this call over the joint legislative hearing on h r forty eight fifty four the false claims act correction act of two thousand and seven congress's great success stories as a fraud by defense contractors contractors ran rampant during the civil war president lincoln implored congress to pass legislation that would recruit citizen soldiers to help uncover schemes that were harming the war effort my recollection was that the union army was buying barrels filled with what they thought were ammunition and when they open the barrels they were  but in response to that congress passed the false claims act of eight hundred sixty three the act created incentives for private individuals referred to sometimes as related to report false claims and fraudulent activity it also allows private parties to sue on behalf of the united states to recover money lost due for odd if the government investigates and finds merits to a relator is allegations it may join the action taken to a lawsuit bringing to bear the government's resources the false claims act has been hugely successful since its passage though not without some bumps along the road amendments made to the act in the  gutted key parts of the law making it virtually toothless after four decades of relative dormancy in which the law was barely used senator charles grassley and i worked together to pass amendments that restored incentives for whistleblowers and clarified that the law was intended to reach all types of fraud on the government regardless of the form of the transaction the one thousand nine hundred six amendments provided a host of new tools for the government and private citizens to utilize in order to make the law an effective tool against fraud once more since these changes were made the false claims act has recovered over twenty billion dollars of taxpayer money that otherwise would have been lost to fraud government funds spent on the pursuit of the false claims act cases have proven to be money well spent a recent study found that for every one dollar invested and health care related false claims act enforcement the federal government receives fifteen dollars in return i suspect that this is still a gross underestimate because though it is impossible to measure the money saved to the deterrence as a result of this law is almost  assuredly much greater if construed to congress's original intent the false claims act could be bringing in many billions of additional dollars in recoveries from those who have cheated at the expense of the taxpayer unfortunately over the last several years a series of judicial decisions have severely weakened key provisions of the false claims act and narrowed its application these courts have misconstrued our intent even in even in clear language in law in legislative history and a manner that leaves in tired categories of fraud outside the reach of the law for example courts have thrown out cases in which the government is administered government programs and expended its funds through contractors and other agents as opposed to direct expenditure many courts have barred suits by whistleblowers who are insiders with key details of rajon schemes because while they know the key details they can't plant plea specific details of the billing documentation such as the dates and identification numbers of invoices information ordinarily sought and obtained in discovery finally do the procedure requirements and overs and over sight in our original drafting the department of justice has not employed the civil investigative demand authority as hoped the amendments proposed in this legislation will remove these debilitating qualifications and clarify that the act is intended to reach all types of fraud without qualification leading to government losses the bill would apply these amendments to all future cases as well as all cases that are pending in the courts on the date the amendments become law the most critical provisions of the legislation will clarify the diac covers fraud on government programs even when the government uses agents or other third parties to administer a program or contract for example when a third party administers a program like medicare part d foss claims against funds in that program are covered even though the claims may not be presented to a fiscal government employee but rather the intermediary the will clarify that the government's new or amended complaint in a key tam action relates back to the original t tam complaint to the same extent it would relate back of the government in filed their original complaint this would ensure that when a cases filed near the end of the statute of limitations the government still can conduct a thorough evaluation whether or not to join a related case and when they joined they joined as though they filed with the relator on the first day of the case we also clarify the plaintiffs do not need to have access to individual claims data or documents to brings over bring a false claims act case as i noted earlier in many cases judges have required related to provide things such as alleged false invoices or phon billing documents in for mange in that is available only to a handful employees in the company's billing department and generally out of reach of most whistleblowers until religious governing process the bill would also amend the act to return the public disclosure bar to its original intent a shield for the government not a jurisdictional shield for defendants the public disclosure bar is meant to keep the government from losing a share of all false claims act recovery to a parasitic claim filed by or later only with information that was available to the public in other words designed to stop the parasitic lawsuit not to provide a basis for the defendant to escape without responsibility for the fraud that he or she is committed we would also amending clarify the act and know how the acts chief investigative tool the civil investigative demand may be used to investigate violations of the act and finally the bill clarifies how the act applies to federal employees who discover fraud during the course of their employment by providing the government authority to move to dismiss the action of eneral of any federal employee who brings  having provided the government fair notice an opportunity to pursue such wrongdoing through its own false claims action or other appropriate remedy i have heard concerns about this provision allowing government employees to quote enrich themselves by just doing their jobs that's not what this provision does this provision is a safeguard backstop if you will for situations in which a government employee identifies fraud tries to get his supervisor the inspector general of his agency or even the attorney general to act on it and his concerns are ignored only then after meeting those standards may you file a suit on his own and even then the government may move to dismiss it when senator grassley and i worked on the one hundred eighty six amendments we were joined by legislators on both sides of the aisle the two decades have not since have not changed much the bill we're considering today was introduced with my friend and colleague the gentleman from wisconsin and the former chairman of the judiciary committee and the judiciary committee in the other body has reported similar legislation introduced by senators grassley leahy durbin inspector these coalition illustrate that the fight against fraud is neither a partisan nor a political issue it is about protecting taxpayer funds judiciously and protecting an approach to doing so that has proven very successful i look forward to hearing the testimony of the witnesses apologize for the length of this opening statement but i did want to at least run to the key procedural changes in this bill and i recognize the ranking member mr coble for his opening statement  citizens were were rewarded the rationale behind this arrangement was that the crown could not police every attempt to defraud it of money compensation paid to was still blowers was more than offset by recovered r for more than two hundred years of american jurisprudence but the quite taboo concept remains a prominent feature of the false claims act written in eighteen sixty three the f c a is still used to prosecute