The Whistlerblower Blog

About This Blog

Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Whistleblowers to Recover $2 Million in 'Worthless Services' FCA Case Against Nursing Home

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On October 10, 2014, the Justice Department and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) jointly announced that Extendicare Health Services Inc. (Extendicare) and its subsidiary Progressive Step Corporation (ProStep) agreed to pay $38 million to the United States and eight states for False Claims Act liability. Approximately $2 million of the total settlement amount will be awarded to the whistleblowers who revealed the fraudulent conduct at issue by bringing suit under the False Claims Act.

SEC Encourages Would-Be Whistleblowers to Comply With Internal Reporting Programs First

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The Securities and Exchange Commission whistleblower program, which provides awards to certain whistleblowers who report securities laws violations to the SEC, encourages would-be whistleblowers to comply with internal reporting programs first. 

The SEC’s whistleblower rules do this in at least two ways. First, the SEC weighs the whistleblower’s participation in the firm’s internal compliance program as a factor that may increase the whistleblower’s eventual award. And the SEC considers interference with internal compliance programs to be a factor that may decrease any award. Second, the SEC’s whistleblower rules give the would-be whistleblower the benefit of the earlier date on which the internal compliance report was made, so long as the whistleblower makes his or her SEC filing within 120 days. In that situation, the SEC form requests a copy of the internal reporting. In these ways, the SEC encourages compliance with companies’ internal compliance programs, without sacrificing whistleblower reporting to the SEC.

46 States, DC Reach Settlement Agreement With Medtronic for False Claims Act Violations

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According to a recent press release, New York, most other states, and the District of Columbia have settled a False Claims Act case with Medtronic. The whistleblower case alleged that “Medtronic improperly induced physicians to recommend Medtronic devices to treat cardiac rhythmic disease.” The qui tam relator who brought the FCA case will share in the proceeds. In this case, venued in a federal court in California, several states and the federal government cooperated to resolve the matter and reach a favorable outcome. New York’s attorney general thanked the relator for bringing the matter to the government’s attention.  

FCA Retaliation Claim Not Subject to Employment Agreement Arbitration Clause, According to Sixth Circuit

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Relators alleging a retaliation claim under the False Claims Act scored a big win in the recent Sixth Circuit decision United States ex rel. Paige v. BAE Systems Technology Solutions & Services, Inc., 2014 U.S. App. LEXIS 9676 (6th Cir. May 22, 2014), which held that a False Claims Act retaliation claim was not subject to an employment agreement’s arbitration clause.

Relators in that case alleged that the defendant employer retaliated against them for cooperating with the government and filing a whistleblower case. Relators alleged that throughout their employment they complained to management about fraud, but, despite their complaints, the perpetrators of the unlawful conduct were left in place and their attempts to correct the problems were rebuffed. Ultimately, one of the relators was forced to quit due to the retaliation and the other was laid off. The district court dismissed the retaliation claim in favor of arbitration due to a clause in relators’ employment agreements.

Research Grant Fraud

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False Claims Act practitioners at recent gatherings seem to agree that research grant fraud will be a growing area of whistleblower activity. As the government spends more on research grants related to health care, frauds are expected to increase as well. Qui tam relators will follow.

Research grant frauds can take many forms, ranging from failure to comply with regulations and grant conditions to false grant applications and fabricated results and data. The FCA bar expects increased whistleblower activity in this area in coming years.

Medical Devices Offer Fertile Ground for Future Whistleblower Activity

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Recent gatherings of False Claims Act attorneys —who represent whistleblowers, the government, and the defense — revealed a consensus that medical devices offer fertile ground for future whistleblower activity. Medical device fraud can take at least three forms and may arise for durable medical equipment as well.

  • First, defective medical devices, sold in connection with Medicare or Medicaid reimbursement, may lead to FCA liability. On this point, manufacturer quality management systems, supplier controls and monitoring, attention to customer complaints, and corrective measures are all key issues that may impact FCA liability. Medical devices that are not safe, effective, and reliable create FCA risk for their manufacturers.
  • Second, off-label promotion of medical devices brings up issues similar to off-label pharmaceutical promotions. FCA approval of devices should guide marketing. If marketing goes off-label, there may be FCA liability.
  • Third, kickbacks paid to medical professionals in connection with medical device sales would trigger FCA liability.

