The Qui Tam Blog

On July 1, the federal government will begin using computerized predictive modeling software to collect and analyze information to spot potential fraud. The software will sort information gathered from Medicare and Medicaid claim forms to generate a risk score for claims. If a risk score reaches a particular level, the system will flag that claim for further investigation by Centers for Medicare and Medicaid Services and the Office of the Inspector General. Prompt payment provisions will be waived for claims that are flagged as suspicious.

$77 million in funding for the system is provided as part of the Patient Protection and Affordable Care Act signed into law last year. Northrop Grumman, National Government Services, and Federal Network Systems, a subsidiary of Verizon, are working on the system.

Novo Nordisk will pay $25 million to the U.S. Government to settle allegations of improper marketing of the anti-clotting drug NovoSeven. The complaint alleged that the company improperly promoted NovoSeven for indications not approved by the Food and Drug Administration.

Novo Nordisk also agreed to pay $1.725 million to the U.S. Government and four states to resolve allegations that its sales representatives paid Rite Aid pharmacists to recommend the diabetes drugs Novolin and Novolog.

Novo Nordisk made no admission of wrongdoing in either settlement.

The public disclosure bar generally precludes qui tam relators from bringing actions based upon publicly disclosed information unless the relator is an original source of the information. Before the passage in 2010 of the Patient Protection and Affordable Care Act (“Affordable Care Act”), the False Claims Act (“FCA”) specifically prohibited private suits “based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media.” In Schindler Elevator Corporation v. United States ex rel. Kirk, the Supreme Court held that a federal agency’s written response to a Freedom of Information Act (“FOIA”) request constitutes a “report” within the meaning of the FCA’s public disclosure bar.

Relator Daniel Kirk, a Vietnam veteran, was employed by Schindler Elevator Corporation (“Schindler”) from 1978 until 2003. He filed an action against Schindler in 2005, alleging that Schindler had submitted false claims for payment under its Government contracts because the company had falsely certified compliance with the Vietnam Era Veterans’ Readjustment Assistance Act of 1972. Kirk supported his allegations with information his wife had received from the Department of Labor (“DOL”) in response to three FOIA requests.

The Supreme Court held that the DOL’s written responses to the FOIA requests were “reports” within the meaning of the FCA’s public disclosure bar. (Note: The Supreme Court considered the version of the public disclosure bar in existence at the time Kirk’s suit was filed, prior to amendment by the Affordable Care Act.) It remanded the case to the United States Court of Appeals for the Second Circuit to determine whether Kirk’s suit was “based upon . . . allegations or transactions” disclosed in those reports.

A lawsuit was filed Monday, July 19th by Wilfrido Willie Mata, the former IT director of the Harrison County sheriff’s office’s claiming he was illegally fired for being a whistle blower.

“You can’t say to somebody, ‘Thanks for reporting. You’re fired,’” Houston whistleblower attorney Joel Androphy said.

According to the lawsuit, instead of looking the other way while an outsider hacked into the county’s computer system, Mata went to the FBI. In October, Mata disclosed his cooperation to the sheriff’s office. In February, the suit says his performance review was rated average. In May, he was fired.

“That timing is too close to not raise a lot of suspicion that he was fired because of complaining,” Androphy said. The lawsuit alleges the sheriff’s office violated the Whistleblower Act.

Watch the complete story as reported on WKTRK Eyewitness News.

$176,000 was just paid to qui tam whistleblower who filed a lawsuit against Cochlear Americas on behalf of the federal government. Whistleblower Brenda March filed the lawsuit as the company allegedly paid illegal remuneration to health care providers as an incentive to sell Cochlear devices.

The total settlement with Cochlear Americas was worth $880,000. The defendant company is a subsidiary of the Australian company Cochlear Limited.

March originally filed using provision in the Anti-Kickback Act and False Claims Act, saying that the company was clearly paying kickbacks to physicians who sold Cochlear devices to Medicare and Medicaid patients.

In an attempt to speed up civil fraud investigations in the U.S., Attorney General Eric Holder expanded the power of the False Claims Act by signing an order allowing U.S. Attorneys to issue civil investigative demands under the Act.