the wrote the house bill and he's the author of the legislation that is subject of our hearing this morning none of us is indifferent to the theft of public resources food stamps defense medicare medicaid education and more no area of federal spending is it mean to that we must be vigilant and we must give the department of justice the resources it needs to combat for all but there's always a flip side to every legislative coing well intentioned critics of h r forty eight fifty four four and a bill pending in the other body believe that we may be overreaching these critics argue that the government not the whistleblowers is large but opponents of these actions say these organizations do business and above board manner they are guilty of committing paperwork mistakes it is alleged that they simply lacked the resources to defend themselves against questionable quite actions resulting in four settlements and conclusion when i approached today's hearing would open criminals or default the fraud of the federal government was greater frequency and the chairman we are here today to hear testimony from several witnesses on h r forty eight fifty four the false claims act corrections act of two thousand and seven this legislation introduced by chairman berman and representative sensenbrenner would amend the false claims act which was in response to complaints about fraud and corruption against the united states government during the civil war the central purpose of the false claims act has been to private citizens in combating fraud against the united states the provision provides a clear process to assist and encourage private citizens not only to report fraud against the united states but also to participate in investigating and prosecuting those who steal from the federal government since nine hundred eighty six filings under the false claims act have led to recovery for the united states government of over twenty billion dollars in taxpayer funds such a success should be commended however over the course of the act history court decisions have led to conflicting interpretations that have limited the reach of the act discouraged keep tam relator as from filing suits under the act and left billions of dollars vulnerable to fraud the various interpretations in fact were noted earlier this year when an arkansas federal court invited congress to take legislative action to clarify the false claims act stating quote the court sympathizes with anyone litigating under the false claims act perhaps congress will elect at some point to give legislative attention to the f resolve some of the still unresolved questions about the access application h r forty eight fifty four is a legislative response to the court's plea for clarification of many issues and resolves the splits among the federal circuits the bill provides that false claims act liability protects all federal funds among other things the legislation defines what are recoverable damages and strengthens anti retaliation protection finally h r forty eight fifty four establishes a statute of limitations period and revitalizes the government's investigative powers under the act at a time when billions of american taxpayer dollars are being poured into the hands of contractors in iraq this legislation is particularly timely often fraud cannot be discovered unless a whistleblower comes forward and this bill make sure that whistleblowers have better tools to hold fraudulent individuals and companies accountable accordingly i think chairman berman and representative sensenbrenner for their leadership on this issue and i look forward to hearing the thank you mr chairman false claims actions have a distinguished legal pedigree they evolved in england during the thirteenth century as a way to help the crown prosecute fraud perpetrated against the government like it's modern day american equivalent these actions of old empowered an ordinary citizen to sue a transgressor on behalf of the government and himself if a transgressor was penalize for his misconduct that whistleblowing citizen kept a portion of the fine during the civil war many companies supplying the union army with goods and services indulged in fraudulent conduct this compelled congress to create the first false claims act in eight hundred sixty three defense fraud motivated congress to revisit the false claims act again in one thousand nine hundred eighty six amendments adopted that year encourage greater use of the law since then the government has recovered more than twenty billion dollars under the act the bill before us h r forty eight fifty four represents the largest potential change to the act in more than twenty years it eliminates the requirement that a false claim be presented directly to a member of the government it revises the ban against retaliatory measures by including material or hindering of a complaint and in obtaining new employment and it expands the act statute of limitations from six years to ten years well why should we amend the false claims act once more while the statute applies to a broad spectrum of industry fraud  housing defense and food stamp programs many proponents argue that health care fraud has become a major problem most recently the washington post reported that health care fraud cost americans sixty billion dollars annually are stories such as these a reflection of a trend or are they anecdotal that's one of the main issues we need to explore today are fraudulent claims on the rise if so are the provisions of h r forty eight fifty four necessary to combat this upsurge in commercial crime some critics of the house and senate bills believe the legislation constitutes an overreaction they maintain the government is better suited to policing misconduct in bringing transgressors to dust this to these critics the false claims act is counterproductive and has devolved into a lottery for plaintiff's attorneys who can't resist the lure of a big payoff if the department of justice intervenes in only twenty percent of false claims cases as the wall street journal points out doesn't that suggest the other eighty percent might be meritless and why since one thousand nine hundred eighty six had these cases in which the government did not participate generated less than two percent of all recoveries under the act other detractors argue that the majority of defendants and false claims cases do not fit the stereotype of a venal corporation rather they are small businesses local governments and nonprofit institutions strapped for legal resources they settle questionable cases rather than risk bankruptcy so many many individuals who do business with the government believe that advocates of the false claims act confused fraud with honest mistakes for example if a contractor checks a box attesting to us from il yearly with the rules and regulations of the medicare program which reportedly exceed one hundred thousand pages but subsequently fails to comply with one of these rules has he really really committed fraud  i support whistleblower laws that help the government uncover fraud if there isn't a module need to pass h r forty eight fifty four we should support it but we should not support legislation that does little to combat fraud while placing additional burdens on the backs of businesses local governments and nonprofit institutions these are the issues that i think this committee and other committee should explore with that mr chairman i yield back the balance of my time thank the gentleman and though i'm pleased me of my professors when university who does you do because you cover everything in such detail that there's nothing left for me to well i'll save those descriptions for some other parts of your opening statement but i was i did take a latin course that if it didn't do anything else it help me pronounce words that began with q in latin but what i'm impressed with and this is an important hearing because we're really talking about whistleblowers and of course when we get disturbed about  cheating the government everybody the focus becomes some poor little bloke out somewhere that is getting unemployment compensation  for a few weeks more than he was eligible or something like that but this is the beginning of a subject that goes into a f deeper and more