Federal government spending on health care is ever-growing. The government frauds in this area, along with qui tam activity, are expected to increase as well.

Relators Win Right to Share of Proceeds Under False Claims Act

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In a recent False Claims Act case from the Eighth Circuit, Rille v. PricewaterhouseCoopers LLP, 2014 U.S. App. LEXIS 6597 (8th Cir. April 10, 2014), the relators won an important victory against the government relating to their right to obtain a portion of the settlement proceeds of a claim under the act. Specifically, according to the act, if the government “intervenes” in a case brought by relators, relators are entitled to a portion “of the proceeds of the action or settlement of the claim.” 31 U.S.C. 3730(d)(1). But in Rille, the relators had to fight not only defendants, but also the government to get the recovery they were entitled to under the act. The Eighth Circuit – in no uncertain terms – sided with the relators.

IRS Paid $53 Million to 122 Whistleblowers in 2013

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According to the IRS Oversight Board’s recent report to Congress, the IRS paid $53 million last year to 122 whistleblowers. This is an average of nearly $435,000 per whistleblower. The whistleblower awards last year average 14.6 percent of the amounts collected by the IRS. As noted in the report, the law requires the IRS to pay awards if the information provided “substantially contributes to the collection of tax, penalties, interest, and other amounts when the amounts in dispute are more than $2,000,000.” The award ranges are based on “percentages of the collected proceeds.” The law is designed to encourage people “with knowledge of significant tax noncompliance to provide that information to the IRS.” According to the report, the IRS “continues to receive submissions from whistleblowers, many of whom claim to have inside knowledge of the transactions they are reporting. They often provide extensive documentation to support their claims.”

Moving at Warp Speed, New York’s Attorney General Lands a Significant Tax Whistleblower Win

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New York Attorney General Eric Schneiderman announced on March 14, 2014, the successful conclusion of a tax whistleblower case brought under the historic 2010 amendments to the State False Claims Act. Those amendments authorized whistleblowers to earn huge rewards by bringing cases on behalf of the state against those who have engaged in significant violations of the tax law. We have written previously about the 2010 amendments and other New York tax whistleblower developments including the attorney general’s major whistleblower suit against Sprint/Nextel.

In this newly announced case, the attorney general’s press release disclosed that a “tax services provider” became aware of the tax violations and blew the whistle on a medical imaging company, Lantheus Medical Imaging, and its parent company, Bristol-Myers Squibb, for failing to pay more than $2.2 million in New York State franchise taxes, New York City corporation taxes, and MTA surcharges for the period 2002 to 2006.

Because the False Claims Act empowers the state to recover treble damages, the suit was settled with the payment of $6.2 million (which appears to be only a minor compromise by the state), of which $1,137,814 was earmarked for the whistleblower.

The settlement is good news for tax whistleblowers.

Topics: Tax Fraud

JPMorgan Chase to Pay Over $600 Million in Whistleblower Case

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JPMorgan Chase recently agreed to pay over $600 million in its settlement of a case brought by the federal government, including HUD, FHA, and the VA, according to a February 2014 stipulation and order of settlement and dismissal entered by the Southern District of New York. The case, originally brought by a qui tam whistleblower, alleged that JPMorgan Chase Bank, N.A. engaged in misconduct as to mortgage loans with a connection to HUD, FHA, or VA programs. In particular, the government alleged that JPMorgan Chase Bank approved improper loans, submitted false certifications, entered information into its automated system that lacked integrity, and approved ineligible loans, and, as a result of these items, the government paid claims related to defaulted loans. Among other things, the settlement requires defendants to pay the government $614 million. Defendants obtained a False Claims Act release in the settlement agreement, and the agreement recognized that a relator’s share of the government’s recovery would be forthcoming.

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Hodgson Russ is one of only a few major law firms that represents both whistleblowers and companies accused by whistleblowers of wrongdoing. This unusual perspective means we are exceptionally well positioned to advise whistleblowers about potential claims.

We are not a "whistleblower mill" that pays little attention to the needs of its clients or the factual nuances of complex cases. Rather, we are a team of highly experienced lawyers that selects only the best cases, affording us the time and focus to become fully immersed in the factual and legal details necessary to bring cases to successful resolution.