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FALSE CLAIMS ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON THE CONSTITUTION 

AND CIVIL JUSTICE 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 30, 2014 

Serial No. 113–93 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

SPENCER BACHUS, Alabama 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

MARK AMODEI, Nevada 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

JASON T. SMITH, Missouri 

[Vacant] 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON THE CONSTITUTION AND CIVIL JUSTICE

TRENT FRANKS, Arizona, Chairman 

JIM JORDAN, Ohio, Vice-Chairman 

STEVE CHABOT, Ohio 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

LOUIE GOHMERT, Texas 

RON DeSANTIS, Florida 

JASON T. SMITH, Missouri 

STEVE COHEN, Tennessee 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

TED DEUTCH, Florida 

PAUL B. TAYLOR, Chief Counsel 

JAMES J. PARK, Minority Counsel 
(III) 

C O N T E N T S 

JULY 30, 2014 

Page 

OPENING STATEMENTS 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Chairman, Subcommittee on the Constitution and Civil 

Justice ................................................................................................................... 1 

The Honorable John Conyers, a Representative in Congress from the State 

of Michigan, and Ranking Member, Committee on the Judiciary ................... 3 

WITNESSES 

The Honorable Chuck Grassley, a U.S. Senator from the State of Iowa 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 10 

Rachakonda D. Prabhu, M.D., Red Rock Medical Group 

Oral Testimony ..................................................................................................... 15 

Prepared Statement ............................................................................................. 17 

Patricia J. Harned, Ph.D., President, Ethics Resource Center 

Oral Testimony ..................................................................................................... 45 

Prepared Statement ............................................................................................. 47 

John E. Clark, Of Counsel, Goode Casseb Jones Riklin Choate & Watson, 

Taxpayers Against Fraud 

Oral Testimony ..................................................................................................... 56 

Prepared Statement ............................................................................................. 58 

David W. Ogden, Partner, Wilmerhale, U.S. Chamber Institute for Legal 

Reform 

Oral Testimony ..................................................................................................... 77 

Prepared Statement ............................................................................................. 79 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, a Representative in 

Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 4 

Prepared Statement of the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Ranking Member, Subcommittee 

on the Constitution and Civil Justice ................................................................. 99 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Questions for the Record from John E. Clark, Of Counsel, Goode 

Casseb Jones Riklin Choate & Watson, Taxpayers Against Fraud ................. 110 

Prepared Statement of Stephen M. Kohn, Executive Director, National Whistleblower Center ................................................................................................... 117 
(IV) 

OFFICIAL HEARING RECORD 

MATERIAL SUBMITTED FOR THE HEARING RECORD BUT NOT REPRINTED

Report by the National Whistleblowers Center (NWC) entitled ‘‘Saving America’s 

‘Most Important Tool to Uncover and Punish Fraud’ ’’ This report is available at 

the Subcommittee and can also be accessed at: 

http://www.whistleblowers.org/storage/whistleblowers/RebuttalDocs/final%20fca 

%20report.pdf 
(1) 

FALSE CLAIMS ACT 

WEDNESDAY, JULY 30, 2014 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON THE CONSTITUTION

AND CIVIL JUSTICE

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:05 p.m., in room 

2237, Rayburn Office Building, the Honorable Trent Franks (Chairman of the Subcommittee) presiding. 

Present: Representatives Franks, Goodlatte, DeSantis, Cohen, 

Conyers, and Johnson. 

Staff present:(Majority) Zachary Somers, Counsel; Tricia White, 

Clerk; (Minority) James Park Minority Counsel; and Veronica 

Eligan, Professional Staff Member. 

Mr. FRANKS. The Subcommittee on the Constitution and Civil 

Justice will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Committee at any time. 

I will begin by recognizing myself for an opening statement. 

We welcome all of you to the Committee hearing today. 

Because protecting taxpayer dollars from waste, fraud and abuse 

is a critical responsibility with which Congress is entrusted, it is 

important that from time to time we examine how the False 

Claims Act is working. 

It has been 6 years since the Judiciary Committee has held a 

hearing on the FCA, and in that time three major legislative 

changes to the FCA have been enacted. So we have called today’s 

hearing to examine areas in which the Act has been effective and 

potential areas in which reforms could be made to detect and prevent false claims in the future. 

The False Claims Act is the Federal Government’s primary tool 

for combatting fraud in federally funded programs, and the Act has 

proved to be a very successful tool. In each of the last 4 years the 

government has recovered over $3 billion under the FCA, and since 

the significant 1986 amendments to the FCA the Federal Government has recovered over $38 billion using the Act. 