important dimension of being the government being treated fairly which is really all of us being treated fairly as citizens and taxpayers so today we're looking at the big guys and i've got another area that we'll be talking with the department of justice about when the attorney general comes next month and one of the one of the issues are these deferred prosecution practices in which we have lists of of huge settlements that are being arrived to avoid prosecution and there's a lot to learn from this and by the by the way i say to my good friend the ranking member of the full committee lamar guess who some of the biggest violators are there are people in the health care industry the pharmaceuticals tenet nine hundred million h c a seven h thirty million serrano five hundred sixty seven million t a p pharmaceuticals five hundred fifty nine million sharing pull out abbott labs friends and for all of us were worried about the health care problem and these are the greatest between oil  and the pharmaceuticals that's where most of the the huge the largest profit taking in this capitalist system of ours is taking place and are the biggest violators and so this raises some very interesting questions and close with the i r s we're not collecting from the big people  anymore i mean they're there reviews of their returns all the time their taxes across the last two decades and so if i phones slightly disturbed about it today is mr albert campbell who is with us from winter springs florida from one thousand nine hundred seventy three to nine hundred seventy six mr campbell served as a group chief on c h forty seven chinook helicopters as part of the one hundred first airborne division here and a bachelor of science and business administration from austin pay austin peay and that is an even land in clarksville tennessee in hundred seventy eight mr campbell began a twenty one year career in the defense industry as a financial analyst for the honeywell corporation working on programs that produced cryptic communications equipment in hundred eighty one mr campbell started work as a financial analyst for the martin marietta corporation which later became lockheed martin their research as a senior analyst for the patriot missile launcher programs supervisor of cost control for the apache helicopter t a d s p v n as program and cost of chief of cost control for the lantern program the latter of which was a subject of false claims act action filed in one thousand nine hundred five mr campbell now serves on the board of directors of taxpayers against fraud and runs a family real estate business with us wife kimberly in central florida shelley slade is a partner at vogel slade and goldstein in washington d c where she maintains a nationwide practice representing key tam plaintiffs under the false claims act she earned her undergraduate degrees at princeton university her j d from stanford from one thousand nine hundred in one thousand nine hundred seven mislaid investigated in litigated fraud matters in the civil fraud section of the commercial litigation branch of the justice department the office which handles the most significant and large scale balls claims act cases in the country as a trial lawyer in the attorney in the commercial litigation branch mislaid specialized in matters involving fraud on the u s department of defense and fraud involving state and foreign government entities prior to entering private practice in two thousand and mislaid was a senior counsel for the health care fraud in the civil division at d o j where she coordinated the health care fraud it enforcement efforts handled related policy and legislative matters and instructed department of justice attorneys and investigators on the investigation and prosecution of claims act matters she speaks regularly at key legal conferences on the vols claims act published published a number of articles on the area peter hut is that partner is a can go straus our infeld in washington d c he advises clients  of a broad range of federal government contract issues and is litigated more than a dozen false claims act cases including many key damages is us a litigator cases in federal courts ranging from securities fraud to constitutional issues and is conducted this internal investigations mr hart is a former chair of their procurement fraud committee of the a b a section of public contract law and he writes frequently on the false claims act for the northern district of california james helmer jr is a senior partner and president of elmer martin's rice and popping in cincinnati approximately half of his practice involves the representation of employees blowing the whistle on fraudulent government contractors and has been trial counsel and over two hundred published legal decisions most recently mr helmer was the leader elaters counsel and allison engine company versus united states and argued the case for the plaintive at the six circuit and that the supreme court mr helmer testified before this committee over twenty years ago the last time we were considering amendments to the false claims act and i'm pleased to see him back  text false claims act whistleblower litigation mr helmer and his undergraduate degree from denison university law degree from university of cincinnati college of law where he was editor in chief of the cincinnati law review he began his legal career as a law clerk for the chief judge of the united states district court for the southern district of ohio we appreciate all of you being here today your entire written statements will be made part of the record i ask each of you to summarize your testimony in five minutes less and to help stay within that time frame there's a light in front of you when one minute remains on your time the light will switch from green to yellow and then red when the five minutes are up we're glad to have you here and look forward to hearing your testimony mr campbell why don't you begin good morning mr chairman and good morning to the other members of this committee my name is al campbell and as you know i am i was a gore now matt task is to help you understand what it's like to be a whistleblower on the followers claims act and i'm supposed to do it in less than five minutes my previous attempts to do this have taken me about an hour so here we go i felt that i would you i was speaking metaphorically to you and that it might help you understand what it is a whistleblower uses the false claims act not as a source what a whistleblower uses as a sort is his or her truth what they use as a shield is their conviction of what they believe what we use the false claims act for is is as a code of armor and the way that coat of arms is constructed is the congress of the united states instead of the united states passed a false claims act and that false claims act was to protect us if we step forward and if we thought it was the right thing and as your body has pointed out going all right back to the civil war we have been encouraged to do it now if you encourage someone to go out in the battle and you promise to provide them with the armor they need to be protected shouldn't that armor be ask employee and as defensive as it possibly can if you have a slew of armor and you know there was a change in it would you suit me up and puts himself or herself out on the line initially related to not have deep pockets related for the most part on not lawyers but related or in the engaged in a battle with companies rather their s b a's or rather the multinational multibillion dollar corporations they have lawyers and they have funds the department of justice has funds the related only has the truth that he or she believes when i was going through my litigation with the defense contractor the first thing the defense contractor did was attack my character because that's normally the first things that they do the second thing the defense contractor does is seek to prove that if there was any wrongdoing done asked somehow was the person who did it so our character is continually under attack i was one of those we later who ended up having to use the anti retaliation clause of a false claim because i was retaliated against not by the contractor that i found a lawsuit against i was retaliated by a subsequent contractor