Civil investigative demand allows for a subpoena of documents, depositions and interrogatories. Currently the Justice Department can issue these investigative demands before it files a complaint or before signing on to qui tam litigation. This makes the information accessible before the potential defendant can conduct its own discovery.

Until this year, the Attorney General could exclusively approve civil investigative demands. Because of this limitation, they were not common. Last spring, however, an anti-fraud bill made its way through congress and subsequently established the practice of allowing the Attorney General to delegate the power to Assistant Attorney General for the Civil Division. In a further expansion, Attorney General Holder also allowed Assistant Attorney General Tony West to redelegatee such powers to U.S. Attorneys, with notice and reporting requirement.

Laidlaw Transit, Inc., a company that provides busing services to California school districts, is being challenged by the First District Court of appeals on the basis of a Qui Tam case brought by plaintiffs claiming that the company falsified safety records and failed to meet state safety and environmental standards.

Because Laidlaw accepted payment while allegedly breaching the contract held with the city, they are liable under the False Claims Act. The case had previously been dismissed but has been revived by the Court of Appeals.

The case was brought to court by a private individual with knowledge about Laidlaw’s supposed misconduct. If Laidlaw is charged with damages in this case, the whistle blower will be awarded some of the money under the False Claims Act.

The past few months have seen a dramatic increase in Qui Tam cases based on the false-marking section of the Patent Act. This section of the Act allows for whistleblowers to bring a company to court for falsely marking products as being patented or patent ending. If the company is found guilty of falsely claiming patent, the whistleblower and government receive compensation, as outlined in the Patent Act.

A recent case, Forest Group, Inc. v. Bon Tool Co. interprets the false-marking section as incurring a fine of $500 for every printed instance of false patent claim. Previous cases had interpreted the section to mean that a $500 fine should be incurred for every intention of falsely marking a product. The older interpretation was less harsh on manufacturers, whereas the newer interpretation in the Forest case offers hefty incentives for whistleblowers to turn in companies they have found to be fraudulently marking products.

The $500 fee is not automatic nor required. District courts are allowed to strike a balance in cases where mass-produced smaller items have been marked. For low-cost items, an $500 fine per item might be too steep and disproportionate to the benefits garnered by the company that fraudulently marked the product. Still, the potential of up to $500 in fines per item is enough to discourage companies from fraudulently marking future product and is more than enough to cause a substantial and steady increase in Qui Tam cases by whistle blowers who are ready to hold companies accountable for their patent law violations under the new interpretation of the Patent Act.

A qui tam case filed in the Texas Northern District Court by a patent watchdog group (The Patent Compliance Group, the PCG) against Activision Video Game Products, the firm that owns the Guitar Hero line of video games and video game products, accuses the company of patent law infringement.

The lawsuit accuses the Activision brand of improperly labeling its products with the patent and patent-pending notation used to protect brand names from copyright infringement. The case involves provision 35 U.S.C. 292(a) which establishes that, “”… whoever marks upon, or affixes to, or uses in advertising in connection with any article the words “patent applied for,” “patent pending,” or any word importing that an application for patent has been made, when no application for patent has been made, or if made, is not pending, for the purpose of deceiving the public – Shall be fined not more than US$500 for every such offense (in this case per item sold).”

Even though Activision does have some patents currently pending, PCG claims that the patents the company has filed do not cover the scope the packaging notation has claimed.

A Qui Tam suit has been brought against J-M Manufacturing Co and Formosa Plastics Corp, the manufacturing company’s previous parent company. Four states, twenty-one water districts and twenty-two cities in California have brought the lawsuit following reports that J-M Manufacturing had been supplying sub-standard PVC pipe.

The suit accuses J-M of taking several “cost-cutting” measures, including producing inferior quality PVC pipe, filling supervisor positions with inexperienced workers and providing independent quality-testers with a higher quality sample of product than what was actually being provided to customers.

For cities using these PVC pipes for water management, inferior quality product means a bad investment in public infrastructure. John Hendrix, who worked as an engineer in the J-M’s product assurance department, blew the whistle on the manufacturing company’s product quality issues and was reportedly fired by the company a week later.

The suit states that Hendrix’s employment was terminated after he wrote a memo to upper management informing them that the tensile strength of the PVC pipe being supplied was below the certification agency standards provided by Underwriters Laboratories, Inc.