The FCA has been used to combat false claims in several economic sectors including defense, health care, pharmaceuticals, and 

finance. However, despite its success, as it is currently structured 

and enforced, the FCA still fails to prevent massive losses of taxpayer dollars to waste, fraud and abuse. 
2 

According to a recent study by the General Accountability Office, over $100 billion in taxpayer money is lost each year to improper 

payments by the Federal Government. Thus, the government recovers only a fraction of what it loses to false claims every year. This 

is especially troubling considering Congress has amended the FCA 

three times in the past 5 years to expand its coverage and enhance 

the ability of the whistleblowers to bring suit. 

So the question occurs, how do we get more recoveries of taxpayer dollars out of the False Claims Act? Some experts who have 

studied the Act suggest that the answer is all about incentives and 

encouraging those best able to detect and prevent false claims— 

government contractors and government program beneficiaries 

themselves—to self-police and self-report potential FCA violations. 

The advice of these experts seems to make a great deal of common 

sense to me. 

However, as currently structured, the FCA provides very few incentives for Federal Government contractors and businesses that 

participate in Federal Government programs to come forward and 

disclose their own violations. In other words, those with the best 

knowledge of waste, fraud and abuse are not encouraged to self-police for violations and self-disclose violations if they, in fact, occur. 

This is because there is no economic advantage or incentive to 

do so. FCA violators who self-report generally receive the same 

exact penalties and face the same damages as those who are 

caught violating the Act and settle out of court with the government. 

This would seem to make little sense. Shouldn’t those that come 

forward and self-disclose violations get better terms than violators 

who are caught essentially red-handed? The FCA has been as successful as it has because it has provided whistleblowers with tremendous financial incentives for uncovering and disclosing false 

claims. It seems very appropriate and logical that to complement 

the current incentives for whistleblowers in the Act with financial 

incentives for self-disclosure will uncover even more waste, fraud 

and abuse of Federal taxpayer money. We need to examine ways 

to give those who do business with the government meaningful incentives to detect wrongdoing and to self-report it to government, 

and thus return to taxpayers more money than is currently recovered under the FCA. 

The Justice Department itself has acknowledged the limitations 

of the Act as it is currently written. According to the head of the 

division at DOJ charged with enforcing the FCA, the Justice Department is ‘‘well aware of the fact that litigation can only plausibly reach a fraction of the fraud committed against U.S. Government programs, which likewise makes the prevention of fraud a 

more potent tool for protecting the interests of the United States 

than efforts to undo the damage of completed schemes. Litigation 

to recover the costs of fraud is a far inferior option to preventing 

the fraud in the first place.’’ 

Now, I hope through this hearing we can begin to discuss ways 

to prevent violations of the False Claims Act from occurring in the 

first place. The Federal Government has benefitted greatly from 

the increased accountability that has resulted from the False 

Claims Act and the invaluable help it has received from False 
3 

Claims Act whistleblowers. We must make sure, however, that we 

are doing everything that we can to detect and prevent even more 

false claims against our nation’s hard-earned financial resources, 

and I look forward to the witnesses’ testimony. 

And I would yield—I see the Ranking Member is not here, so I 

am not going to yield to him. How does that sound? And I look forward to hearing, then, from our witnesses. We will now just thank 

the Committee for being here. 

We have two very distinguished panels of witnesses today, and 

I will begin by introducing the first panel witness. 

Our first witness is Senator Chuck Grassley, the Ranking Member on the Senate Judiciary Committee. Senator Grassley has 

served in the Iowa Legislature and the U.S. House of Representatives before being elected to the Senate in 1980. In 1986, Senator 

Grassley authored significant amendments to the False Claims Act 

to empower whistleblowers to file suit on behalf of the Federal Government against those who falsely obtain taxpayer dollars. Senator 

Grassley has been a leader in combatting waste, fraud and abuse 

in Federal Government programs and protecting the rights of whistleblowers. 

I am wondering now at this point if we might ask the Ranking 

Member of the full Committee if he has any opening statement or 

any comments. 

Mr. CONYERS. Thank you, Chairman. I do, and I thank you for 

your generosity. 

Senator Grassley, welcome, and to the Members of our Committee. 

I merely wanted to read a page or two of my remarks and put 

them in the record so that we don’t detain the distinguished witness that we have today. 