because of the fact that that provision the way it was interpreted by the federal courts in our district it say that any any sub contractor or any contractor who did anything to a tallit against me was subject to the law now if it had been ruled a different way that contractor would have gotten away with having violated the intent of the law by using a loophole those loopholes that exist in the false claims act chinks and holes in the armor that you give the whistleblower to fight the battles for you the fight the battles for the people  states the fight the battle for themselves and it is not about windfall lotteries it is about a fight it is about a fight to make sure that the right thing is done regardless of how you question whistleblower's motives are his or her beliefs at the end of the day what we're trying to do is make sure that if there was inside a violation that the violation is corrected not that the violation sailed through a loophole not that  hold his life and his family's life and has written his risk his reputation to do what he thinks is right and what he believes in that's not the ultimate goal the ultimate goal is to correct what is wrong so if we close the loopholes if we fix the armor the relator will be much better served through this process if you don't fix the holes in it you will not only lose a related to step forward and get shot down you will lose those other people who considered becoming a relator but said i'm not going to step into that with armor that has those kinds of holes in it so all i ask you to do is consider the whistleblower consider closing the loopholes so that the whistleblowers can do chairwoman and members of the subcommittee thank you for inviting me to testify on h r forty eight fifty four the fos claims correction act of two thousand and seven i have handled false claims that cases on behalf of the key template as in the united states for eighteen years eight years with  private firm and ten years with the department of justice in washington d c to keep ambar wholeheartedly supports h r forty eight fifty four the bill's proposed corrections are badly needed to ensure that the law remains fully effective in an era  which so many government functions have been outsourced to government contractors and grantees according to two thousand and eight testimony by the u s comptroller general the government is relying on contractors to fill roles previously held by from employees and to perform many functions that closely support inherently governmental functions such as contracting support intelligence analysis program management and engineering and technical support for program offices handful of large companies are now effectively serving as a shadow government that awards and oversees contracts this vs federal funds and attempts to detect fraud in government contracting we must do all we can to make sure that the false claims act covers false claims submitted to the shadow governments of government contractors as we all know the key to an provisions in the false claims act as amended in one thousand nine hundred six have been a resoundingly success returning over twenty billion dollars to the treasury since eighty six this law is one of the most brilliant on the books and key time plaintiffs are key to a success in most cases only an informant from the inside will produce a smoking gun that conclusively establishes liability moreover time and time again it has been the relentless delos pursuit ham litigation by key time plaintiffs and their counsel that has played a major role in the large f d a recoveries that we read about in the papers i will provide you this morning with just one example although i would be happy to after a three year investigation that apartment justice declined to intervene in this case convinced of the fraud the relator is in their counsel litigate the case for nine years on their own finally in two thousand and two twelve years after the original case was filed the former northrop grumman employees were able to convince the us of the merits of the case and the d o j then did intervene in two thousand and six the case finally settled for one hundred thirty four million dollars there's no i'd like to emphasize a very important point here this case i just described to you in which a key time or later is litigated on their own going to their own resources for nine years this is in the d o j statistics as an intervened case the d o j did intervene in this case a couple years prior to settlement there are many many other cases like that in that category called intervene cases so you need to examine closely within those stats and upon request i could submit a paper with many such examples where the fact of the act is worked in many ways as planned does not mean that we should sit on our laurels however there are deficiencies in the current operation the law many created by judicial misinterpretations of the statute and others created by the unintended consequences of certain of the provisions in the act here are four examples of how h r forty fifty four fixes these problems number one for the first time the act would impose liability on health care providers who identify over payments they have received through their mistaken billings and then make the deliberate decision to avoid reporting the overpayment so as to fraudulent secure the overpayment for their own use under medicare's rules providers are liable to repay such over payments that they've identified moreover the non disclosure runs afoul of a criminal statute there should be a civil rot fraud grama the here too in my judgment this provision should generate hundreds of millions of dollars if not more in additional recoveries for the u s government each year in the mid one nine hundred ninety s h h s inspector general june gets brown looked into the level of overpayments in the medicare program and concluded that twenty three point two billion dollars or fourteen percent of total program costs were lost each year due to fraud waste and abuse this number and data leaves only grown larger with the aging of our population the increased cost of health care and the addition of medicare d the new pharmaceutical benefit for seniors second h r forty eight fifty four clarifies that the act imposes liability on those who submit false claims to government contractors and grantees to get government money under the allison engine supreme court decision that came down just last week and under a two thousand and five decision by the d c court of appeals the act is being interpreted to cover only those situations in which false claims are submitted to an employee or official of the u s this change in the bill which focuses on the nature of the funding rather than the entity paying the claim is fully consistent with the original intent behind the eighty six amendments and reflect of the of the fact that our government has outsourced even the contradiction contracting function to private companies and importantly this change would not get rid of the nexus between the federal interest and the claim for one thing there were only be recovery permitted when the damages were damages to the united states and secondly the funds would have to be ones that were being held by the contractor a grantee to be spent on behalf of the government or for a government program third as has been rather referenced by some of the congressman the bill makes clear that a key time plaintiff can proceed with his case even if he can't get his hands on the actual invoices submitted to the government in a large business information is the engineer who sees his boss is intentionally taking shortcuts the resultant effect of military products won't have access the billing department files converse lee the billing department pleaser and what are unlikely to know that the engineers are submitting false information to the bill or that the work that they have performed unless we fix this problem that the courts are creating will find that key time plaintiff will not be able to bring cases against large businesses with compartmentalise functions for the bill takes out of the defendants had the ability to move to dismiss key time cases on the ground that they are based on a public disclosure the public disclosure bar