out of the reading – usually one that arises from one of Mr. Thomas’ qui tam cases.  In addition, each student will do at least one class presentation on a subject matter area.


This past week, the seminar explored the misbranding and adulteration theories under the FDCA, and how those violations can fall within the ambit of the False Claims Act (with its treble damages and penalties enhancements).  The Glaxo Cidra case served as a case study, with its $750 million settlement.


Another topic that was explored under the FDCA was the hot topic of compounding.  As you may know, compounders for too long managed to dodge federal oversight by posing as mere pharmacies, until the sad saga of New England Compounding put an end to the obfuscation.  Now, a new compounding law passed by Congress specifically requires compounders to register with the Food and Drug Administration and submit to its jurisdiction or formally seek a written waiver.  Revealingly, in the months since the law was  passed, the FDA has been on a tear visiting these sites, and finding quite a few violations that consumers would want to know about.  Right on cue, a USAToday article just came out summarizing this history, as the once lightly regulated industry now gets used to complying with stricter federal oversight.


It’s enjoyable to be working in a field that is so highly relevant and fluid, something the law students appreciate quickly from the content of the seminar.

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.

Will Judge Rakoff’s Ruling Spur US and Bank of America Settlement Talks?

According to the New York Times, Bank of America has raised its offer to the Justice Department to settle charges stemming from its part in the Great Recession.


As the article notes, much of Bank of America’s legal exposure stems from its acquisition of Countrywide Financial, a large subprime lender, in early 2008.   Nevertheless, as Judge Rakoff’s ruling shows, Bank of America is nevertheless on the hook for the misconduct.   If an overall deal is reached, Bank of  America would be the most recent large bank to reach such a settlement with the Justice Department.

American Bar Association, Section of Public Contract Law, Recent Cases Interpreting the False Claims Act, and Consequences for Conducting Internal Investigations

American Bar Association, Section of Public Contract Law, Recent Cases Interpreting the False Claims Act, and Consequences for Conducting Internal Investigations,
Friday, August 8, 2014, from 9 a.m. to noon at the Hyatt Regency, Boston, Massachusetts

Attorney Robert M. Thomas, Jr., Thomas & Associates

Attorney Robert M. Thomas, Jr., Thomas & Associates

Robert M. Thomas will join several other esteemed speakers from government, the private sector, as well as the whistleblower perspective, in a session covering recent developments in the case law of the False Claims Act.


In the past few years, as the result of an increasing amount of litigation, courts have issued a number of decisions interpreting the provisions of the False Claims Act.


On some important issues involving the Act’s substantive liability provisions and procedural defenses, courts are diverging in their approaches, increasing the level of uncertainty for government contractors, and suggesting that some of these issues will find their way to the Supreme Court.

Full brochure [PDF version].

Whistleblower Law Collaborative Client Key Part of Amedisys $150 Million Settlement

The Justice Department today announced a record False Claims Act settlement against a home health care provider, Amedisys, Inc.  We are happy for our client who as a relator was instrumental in the investigation and this settlement, and we are grateful to our co-counsel Kenney & McCafferty with whom we teamed up to file the qui tam suit in Philadelphia in 2010.

DOJ Files Formal Complaint Against USIS After Intervening in False Claims Act Whistleblower Suit

In October, we wrote about the government’s intention to intervene in a pending whistleblower case against USIS, a security background check firm that is now accused of submitting hundreds of thousands of flawed background investigations. The Department of Justice has filed its complaint, which provides further insight into the allegations.


The complaint states that during the period between March 2008 and September 2012, USIS released at least 665,000 background investigations as complete when they had not received required levels of quality review. These “dumped” cases spanned across most government agencies, including the Department of Justice, Department of Homeland Security and the Defense Intelligence Agency. The complaint states that USIS management was acutely aware that the firm’s practice of dumping cases and quotes one manager as saying they, “flushed everything like a dead goldfish.” About 90% of USIS’ work is for the U.S. government and the company has been awarded more than $4 billion in federal contracts. See WSJ article. The company was responsible for the security checks of Aaron Alexis, the defense contractor responsible for last September’s shooting spree at the Washington Naval Yard, and Edward Snowden, the infamous NSA leaker, but the complaint does not allege that either of these checks were compromised.


Blake Percival, a longtime employee at USIS, was the original whistleblower that helped bring these allegations to light. Among the allegations, are claims that USIS created a special software program called “Blue Zone” to assist in dumping practices by sending cases to the government even when they had not undergone proper review. The company’s officials allegedly received close to $12 million in bonuses from the federal government, although USIS says it has replaced all officials implicated in the scheme.


In addition to alleging violations of the FCA, the United States’ complaint alleges USIS breached its contract with the Office of Personnel Management. This claim gives the United States a fallback in case it cannot prove the requisite scienter under the FCA.  However, breach of contract (like other common law claims) would only permit the United States to recover single damages plus interest, not the treble damages and civil penalties that are possible under the FCA. Common law claims can only be pursued by the United States; private citizen whistleblowers lack standing to bring such claims.


We also wrote last year about the government’s parallel criminal investigation of USIS. There is still no further news on that front, but we will update you when there is.

BU Law Health Care Fraud Seminar Turns From Substance To Practice

The fifteen students enrolled in Bob Thomas’s Health Care Fraud and Abuse seminar at Boston University Law School have covered a lot of substantive ground this fall and are now looking forward to hearing a series of outside speakers who offer different perspectives on this dynamic area of the law.


The first eight weeks have covered the nitty gritty of the most important statutes and legal theories: The False Claims Act, the Anti-Kickback Statute, Stark, Off-Label Marketing, Adulteration and Misbranding under the Food Drug and Cosmetic Act, Remedies including Exclusion and Debarment, and the False Claims Act’s Anti-Retaliation provisions.  Throughout the seminar, as the students have covered these areas of law, they’ve been asked to think like practitioners: How would a defense attorney deal with this issue? What would a prosecutor think? Would a whistleblower have a good claim? What would an in-house attorney do?


Now they get to dig a little more deeply into these practical aspects. Over the next four weeks, outstanding speakers will present their thoughts on the world of health care fraud enforcement as they see it, each from a unique perspective.


Next week, Gene Hull, the Chief Compliance Officer at Ironwood Pharmaceuticals in Cambridge, MA will lead an on-site presentation of what’s going on at the company, and how he and the General Counsel’s office are structuring compliance initiatives at a young company just rolling out its first product and hiring its first sales force. The students will get a tour of the company while they are there.


In the following three weeks, the students will hear from:


  •  defense lawyers at Boston white shoe firm Ropes & Gray, which has deep experience in this sector, including some high profile trial wins in health care fraud cases;


  • former Assistant U.S. Attorney Shannon Kelley, now in compliance at Boston Scientific but nationally known for her leadership in the ground-breaking Glaxo Smith Kline prosecution; and


  • an actual whistleblower who will recount what it’s like to take the big step into taking on one’s former employer in a multi-billion dollar claim, knowing that the decision is a life-altering moment, one way or another.


It will be a great sequence, and if history is any guide, the speakers will enjoy it just as much as the students!