The False Claims Act is a longstanding and vital tool for ferreting out fraud against the government and ultimately protecting 

taxpayer dollars, and since its enactment and in 1986 amendments 

to this law almost $39 billion have been recovered from those that 

defrauded the American people, including some large pharmaceutical companies, hospitals, and defense contractors. In fact, 

more than $3.8 billion was recovered in the Fiscal Year 2013 alone. 

While no system is perfect, this Act has worked well, particularly 

in light of the amendments which were spearheaded by our distinguished witness who is with us today. These amendments revitalize the Act’s qui tam provisions. The Act was further strengthened with clarifications to its liability provisions that were made in 

2009. Thus, as we consider the state of the False Claims Act, we 

should keep the following points in mind. 

To begin with, qui tam actions are a critical component of the 

False Claims enforcement scheme, and I think for the interest of 

brevity I will ask permission to include the rest of my statement 

into the record and yield back the balance of my time, and thank 

the Chairman. 

[The prepared statement of Mr. Conyers follows:] 
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Mr. FRANKS. And I thank the gentleman. 

I would now like to recognize Senator Grassley. 

Senator Grassley, thank you for your gallant service to the country, and we are pleased to have you here today. 

I want to make sure that microphone is on so we can hear you, 

sir. 

TESTIMONY OF THE HONORABLE CHUCK GRASSLEY, 

A U.S. SENATOR FROM THE STATE OF IOWA 

Senator GRASSLEY. The green light is on. 

Before I read my 5-minute statement, I would like to, first of 

all—I thought the green light was on. I would like to thank you 

for responding to my request to come and testify. Thank you for 

doing that. 

The second thing I would like to say, you gave a nice introduction of me. Thank you for that. 

Thirdly, I often speak about whistleblowers as being welcome 

within an organization kind of like a skunk at a picnic. Now, I kind 

of feel that there is a lot of special interests in this town who are 

going to consider me a skunk at this picnic. 

Thank you for allowing me to come here today to testify. Today 

happens to be National Whistleblower Appreciation Day. Whistleblower groups are meeting as we speak to honor some of our colleagues on the Hill for their support of whistleblowers who report 

waste and fraud. 

I am wary when I hear the biggest violators of a fraud law hire 

people to talk about strengthening that law. Last fall, the Chamber 

of Commerce released a report on the False Claims Act. It claims 

the Act ‘‘plainly is not getting the job done since the government 

has recovered only $35 billion since 1987.’’ Now that figure, as you 

folks have said, is $39 billion, and some people use the term $42 

billion. Anyway, this amount of money is nothing to sneeze at 

where I come from in rural Iowa. 

The fact is that since 1986, no other law has been more effective 

in battling fraud, and you said that, Mr. Chairman, in your opening statement. Before the 1986 amendments, it only brought in 

about $40 million a year, not billions of dollars. At that rate, it 

would have recovered only $1 billion in the past 25 years. Thanks 

to these ’86 amendments, it has brought in 39, 40 times that 

amount of money. 

Clearly, the False Claims Act is working, and it is working fantastically. The report that I previously referred to says that the law 

is ‘‘ineffective in preventing fraud.’’ Yet, my staff have met with 

some of the authors of that report, and they don’t have any concrete proposal for preventing fraud more effectively. They talk 

about ‘‘a gold standard compliance certification program,’’ but that 

just happens to be a pie-in-the-sky idea with no specifics. As they 

said, ‘‘We had to come up with something, so we just put that in.’’ 

The Chamber clarified to my staff that they were talking about 

their proposal for internal reporting 180 days before any whistleblower can file a False Claims suit. Yet they also said of the overall 

certification program, ‘‘We deliberately left this vague.’’ 

Now, that is a very serious problem. They lack details on who 

would create the program, who would enforce the program. Basi-
8 

cally everything about it lacks detail, but they want you to believe 

that once this pipe dream is in place, it will magically increase the 

amount of taxpayer dollars the government recovers. In exchange, 

the report proposes hefty concessions for its big corporate sponsors. 

For starters, they want to eliminate the use of exclusion or debarment, some of the government’s strongest tools on deterring 

fraud. They would require whistleblowers to report internally, 

which just puts a huge target on the back of a whistleblower. Internal reporting and a 6-month head-start on retaliation before a 

whistleblower gets the chance to be heard in court is a recipe guaranteed to reduce disclosures of fraud. Even when a corporation 

does come forward, the company line is never going to be the complete picture. 