is designed to protect the government from copycat pleadings by key time plaintiffs it is not designed to protect any interests of the defendants it is a government that should properly assess whether the plaintiff pleading is parasitic of a matter in the public domain yet the defendants these days are filing motions to dismiss under this provision time and time again to delay adjudication the merits and wear down their opposition in many of the cases in which defendants make these motions there is no active government investigation that had been generated by the arguable public disclosure if there had been the government would have been concerned enough to thank you and mr hutt chairman berman chairwoman sanchez and members of the committee i thank you for inviting me to testify here today i'm here on behalf of the united states chamber of commerce and the u s chamber institute for legal reform in opposition to h r forty eight fifty four for twenty years i have analyzed and written on the false claims act it squeaked and provisions i've also defended individuals and companies both small and large and other entities that were sued by quita employing tips under the statute the chamber let there be no doubt fully supports the department of justice and its ongoing efforts to root out and eliminate instances of fraud against the federal fisc the chamber recognizes that the false claims act has provided the government with an effective tool to combat fraud against the federal treasury the twenty billion dollars that has been returned to the federal treasury over the last two decades is a testament to the reach of the statute and the hundreds of qui cham actions that are filed each year show that the statute already provides sufficient incentives for whistleblowers to come forward accordingly the chamber strongly believes that no amendment to the statute is necessary or desirable the current proposed amendments would not assist the department of justice  efforts to protect the federal treasury rather they would encourage cui template of to file baseless and derivative actions that are not in the interests of the united states government or its taxpayers at the outset i would like to dispel any misconception that the supreme court's recent decision in the allison engine case has weakened the statute or compels any legislative change to the contrary that decision illustrates precisely why no amendments to the current legislation are needed the supreme court reversed the totten decision that the bill before you today was in part designed to reverse the supreme court unanimously agreed with the department of justice that a false statement of record is actionable even if no claim is directly presented to the united states there is no need therefore for the provisions in the current bill that would eliminate presentment as a requirement under the statute moreover the allison engine decision left untouched sections a one and a three of the statute and impose only modest if any limitations on the liability provisions of section eight two more broadly the allison engine case exemplifies that the current legislative undertaking is unnecessary it is far better we urge to let the courts continue to apply and interpret the current statute which has worked so well i will now briefly touch on some of the more objectionable features of h r forty eight fifty four first the bill contains expansive new definitions of government money or property and administrative beneficiary that would expand the liability provisions of the statute to situations that are currently covered by state contract laws and tort laws the unanimous supreme court in the allison engine case concluded that expanding the false claims to encompass all claims submitted to private entities where the claimant never intended to seek government funds would threaten to transform the false claims act into an all purpose anti fraud statute second h r forty eight fifty four would destroy the logical structure of the public disclosure provision of the current law since one thousand nine hundred six the act has effectively encouraged true whistleblowers to come forward but deputized to defendants to seek dismissal where the action was based on publicly disclosed information by stripping defendants of the ability to raise this defense parasitic lawsuits that bring no new or useful information to the government will routinely go forward third the proposed legislation would unfairly exempt quita employee types but not the department of justice from the requirements of federal rule of civil procedure nine be that all persons asserting fraud actions in federal court must plead the elements of fraud with particularly  sensible purpose of rule nine b is to prevent abusive plaintiffs from using conclusory allegations of fraud to embroil defendants in litigation and to give defendants sufficient information to prepare their defense there is no basis whatsoever for holding  lower standard than all of the litigants in federal court and certainly no basis for holding them to a lower standard than the department of justice in false claims that cases forth the bill would encourage government employees to file lawsuits based on information they learn on the job the chamber agrees with the department of justice that this represents a terrible policy that would lead to conflicts of interest within the government workforce and would greatly undermine public trust in the integrity and the impartiality of government personnel finally the package of amendments in h r forty eight fifty four if enacted would disproportionately fall on non profits educational institutions hospitals and small businesses the legislation would encourage a spate of unfounded and parasitic lawsuits without the gate keeping device of rule ninety and without the defense of the existing public disclosure bar these nonprofits universities and small businesses will bear the enormous costs of living ating case is that the department of justice has declined to prosecute the cost of doing business with the government and participating in vital federal programs will go up the government will lose the benefit of working with some of its most valuable partners or will pay more for their services in some of the chambers submit said it is only the plea time plaintiffs and their attorneys who will benefit from the amendments proposed today the government the american taxpayer and nonprofits universities hospitals and small businesses will all be the losers the department of defense this body also became alarmed and took action as a result of those reports in february of one nine hundred eighty six i testified before this subcommittee  concerning amending the civil war era false claims act because i had the only pending case in the united states at that time which chairman berman's leadership in this house passed the false claims act amendments in one thousand nine hundred eighty six and president reagan signed them into law in october of that year now prior to that prior to nine hundred eighty six the entire department of justice with all of its lawyers and jet airplanes and resources recovered twenty six million dollars for fraud since one nine hundred eighty six and the amendments that were made at that time the average now is close to a billion dollars a year year after year after year false claims act has three thousand words and i thought in one thousand nine hundred six that the concept was simple enough go out and list citizens to assist their government in fighting those who would abuse the public trust and steal tax dollars and at the same time encourage those citizens and protect them but that was a simple enough concept but i've now spent twenty five years litigating under this statute the false claims that i've done that all over the united states i've been involved in cases involving medicare theft violation of the environmental protection laws cheating on federal  and gas leases and on trade duties but i spent most of my time prosecuting this country's major defense contractors and these aren't small businesses these aren't universities these are the largest corporations known to western civilization and what i've learned in those twenty five years of using this statute is sit out in a sixteen