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The Whistleblower Blog

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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.

Showing 10 posts from 2010.

Whistleblowers’ Proceeds Taxable as Income

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Two recent court decisions and a 2004 statute affirm that False Claims Act whistleblowers have to pay income taxes on their relator’s share of any recovery―at ordinary income rates. Because the taxation questions that arise from whistleblower’s rewards can be significant, as shown below, it remains wise for any successful relator to seek proper and current tax advice.

New Bounties for Whistleblowers

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The recent regulatory reform package known as the Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes the Securities and Exchange Commission to pay bounties to whistleblowers whose information results in a monetary recovery. In cases involving valuable information concerning securities fraud, the whistleblower payment can be as high as 30 percent of the total recovery. There is good reason to believe that these bounty provisions will extend to cases involving violations of the Foreign Corrupt Practices Act of 1977 (FCPA), which broadly prohibits the payment of bribes to foreign officials for the purpose of obtaining government contracts; securities fraud occurs because the bribes are seldom, if ever, properly accounted for on a company’s books. Recent FCPA cases have resulted in recoveries in the tens of millions of dollars.

Amendments to False Claims Act May Affect “Original Source” Issues

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The False Claims Act amendments found in the Fraud Recovery Enforcement Act of 2009 appear to broaden the “original source” rules by eliminating the requirement that a person must have “direct” knowledge of information underlying False Claims Act allegations.

Major Changes to New York State False Claims Act

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On August 13, 2010, New York State Governor Paterson signed into law Assembly Bill 11568, which includes major changes to New York’s False Claims Act, enacted in 2007. According to legislators, the bill was passed to address several issues that have arisen in the courts since its enactment. It is also designed to assure that the New York law continues to keep pace with federal law. One of the biggest changes, a divergence from the federal False Claims Act, is a provision that allows qui tam plaintiffs to bring actions for tax fraud, but only when the net income or sales of the defendant total $1 million or more and the damages pleaded in the action exceed $350,000. It also strengthens the protections for whistleblowers, both private individuals and government employees, who uncover information concerning the misuse of government funds. These amendments took effect immediately and apply to all false claims, records, and statements made or used prior to, on, or after the April 1, 2007, effective date of the New York False Claims Act.

Topics: Tax Fraud

Medical Industry Whistleblower Settlements Increase

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False Claims Act settlements are increasing dramatically in the medical industry, and many of the growing number of settlements are being paid by an unlikely target: hospitals. Over the past few months, Brookhaven Memorial Hospital Medical Center, in Long Island; Mercy Hospital, in Springfield, Massachusetts; and Southern New Hampshire Medical Center, in Nashua, New Hampshire, all resolved False Claims Act cases with considerable settlements. Most of the whistleblower claims were based on allegations of improper charges to obtain Medicare and Medicaid reimbursement. Read more here.

Whistleblower Provisions in the Wall Street Reform Act

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Commentators are talking about the somewhat under-the-radar whistleblower provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, recently signed into law by President Obama. This massive law is a sweeping overhaul of the financial system, and it includes a number of provisions expanding opportunities and increasing protections for whistleblowers. The National Whistleblower Center has compiled the sections of the act pertaining to whistleblowers and has posted it here.

Parallel Prosecutions: Good or Bad in a Whistleblower Case?

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A common scenario: a whistleblower files a solid False Claims Act complaint with an ample disclosure. The government takes the disclosure and complaint, does some preliminary investigation, and opens a criminal file and grand jury investigation. The civil False Claims Act goes dormant and the Federal Rule of Criminal Procedure 6(e) prohibits the U.S. attorney from discussing any grand jury evidence with the whistleblower or whistleblower’s counsel. De facto, the government has taken over the case. That can only be good. Simply, if there is a criminal conviction by plea or after trial, and the factual basis for the conviction is the same as that alleged in the complaint, the case is a winner. And if there is a plea, global settlements are the rule rather than the exception. So the relator gets paid at the same time the criminal plea is entered.

Our Whistleblower Suit Against DHL Continues

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A recent decision by State Supreme Court Justice John M. Curran allows a New York State False Claims Act lawsuit brought by Kevin Grupp and Robert Moll, the owners of MVP Delivery and Logistics, to proceed. MVP Delivery is an independent trucking company that was subcontracted by DHL. Grupp and Moll are represented by the whistleblower attorneys at Hodgson Russ.

Increased Whistleblower Lawsuits Based on “False Marking” Theory of Liability

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The National Law Journal recently published an article about the increase in whistleblower lawsuits that are based on a “false marking” theory of liability in the wake of the recent appellate court decision in The Forest Group Inc. v. Bon Tool Co. The “false marking” theory of liability encompasses labeling products or packaging with an expired patent or one that doesn’t cover the product’s technology. This decision is bad news for companies with patents.

The False Claims Act

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The False Claims Act, first passed by congress at the time of the Civil War in response to government fraud in the purchase of war supplies, really hasn’t changed much over the years. While the False Claims Act is now directed toward substantive areas like health care, pharmaceuticals, and sophisticated government transportation contracts, the claims are no different than back when. Simply, unscrupulous persons and entities attempt to defraud the government (and the taxpayers) by selling inferior goods, by charging more than what has been agreed to by the government, and by providing goods or services that are not as represented in agreements with the government. The dramatic increase in government programs (Medicare, Medicaid, HUD, HHS) has resulted in a commensurate number of ways for the government to be defrauded within the scope of the False Claims Act. So while the modern claims under the act involve things like off-label sales of prescription pharmaceuticals, overcharges under the Medicare program, and phony claims for the transportation of military parts, that is the only difference from those that sold inferior gun powder, blended blankets instead of wool, and mules instead of horses to the Union army and the government.

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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.