That is why the False Claims Act incentivizes whistleblowers, 

and you see how it has worked. While I believe companies should 

have strong internal compliance programs, nothing is worth the 

get-out-of-jail-free pass that this report asks in exchange. Many 

corporate giants already spend large amounts on compliance but 

still routinely bilk the government out of millions of taxpayer dollars. 

This report’s recommendations contradict its assertion that the 

False Claims Act has failed by not recovering enough money. The 

report proposes to limit government recoveries across the board regardless of the participation in any compliance certification program. That just makes no sense. 

In the last 5 years, the Federal Government has grown larger 

and larger, and spending has gotten more and more out of control. 

Whistleblowers using the False Claims Act have played a key role 

in checking fraud and wasteful spending. Annual recoveries under 

the False Claims Act have increased dramatically in the last 5 

years. State Attorneys General around the country have used state 

False Claims Act to successfully recover billions of dollars for their 

states. 

For example, last October, then-Virginia Attorney General Ken 

Cuccinelli recovered $37 million for the State of Virginia from a 

drug company that was inflating its prices to scam taxpayer dollars 

from Medicare. The next month, Cuccinelli recovered $21 million in 

two healthcare fraud settlements with multi-national pharmaceutical giant Johnson & Johnson, which was paying millions of 

dollars in kickbacks to the nation’s largest pharmacy. 

Yet, just days before Cuccinelli’s announcement of the settlement, Health and Human Services Secretary Kathleen Sibelius 

also made an announcement. She revealed that this Administration 

did not intend to treat the Affordable Care Act as a Federal 

healthcare program, then exempting it from anti-kickback laws. 

Precisely because of the fraud opportunities under the Affordable 

Care Act, one provision that Congress added to the law made a violation of the anti-kickback law an automatic violation of the False 

Claims Act. This Administration has chosen to ignore that part of 

the law. 

Congress must step forward and we must reiterate that the Affordable Care Act is no less subject to the anti-kickback law and 

the False Claims Act than any other Federal healthcare programs. 

Additionally, this Subcommittee should strongly consider strength-
9 

ening the False Claims Act’s connection with suspension and debarment. That would keep repeat offenders away from taxpayer 

dollars. 

A couple of years ago, the nonpartisan Government Accountability Office discovered serious weaknesses in the suspension and 

debarment program of numerous government agencies. Chairman 

Issa and Ranking Member Cummings of the House Oversight Committee have joined together with some proposals on this issue. 

Chairman Issa stated last fall, ‘‘The current process of keeping taxpayer dollars out of the hands of criminals, tax evaders, and the 

chronically incompetent is stove-piped, fractured and inadequate.’’ 

This issue is really about law and order. If we really want to improve the False Claims Act, we should make a judgment or settlement under the law result in an automatic review for suspension 

or debarment. That would capitalize on the success of the law 

while increasing its deterrent effect. The False Claims Act has already provided a crucial check during a time of growing government and out-of-control spending. No matter what we do to deter 

waste and fraud, whistleblowers are the key to the government 

finding out when that act happens. 

Today, on National Whistleblower Appreciation Day, I hope we 

can honor whistleblowers for the patriotic service that they provide 

to the taxpayers. 

Thank you very much. 

[The prepared statement of Senator Grassley follows:] 
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Mr. FRANKS. Well, thank you, Senator Grassley. And again, we 

want to express our gratitude for you making the trip over here 

and the cogency of your remarks. Thank you very much, sir. 

I would now like to turn to the second group of witnesses, if you 

would like to take your seats. 

Our first witness on this panel is Dr. Rachakonda Prabhu. I am 

going to try that again, sir. Rachakonda Prabhu. I know nobody 

ever has any trouble with that name, do they? 

Dr. Prabhu is a Board-certified pulmonologist—boy, I am having 

trouble today—pulmonologist and the Founder of Red Rock Medical 

Group, the largest specialty medical group, multi-specialty medical 

group in the State of Nevada. He is also a Clinical Associate Professor of Medicine at the University of Nevada School of Medicine. 

Dr. Prabhu was twice sued under the False Claims Act and both 

times, at great personal expense, prevailed in the litigation. In one 

of the cases against him, the court determined that the case 

brought by the government was without substantial justification. 

Our second witness is Patricia Harned—I got that one—President of the Ethics Resource Center, the nation’s oldest non-profit 

organization devoted to the advancement of high ethical standards 

and practices in public and private institutions. She serves as Consultant to the New York Stock Exchange and is a member in good 

standing of the Advisory Group of the Public Company Accounting 

Oversight Board. Dr. Harned has testified before Congress and the 

Federal Sentencing Commission and has been featured in media 

outlets including the Wall Street Journal, Washington Post, and 

USA Today. 