hundred page book i wrote now five times been written five times on this subject and what i've learned is that nearly all of those three thousand words in the false claims act have been challenged and are being challenge by those who represent the minority of government contractors who are unscrupulous as a result several courts have lost sight of what this body was intending to accomplish and this magnificent public private partnership the device of using the key ten cases is in my opinion doomed to become the toothless tiger that it was after nine hundred forty four when congress at that time legislated the ability to use cases out of existence every provision of the false claims act corrections act of two thousand and seven h r forty eight fifty four is designed to clarify parts of the false claims act which have been tortured by various judicial decisions over those twenty two years since one nine hundred eighty six the allison engine case which was reverted to i worked on that case for fourteen years the next paycheck i get in that case will be the first one in those fourteen years is not a get rich quick scheme to bring a key tam case against a major defense contractor in that case for major defense contractors you might even end up having your case go to the united states supreme court after fourteen years and while mr hurd is correct that the supreme court determined that presentment no longer exist in two or three although some judges had seen it the was for new elements that you will find nowhere in the one nine hundred eighty six version statute or the eight hundred sixty three version the statute intent materiality reliance and even damages none of those are in the false claims act all of those can be found in this room court's allison engine decision urge your subcommittees just hundred eighty six to give full consideration to passing this bill out of committee and joining with your colleagues in the senate in getting these amendments made so that citizens like camp a real patriot my period can continue to play a vital and necessary role in helping their government to protect the billions and billions of tax dollars that rema your your comments and support for the existing law i don't know if you're aware that twenty twenty two years ago your your client didn't like the bill that was proposed or the law that it just passed and your client felt like it would unfairly drive up the cost of doing business with the federal government and therefore make contracts more expensive that it would disproportionately fall on the backs of of small businesses and non profits and felt that the bill you now so that that the statute as drafted is not perfect but certainly the chamber and i think everyone who litigate under this statute recognizes that over the past twenty years it has provided the department of justice with a very effective tool in enforcing fraud and primarily when it's been used by the department of justice it has been effective tool in bringing recovery's back to the federal treasury but i will say that i do feel strongly that it is very difficult for small businesses and smaller entities not the large defense contractors to defend themselves against allegations of fraud especially ones asserted bike we can point of under the statute which tend in many many circumstances not to have substantial or sometimes any merit and that's really the reason for the continued opposition to any expansion of the false claims act or the reduction of available defenses with the chamber changes a position on this bill if we simply set it at an amendment that said the these amendments don't apply to companies doing less than a certain amount of business a year or way below a certain net worth would that cause the chamber that would be supportive of this legislation i think it would be difficult to craft a new line that could could be workable in the public disclosure issues we want we wanted then and we want now to stop parasitic lawsuits we think that the federal government and the taxpayers that is supposed to be protecting and we in congress don't want to see private parties grabbing a significant part of a recovery  for actions that the federal government was about to move on in any event why should that and that's an important consideration why should that be an issue a defendant raises rather than the department of justice raises rather than the government why should the defendants have this as a jurisdictional shield to dismiss a case where and for the sake of this question assume they had committed the fraud and in fact were appropriately libel why should they get out of their liability when the justice department which has a high interest in making sure that the taxpayers recover all the damages contemplated not to file the motion in other words all this does is give the party who has the real interest in preventing the parasitic lawsuit the power to stop the lawsuit where there's been clear public disclosure of the fraud already and they and the whistleblower is adding nothing to it in that situation  d i'm not sure why we should consider continuing to allow you defendants to have the tool to raise this issue when their goal in raising that issue is to avoid their liability i think that in a nutshell the reason that it makes sense to continue to allow defendants to raise the public disclosure bar is best answered by looking at the overall purpose and structure of the statute as it exists whistleblowers like mr campbell to come forward with allegations of fraud it does that by providing significant financial incentives for them to come forward a share in a potential recovery at the same time from the very outset in  chairman you and others were concerned that there could be the possibility for parasitic actions for the public disclosure bar was put in the statute the way the statute has worked because this was a jurisdictional provision since  hundred six defendants have been able to raise this defense the statute the sensually deputize has defendants to do the department of justice is work for it defendants have the ability and the incentive to determine which of the whistleblowers or qui templated to come forward in fact have true fresh new information of fraud and which ones are merely parasites or echoing information already in the public domain or already known to the government it simply make sense to allow the public disclosure provision of this statute to be policed effectively by defendants who have the tools of discovery and other tools available to them to determine which whistleblowers really are bringing the kind of information forward that the equitably to name defendants what do you say to that i would i would concur wholeheartedly it makes simply no sense to allow anyone to come into federal court and failed to identify in an action sounding in fraud all elements of the fraud with  particularities the goal of ninety is very simple courts of recognize uniformly that the purpose of nine b is really twofold first of all to ensure that litigants coming into federal court making serious out is a sions that sound in fraud have to have the goods they have to have specific information about all elements of the fraud and then second they need to put defendants on notice of these very serious accusations against them let me insert mr helmer into the witness box and let the let's hear from him fraud is disfavored by the courts throughout the country in a common law fraud it's a disfavored tort and as a result of that nine b was constructed to add an additional level or  hurdle that litigants had to get over before they had their ticket to the court room the false claims act is not disfavor in fact this body has spoken very clearly and very eloquently that the false claims act provisions are to be encouraged that citizens like mr campbell and others are to be encouraged to come forward with their information now what's happened is that nine b has been grafted on to the false claims act i don't think it should ever been engrafted there to start with this is a statutory cause of action not a common law cause of action where the elements are set by this body may be that as it may be now having been the landscape the whistleblowers like mr campbell see a portion of the elephant