The Qui Tam Blog

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.

History of the False Claims Act
In 1863 Congress passed a law that created incentives for private individuals to report government fraud in an attempt to curb a rash of fraud against the government. On March 2, 1863 President Lincoln signed the law, called the False Claims Act (“FCA”). Also referred to as the “Informer’s Act” or “Lincoln’s Law,” the original FCA prohibited various acts designed to fraudulently obtain money from the government.

The FCA was initially adopted by Congress with the intention of combating fraud against the United States Army during the Civil War. Although the legislative history of the FCA focused specifically on fraud committed by military contractors, the FCA also applied to fraud committed by all government contractors.

Defendants were subject to both civil and criminal penalties under the original FCA and fined $2000 for each fraudulent claim in addition to a penalty of double the government’s actual damages.

Under the 1863 FCA, private individuals known as “relators” could pursue this remedy through a “qui tam” action, and the informer was entitled to half the total recovery. The justification for allowing qui tam litigation was to encourage citizens to report wrongdoing against the government that would otherwise go unnoticed. In short, the government hoped that economic incentives would promote private enforcement of federal legislation.

Next month we will continue our history lesson with The 1986 Amendments to the FCA.

History of the False Claims Act
Qui Tam Defense Industry Cases
Qui Tam Litigation

Last month the Department of Justice announced that American Grocers, Inc., has agreed to pay $13.2 million to settle a lawsuit that charged the Houston company with changing "use-by" labels on food sold and shipped to U.S. troops in the Middle East during the Iraq war.

The case began in 2005 after Delma Pallare, despite fears of retaliation, blew the whistle on American Grocers, Inc. and its owner Samir Itani, and brought to light the illegal conduct.

Ms. Pallares, represented by the law firm of Berg & Androphy, brought her lawsuit, also known as a qui tam action, under the Civil False Claims Act in the Southern District of Texas. The Houston law firm spent 5 years relentlessly pursuing the case along with Assistant U.S. Attorney Michelle Zingaro. As a result, the government issued a search warrant for American Grocers’ warehouse, indicted Itani, and intervened in the qui tam action.

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View Los Angeles Times Cover Story
View Houston Press Cover Story

AARP has signed on as co-counsel in a qui tam whistleblower suit filed in 2006 against Abbott Laboratories, Johnson & Johnson and Boston Scientific who allegedly deceived the Food and Drug Administration (FDA) to gain approval for biliary stents, which they then illegally marketed its off-label use as vascular stents. AARP is sending a clear message to pharmaceutical companies who illegally market their drugs and devices off-label with their involvement in this qui tam case.

“More and more people see the False Claims Act as a means of correcting years of fraudulent activity,” says Joel Androphy, partner at the Nationwide Law Firm of Berg & Androphy.

The education of the growing senior population is an essential ingredient in reducing the incidents of Medicare fraud. Recently, the Centers for Medicare & Medicaid Services (CMS) announced that $9 million in grants have been awarded to bolster 51 Senior Medicare Patrol programs enlisting volunteers to educate seniors to recognize and report Medicare fraud.

The Obama administration recently warned that, due to confusion over the provisions of the Patient Protection and Affordable Care Act, fraudsters are taking advantage of the Act to prey on seniors, whose Medicare beneficiary numbers are the key to billing scams that drain resources from the federal health program.

Allergan Inc., has agreed to settle a federal investigation over how it marketed Botox, said the Associated Press (AP). Allergan Inc. allegedly promoted Botox Therapeutic for unapproved medical uses through Medicaid resulting in a combined $600 million in civil and criminal penalties. The settlement becomes official once a federal judge approves it, said the AP.

A whistleblower complaint led to the probe that lasted one year, with the Justice Department looking at Allergan’s marketing of Botox from 2001 through 2008. The five whistleblowers will split $37.8 million of the government’s settlement.

Private citizens who file lawsuits on behalf of the government alleging fraud are eligible for up to 18 percent of whatever is recovered as the result of a qui tam lawsuit. According to a press release, Allergan Inc. agreed to pay state governments and the federal government a combined $225 million civil settlement to compensate Medicaid, Medicare and other federal health programs for reimbursements wrongly paid for Botox Therapeutic. This includes $210 million to the federal government—the rest to a number of states—connected to the probe.

“Off-label marketing violates the civil and criminal laws.” says Joel Androphy, Partner at the prestigous Nationwide law firm of Berg and Androphy. “In addition to misbranding a drug, many pharmaceutical companies pay kickbacks to doctors to induce more prescriptions. As long as companies compete for patients, off-label marketing will continue.”

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.

Who is liable for man-made disasters such as the oil spill? Just the primary corporation, like BP, or also the suppliers of their equipment and parts? See what Geoff Berg has to say in this article:

Cameron Provided Blowout Gear for Rig That Sank
“I don’t think it could possibly be much more serious than a severe incident like this,” Geoff Berg, a partner at the Houston law firm Berg & Androphy, said today in a telephone interview. “If there is some evidence of liability, then you can bet that everyone will and should be sued over it.” Read More

$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.

Signed into law on March 23, 2010, the Patient Protection and Affordable Care Act (the “Affordable Care Act”) narrowed the bar against bringing suits based on public disclosure by restricting the public disclosure bar to only information publically disclosed at the Federal level – not at the State or Local level.

The Affordable Care Act, however, broadened the definition of an “original source” to include, not only a relator with direct and independent knowledge of the information on which the allegations were based and that voluntarily provided that information to the government before filing suit, but also a relator who provides knowledge to the government before filing suit that is “independent of and materially adds to the publically disclosed allegations or transactions.”

The Affordable Care Act amends the Anti-Kickback Statute to provide that items or services resulting from an Anti-Kickback Statue violation are false for purposes of the FCA, disposing of the need to rely on a false certification theory of FCA liability.

Additionally, the Affordable Care Act settles the circuit split regarding the definition of “willfulness” in the Anti-Kickback Statute. Some courts required the government to prove that a defendant knew that the Anti-Kickback Statute prohibited the conduct at issue, while other courts disagreed. The new law, however, makes it clear that the Anti-Kickback Statute does not require the government to prove actual knowledge of a “known legal duty” that was being violated.