Our third witness is John Clark. John, thank you for having a 

simple name. [Laughter.] 

An attorney specializing in False Claims Act litigation. Mr. Clark 

is testifying today on behalf of Taxpayers Against Fraud. He served 

as an attorney in the Justice Department’s Criminal Division as an 

Assistant U.S. Attorney and as the U.S. Attorney for the Western 

District of Texas. Mr. Clark has been a member of legal teams representing whistleblowers in cases that have resulted in recoveries 

totaling more than $3 billion for the United States and state Medicaid programs. 

Our final witness is David Ogden, a partner at WilmerHale. He 

is testifying on behalf of the Chamber of Commerce’s Institute for 

Legal Reform. Mr. Ogden has held several positions at the Justice 

Department, including serving as the Deputy Attorney General of 

the United States from 2009 to 2010, and as Assistant Attorney 

General for the Civil Division from 1999 to 2001. As head of the 

Civil Division, he directed the Justice Department’s False Claims 

Act enforcement. 

Now, each of the witnesses’ written testimony will be entered 

into the record in its entirety, and I would ask each witness to 

summarize his or her testimony in 5 minutes or less, and to help 

you stay within that time there is a timing light in front of you. 

The light will switch from green to yellow, indicating that you have 

1 minute to conclude your testimony. When the light turns red, it 

indicates that the witness’ 5 minutes have expired. 
15 

And before I recognize the witnesses, it is the tradition of the 

Subcommittee that they be sworn. So if you would please stand to 

be sworn. 

[Witnesses sworn.] 

Mr. FRANKS. Let the record reflect that the witnesses answered 

in the affirmative. 

I will now recognize our first witness. Dr. Prabhu, please turn on 

your microphone, sir, before you begin. 

TESTIMONY OF RACHAKONDA D. PRABHU, M.D., 

RED ROCK MEDICAL GROUP 

Dr. PRABHU. Thank you, Chairman Franks, for inviting me to 

testify, and Honorable Congressman Mr. Conyers, Honorable Mr. 

DeSantis. I am a doctor who has been practicing medicine in Nevada since 1979. I have been sued twice under the False Claims 

Act. Both times the actions were dismissed and I was exonerated. 

But the lawsuits were ordeals that had a terrible effect on my medical practice, my finances, my health, my family, on my reputation. 

Over 10 years, my wife and I had built a good medical practice 

with several doctors and employees. In the 1990’s, three former employees made a false accusation against me in a qui tam lawsuit. 

Then they persuaded the Department of Justice to join the lawsuit 

in 1999, and my life turned upside-down. 

They fabricated charges that I had performed unnecessary medical tests and used the wrong billing codes. These allegations were 

not true, but that did not stop the press from printing them. I was 

a doctor with a tremendous reputation, a teacher, a humanitarian, 

and the next day my reputation was tarnished. My medical practice went down. My wife and I had to work without taking any salary. The doctors left and we had to let employees go. I was also 

emotionally distraught. It was hard for me to get up in the morning, to face people giving you dirty looks in the hospitals. The 

stress took a toll on me physically and I developed medical problems. 

Worst of all, my kids were little, and because of the press, other 

kids would tease them and make them cry. They would tell me, 

‘‘Dad, we don’t want to go to school.’’ But I never considered giving 

up or settling even though the government was asking me for millions of dollars for things I had not done. I also knew the government could kick me out of Medicare and Medicaid. 

After many years I was finally proven right. The government 

dropped all of the qui tam lawsuit because it found the allegations 

were untrue. Eventually, the judge dismissed the entire lawsuit. 

Although I was vindicated, the financial cost to defend myself was 

incredible. The total expense was between $4 to $5 million. Almost 

all of the money we had made was gone. 

After the lawsuit ended, I tried to gain my reputation back and 

build my medical practice. After several years we had grown to 30 

doctors and over 100 employees. One of the services I had been providing to my patients with advanced lung disease is known as pulmonary rehabilitation service. Patients would come to our office 

and we would exercise them under supervision. 

When I first started providing this service, there was no Medicare code, so I was doing it for free. Later, I was told that it was 
16 

improper under Medicare rules to do anything for free. So we asked 

Medicare what should we do, and Medicare representative came to 

our office and told us the billing code that we have to use, and we 

used that code for 20 years, and a Medicare carrier assured us it 

was the right code to use. 