they see where the part for the chinook is not being made pursuant to the regulations and the contract requirements they see that fraud going on but they don't see the claims process that's being made by the contractor to the united states army and that's being done in a billing department mr hutt and his colleagues want that the whistleblower has to have the entire picture of the elephant when he comes into court yes not only know the fraud that occurred but he has to know that claim process and where the claim is and why that claim is false and tie it back to the allegations and what mr campbell mike the statute as would as it would be amended by this bill does not get rid of rule nine b that that is a misperception there is nothing in the statute that says it will not be no longer applies all it says is that the key  plaintiff when he first goes to court in his opening pleading doesn't need the specifics of the billing documentation and i think an important distinction is in your common law fraud case the two parties in the case are the two parties to the transaction who presumably do have access court's i think uniformly the rule nine be applied that weeds out many cases the second principle two of the defendants have to weed out the frivolous cases is the public disclosure provision many cases that are frivolous in fact are based upon public disclosure billion dollars to the federal treasury there's no reason for any additional penalties to be imposed by this light i see the red light black i thank the gentleman the generally from california sure i am going to same and then if there is a frivolous unsubstantiated case that there already is a provision in the in the law as i recall for the defendant to be able to recover its cost attorney's fees and the like yes thank  you mr helmer based on your experience and expertise why do you think the government has increasingly relied on key tam related and their counsel to locate and investigate federal claims allegations and in addition how do you think that th public and private partnership has grown over the last twenty two years if i could give a real life example i was involved in litigation against the seventeen major oil companies in texas who were cheating the them all back we had to move the proceedings into a different facility so that all depends council could in the hearings in the case what happened was the department of justice was very interested in the case and assigned a very top notch  lawyer to it but the size of the case was just so overwhelming that eventually the government allowed the relator council to prosecute most of those oil companies we recovered four hundred thirty two million dollars for the tab on the day that the settlements were reached in the cases were dismissed the united states department of justice intervened in those cases you will not find that four hundred thirty two million dollars listed in the department statistics or a non intervening case because they did intervene at the eleventh hour at the eleventh hour a question of resources to some degree and what i was going to add in that case we hired  additional lawyers we being the private counsel representing the relator is in texas at a cost of in excess of ten million dollars the entire civil fraud division of department justice does not have eighty lawyers  had the resources of the department in prosecuting that case and carrying out the intent of this body and that is one of the things that i think congressman berman and his colleagues back in eighty six were interested in not just people coming forward and bringing information to government but coming forward and putting their neck on the line and helping the government prosecute these cases so that there can be a recovery for the taxpayers and that's exactly what happened the public private partnership is working very well but the bottom line answer to your question is department of justice could use additional resources and until they have those resources they need the later and the key to hammer later bar small as it is to complement their abilities thank you mr campbell i just wanted to thank you for your testimony i had an opportunity read your written testimony and i think that your oral testimony with the metaphor about the armor one point and i want to thank you for your courageousness in coming today to tell your story mr what congress is considering amendments to the false claims act over two decades ago witnesses testified that they didn't blow the whistle on fraud because there was no anti retaliation prote protection so congress included the protection in one hundred eighty six amendments to the act and since then court decisions have weakened that protection h r forty eight fifty four the bill that we're discussing today would seemingly restore that protection that the courts have undermined in their decisions i'd like to for you to perhaps explain briefly why in your written testimony you suggest that this legislation would unnecessarily and confusing expand the anti retaliation provisions i would think and i would hope you would think and hope that we would want to protect employees like mr campbell future employees and others from retaliation for basically blowing the whistle on  fraud certainly i don't think anyone would take the position that in favor of retaliation against someone who's trying to blow the whistle on fraud and certainly i would not take that position our position is simply that the proposed changes are largely unnecessary i would respectfully disagree with the characterization that the courts have somehow cut back on protections which are available under the anti retaliation provision in my experience many qui template of use the assert claims under the thirty seven thirty eight provision are successful in doing so i view that provision as having worked quite well right now the way that provision has been crafted is understood the courts have addressed that provision the rules of the road if you will are fairly well understood a large part of the concerns that we have with the current provision is that is confusingly drafted it seems to have new terms which are unclear such as making an effort to stop a violation of the false claims act the kind of language embedded in forty eight fifty four we e unclear and will lead to a great deal of litigation over the years as the courts have to work through what the language might mean but the time agility has expired the gentleman from florida mr feeney for five minutes well thank you chairman i was here when the original act was passed so this has been a good education about the nuances of this important area of the law i think that even mr hutt whose organization apparently opposed the original legislation agrees that when there is general intentional wrongdoers who defraud taxpayers there ought to be a way to protect those people and like mr campbell's testimony points out that there's a lot of pressure not to come forward in normal circumstances you've got colleagues who are going to be mad at you co workers not to mention your bosses or the wrongdoers but and then there's always the concern about loss of job and so retaliation on the other hand it's important to find a way to balance those interests the taxpayers have with the higher costs associated with total risk avoidance and so not to mention lawsuits or frivolous claims which are a huge burden in the american economy one of the reasons that increasingly international companies are even american companies are moving offshore because of the civil litigator litigation abuse here so finding some balance i think is what all of us want to do to one extent or another all of the witnesses have  talked about some positive experiences with the with the act we do we want to create a shield and an incentive for people to come forward without giving a sword and sort of a lottery mentality that there's nothing to lose and so some of my some of my concerns are maybe just because i don't understand off of it mister mr what you talked about the nine be problem to me right now to get the most cases whether they're common law or in this case statutory i suppose we could do away with virtually anything as long as it wasn't unconstitutional in terms of a defense but one