Then in 2004, we learned the U.S. Attorney’s Office was investigating our use of this code. I met with the U.S. Attorney, but he 

didn’t listen. One afternoon a reporter called and said, ‘‘Dr. Prabhu, 

do you know the government filed a False Claims lawsuit against 

you?’’ The nightmare started all over again. My medical practice 

collapsed. Doctors started to leave. We had to let our employees go. 

We even had to close a clinic in a nearby town that badly needed 

our doctors. I was so depressed. 

This time the government told me that under the False Claims 

Act I would have to pay $22 million. They said I had billed Medicare for 2,000 tests over 6 years, and they wanted a penalty of 

$11,000 for every test, which came to $22 million. But we only 

charged $50 for one test, and we had charged only a few hundred 

thousand dollars for all the tests. In the process, we even lost 

money. It just made no sense. 

But I knew the government could kick me out of Medicare and 

Medicaid and I would lose my livelihood. I know that in many 

cases doctors simply settle when they have to go through what I 

have gone through. Some lose their patients, their spouses, their 

children, their houses, their health, and some even commit suicide. 

But I refused to give in. 

Once again, I hired a team of lawyers and experts. In the end, 

the government’s case fell apart and they just dismissed the case. 

The lawsuit was so unjustified that we filed a motion to recover 

legal costs. The judge awarded me $500,000 in attorney’s fees. But 

I still spent over $2 million to defend myself. 

In conclusion, I went through this ordeal twice. I spent more 

than $6 million to defend myself. I twice lost my practice, my 

friends, my partners, my dreams, and my reputation. The False 

Claims Act should be more fair so that it cannot be used to bankrupt people when they have done nothing wrong. I don’t want what 

happened to me to happen to other citizens of this great country. 

Thank you. 

[The prepared statement of Dr. Prabhu follows:] 
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ATTACHMENTS 
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Mr. FRANKS. Thank you, Dr. Prabhu. 

I now recognize our second witness, Dr. Harned, and please turn 

on your microphone, if you would, Dr. Harned. 

TESTIMONY OF PATRICIA J. HARNED, Ph.D., PRESIDENT, 

ETHICS RESOURCE CENTER 

Ms. HARNED. Good afternoon, Chairman Franks, Ranking Member Cohen, and Members of the Subcommittee. Thank you for the 

opportunity to testify today. 

I am President of the Ethics Resource Center, America’s oldest 

non-profit dedicated to independent research on workplace ethics. 

Our center generates the U.S. benchmark on business ethics known 

as the National Business Ethics Survey. We also consult with companies to assess their ethics and compliance programs and cultures. And finally, ERC educates public officials on new insights 

coming from our research. For example, very recently we shared 

our work with the OIG from the Department of Justice, the Department of Housing and Urban Development, and also the Interagency Suspension and Debarment Committee. 

It is important to note that while ERC’s research was cited in the 

report that has been the impetus for today’s hearing, our center 

was not involved in the writing of the report itself. Neither am I 

an expert on the False Claims Act. The views I express today are 

based on the objective findings from ERC’s research. 

A central focus in today’s discussion is the proposal for accrediting rigorous compliance programs, so I would like to address a 

few questions that are fundamental to that proposal. For example, 

if a company has invested in an ethics and compliance program 

that actually works, can we expect that the number of instances of 

fraud will go down? When fraud does occur, will the reporting of 

violations go up? And finally, if standards are established to define 

state-of-the-art programs, is there evidence that industry practices 

will improve? 

First and foremost, ERC has found that when an ethics and compliance program is well implemented within a corporation, there is 

demonstrable impact on the conduct of its employees. Employees 

and companies with well-implemented ethics and compliance programs are more likely to say that they work in strong ethics cultures. And when a strong program and a strong culture are in 

place, misconduct decreases by more than half. 

Similarly, in organizations with strong programs and cultures, 

the potential for wrongdoing is lessened. Forty-four percent fewer 

employees and companies with strong programs say they feel pressure to break the law in order to do their jobs. And in the same 

vein, 90 percent of employees in those kinds of organizations with 

strong programs and cultures say they know how to appropriately 

handle wrongdoing if it were to arise. And importantly, when 

wrongdoing does occur, the rate at which employees step forward 

to report increases by 94 percent. 

In 2013, more than 1 in 5 U.S. business employees said that they 

observed at least one incident that might be considered a False 

Claims Act violation. That percentage dropped by 71 percent when 

employees said they worked in a strong ethics culture. Yet you 
46 

could ask, if ethics and compliance programs have such a significant impact on business conduct, why does fraud continue to occur? 

Part of the reason is that misconduct is a reality in every corporation, and in every organization for that matter. But it is also 

the case that as of 2011, only one-quarter of U.S. employees said 

that their company had a compliance program that was well implemented, meaning that it had all of the elements in place that we 

know improve and encourage ethical conduct, and that is where a 

certification process has the potential to play an important role. 

Standards for certification or the like do shift corporate behavior 

provided the entity establishing the standards is trustworthy and 

free from conflicts of interest; standards are established with significant input from industry leaders and enforcement officials; the 

criteria take into account differences in organizational size, industry, and the context in which an organization is operating; and the 

standards are living and breathing, meaning they evolve with new 

insights from research and practice. 

Finally and perhaps most importantly, it is imperative that any 

definition of an effective program focus on compliance but also ethics. Companies that merely comply with the law check the box 

when they have met expectations and move on to other priorities, 

and that is the danger of a certification standard without the dimension of ethics. It is the commitment to ethics and culture that 

perpetuates right conduct in a company and diminishes the need 

for enforcement due to violations of the False Claims Act. 

Thank you again for the opportunity to address you today. I welcome your questions. 

[The prepared statement of Ms. Harned follows:] 
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Mr. FRANKS. Thank you, Ms. Harned. 

Mr. Ogden, we will get back to you. 

I now recognize our third witness, Mr. Clark. And if you would 

turn on your microphone, sir. 

TESTIMONY OF JOHN E. CLARK, OF COUNSEL, GOODE CASSEB 

JONES RIKLIN CHOATE & WATSON, TAXPAYERS AGAINST 

FRAUD 

Mr. CLARK. Thank you, Mr. Chairman. I appreciate the opportunity to express my views on this important law. It has enjoyed 

overwhelming bipartisan support for 28 years now. 

I come from a small firm of nine lawyers. Two of us represent 

whistleblowers. The other seven are busy with things like real estate transactions and municipal law and insurance defense litigation. 

Representing whistleblowers is the most professionally satisfying 

thing I have done since I was the U.S. Attorney in Texas, investigating and prosecuting corrupt public officials in an historically 

corrupt Texas county. We live in an era of ever-growing government and ever-proliferating programs that spend mind-boggling 

sums of taxpayer money. Big industry groups love big government 

programs because they have all that money to spend, and we have 

a resulting phenomenon that I call the Washington merry-goround. Others call it crony capitalism. Bright, able people get on 

the merry-go-round and they enter government service, most as administrators or lawyers. They make policy, administer programs, 

deal with legal issues. They are regulators, and they learn how the 

government works from the inside. 

Later, the same government officials get off the merry-go-round 

and they are eagerly recruited by industry groups as counsel or as 

lobbyists, or both. They become part of a community that they used 

to regulate, and now the regulated industry group’s interests are 

their interests to protect. 

One of their goals is to undermine incentives for whistleblowers 

who take risks when exposing fraud. The goal of the former regulator, now an industry lobbyist, is to make it more difficult for the 

government to succeed in making False Claims Act cases against 

their clients’ interests. 

The Department of Justice does a lot with limited resources. 

They work hard to enforce the False Claims Act and recover America’s stolen billions. One way the False Claims Act might be 

amended to help the Department of Justice, and it could be accomplished without cost, is to embrace a provision that we now find in 

15 of the 29 state False Claims Acts. Under those 15 state False 

Claims Acts, the state can recover its attorney’s fees in a successful 

case. The United States should have the same right, but that is a 

right that is now lacking under the Federal False Claims Act. 

Those fees and a percentage of all False Claims Act recoveries 

should be specifically allocated to funding False Claims Act enforcement. 

I suggest we should also add tax fraud enforcement to the False 

Claims Act. The IRS now has a whistleblower incentive program, 

but that program is not working. But again, the states provide a 

working model that the Federal Government might copy. New York 
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has added taxes to its False Claims Act, and it is already recovering millions of dollars. 

And one more thing. Just as no company should be too big to fail, 

no individual should be too important to incur personal consequences for fraud against the government. Personal consequences 

are a strong deterrent to fraud. 