of the typical claims that a defendant has is that you have to state a full cause of action you have to plead your entire case and i guess my in my initial question is supposing that i'm aware i'm an employee and i'm aware that a contractor i work for is guilty of a specific case or incidents fraud in a contract but supposing during the discovery period or if the government intervenes during their discovery that it becomes apparent that it's not just the widgets we produce but it's the paper clips and it's whatever else we sell to the government and this is routine my potential share of the proceeds for bringing this initial claim i just subject to the fact that i knew about the widget problem but not about a dozen other problems or my eligible to share in the benefits that the tax payer receives from everything that is discovered as a consequence of my bringing the case  forward i would answer that question this way it seems to me that the statute is seeking to reward individuals who come for less concrete knowledge particularize knowledge of fraud that's the benefit to the united states taxpayer that's rewarded genetically can't provisions for relate or comes forward with specific instances of fraud and only those instances let's call it x then the relator should be rewarded only for a share of the x that he brings forward if the united states government and using its own resources uncovers additional fraud why let's say discover that it's not just x but it's a b and c and can we amend our complaint complaints can always be amended yes and you know quite template if they if they bring a case are permitted i think fairly routinely to amend compliance but there's a real question the ways as to whether it's appropriate to allow recovery for something the relator has not brought forward but but if i met my complaint they may disagree that if i met my complaint because of something i've discovered to add  add specifics that i would be eligible in the slate i believe that under the current law many courts would rule that no you would not be able well because of the public disclosure that generated your new knowledge many courts would rule that way at the current time i would just posit are fairly close to what i believe happened in the stone case where relator came forward with information as to fraud he was wrong the department of justice then investigated and found out the real fraud the supreme court decided that in those circumstances it not appropriate to afford a recovery to dick we can point up because he had not brought forth new fresh accurate information of fraud well let me just finally say and if there's a time left that would perhaps we get a couple  a defendant can move to dismiss based on public disclosure is a huge concern based for two reasons for me number one philosophically i think those of motions ought to be available to the defendant and the judge ought to decide based on the requirements of the statute but  even mr helmer acknowledged that this division of the justice department i think you said has less than eighty attorneys in it so that they're probably disinclined to be out there defending hundreds of contractors that may be subject to these sorts of after the fact  you know lawsuits from employees number one they're disinclined a number two you know they don't have the resources so it seems to me it seems to me that seems to be an unfair part of this proposal and you know the federal claims scuse me the federal claims act was first eighteen sixty three in response to widespread fraud in defense contracting during the us civil war and it's ironic that we're in the midst of two wars and we're dealing with with this false claims correction act at this point but now given the fact that the original lack this over one hundred years old and i suppose that the federal rules of civil procedure are not quite that old how was it that federal rule of civil procedure nine b has been found to apply to federal claims act cases was it statutory a was it a result of judicial activism i would say that every court except two that i'm aware of over the last twenty years has concluded that a case asserted under the false claims act sounds in a fraud rule nine b is simply a general rule of pleading embedded in the federal rules that says that if you're going to plead an action asserting fraud or mistake then you need to allege all the elements of the fraud or mistake with particular them to the complaint not attached in the complaint but what courts have general actually referred to them in the complaint or referred to them and like many court which is the same as pretty much being able to produce i would answer it this way many courts have said that it's not enough to allege a general in call it non particular scheme of fraud unconnected to piss specific claims for payment and the time for payment keep in mind this is the false claims act the claims are at the heart of the fraud and as a defense counsel i will tell you the first thing you need to prepare a defense is to find the claims find the document as i understand it now if if if a complaint is specifically is reasonable with no documentation is an individual who were not in mr campbell's position would not be able to produce records but i mean if you can if you can make exclude those kinds of claims no mr helmar did congress intend that federal claims that cases would be subject to the strict pleading provisions of  the rule nine b congressman johnson it's my opinion that they did not and the reason for that is they didn't call this the fraud claims act it's the false claims act the broad claims act something that's been overlaid on to this statute by some very well paid very competent defense counsel and bought by a number of courts around the country and they the problem with that is it adds additional elements to prove that both the government and the relay tours have to get over to establish their case additional elements to prove that this body never intended to put in there now what  what is your is that conclusion based on the the false claims act is a statutory cause of action that very specific elements broad is not one of the elements of the causation is in the materiality they know those elements when you have an action involving a crime against the sovereign which is what this statue is designed now those individuals are going to have that access to that type of information i would have to disagree strongly the ninety speaks of fraud or mistake most cases asserted under the farms claims act allege fraud outright fraud or false claims but usually fraud in addition to false claims in any event an allegation of a false claim very much is like an action for mistake by its very terms rule nine b is intended to apply broadly to all action sounding in fraud or mistake certainly the false claims act sounds either in fraud or mistake and i would also note there are many other federal actions which  statutory involving fraud such as securities fraud cames all of which have also been held to my understanding to require compliance with rule nine all right thank you mislaid any comment briefly all right and i think we've got about three minutes and fifty two seconds to get to get our vote be still remains potentially applicable according to these a memo these memos did not take away the applicability of rule nine b in fact the contrary they require a keepin plaintiff to allege facts the provide a reasonable indication that one or more violations are likely to have occurred to provide adequate notice of the specific nature of the alleged misconduct this language one of the court rulings that did apply rule nine b but felt that a false claim that case that was the way will not be should apply in other words you do need to allege your fraud with your false claims of particularity but that doesn't necessarily mean that you need to have the invoices t up we have a vote i would love to pursue this further i think the story of mr campbell and how the successor employer retaliated under what circumstances would be very interesting but time is not going to do this i i think all of you for for being here and sharing your insights with us and without objection members will have five legislative days to submit any additional written