Let me conclude by saying I am struck by the wisdom of Senator 

Grassley’s skepticism and caution about buying into a fanciful, untested, gold-plated, certified compliance program. The key to compliance is integrity. It is not just a matter of paperwork, as evidenced by the multiple offenders under the False Claims Act. Justice Oliver Wendell Holmes said it best for all of us, and in just 

11 words. When he wrote for the Court in U.S. v. Rock Island Central Railroad in 1920 he said, ‘‘Men must turn square corners when 

they deal with the government.’’ 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Clark follows:] 
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Mr. FRANKS. Thank you, Mr. Clark. 

And now we will recognize our fourth witness, Mr. Ogden. 

Sir, if you will make sure that microphone is on. 

TESTIMONY OF DAVID W. OGDEN, PARTNER, WILMERHALE, 

U.S. CHAMBER INSTITUTE FOR LEGAL REFORM 

Mr. OGDEN. Thank you, Mr. Chairman. Thank you, Chairman 

Franks, Ranking Member Cohen, and Members of the Committee. 

I appreciate the opportunity to appear before the Subcommittee 

today to testify on this important issue. 

The False Claims Act has been a focus of both my government 

service and my private practice for over 15 years now, and so I 

know from direct experience in both places that its unique provisions play a catalytic role in unearthing evidence of fraud and in 

recovering monies lost to fraud. But there is no doubt, and we have 

heard some of them today from Dr. Prabhu, that there are costs, 

and harmful and counter-productive effects of the law as well. 

I believe in the False Claims Act. Indeed, as Assistant Attorney 

General, I personally defended the constitutionality of its critical 

qui tam provisions before an en banc court of appeals; and as Deputy Attorney General, I helped implement and design the HEAT 

program which has effectively addressed hard-core fraud in the 

healthcare industry. But I also believe that we have a real opportunity to enhance the Act’s effectiveness and fairness while using 

it more effectively to prevent fraud before it occurs, as you, Mr. 

Chairman, identified, as a goal, an important goal. 

I start with four basic points. First, the FCA helps uncover fraud 

against the United States and helps return ill-gotten gains to the 

Federal Government. Those functions should be preserved and enhanced, and nobody is suggesting otherwise. 

Second, encouraging whistleblowers with valid concerns to come 

forward is critical to the Act, and that is a very good thing. Indeed, 

I believe the Act can do much more to encourage and protect legitimate internal whistleblowers by incentivizing companies to do 

more of that themselves. 

I heard and understand Senator Grassley’s concerns and, to be 

clear, we strongly support the function of whistleblowers and the 

role the FCA has played in incentivizing them to come forward. 

Third, however, at the present time, the Act is generating a 

stampede of weak and frivolous claims—we heard about a couple 

of them earlier—that unproductively burden the government, the 

courts, private businesses, and individuals alike. 

And fourth, the Act as construed by the courts often mandates 

punishments so far in excess of any real-world harm that defendants are often deprived of meaningful access to the courts to test 

the most aggressive theories of liability because settlement for 

many businesses in that situation is effectively the only option. Dr. 

Prabhu identified some of the ways in which that works where the 

potential penalties so far exceed the consequences at issue. 

I discuss in my written testimony the way these virtues and 

vices are caused by the FCA’s unique features that make it entirely 

different from other enforcement schemes and call for, I think, 

some intelligent adjustments. 
78 

As outlined in my testimony, I believe there is a sensible way forward, one that aligns government and business alike to prioritize 

preventing fraud before it diverts Federal dollars from their intended uses, truly making compliance the first line of defense. 

First and foremost, we should be encouraging and incentivizing 

all companies to implement and maintain state-of-the-art compliance programs, programs that promote the highest levels of corporate ethics and legal compliance, encourage and protect internal 

whistleblowers, and voluntarily report any violation promptly to 

government authorities. Dr. Harned has talked about how that 

works. 

Under reforms I helped develop for the U.S. Chamber of Commerce and its Institute for Legal Reform, certain rules would apply 

differently to entities that have been independently certified as 

maintaining state-of-the-art compliance programs, including the 

strongest protections for whistleblowers consistent with standards 

approved by the government. These proposed reforms were the 

product of my years of work thinking about the Act and the good 

ideas of my co-authors. 

We put pen to paper after months of discussion and consideration, eventually producing the white paper ‘‘Fixing the False 

Claims Act.’’ Our compliance-based approach is not, with all due 

respect, pie in the sky. Dr. Harned’s research shows that state-ofthe-art compliance systems work. They reduce fraud, they encourage and protect whistleblowers, and they result in prompt self-disclosure of violations to the government. 

So what we propose are incentives for companies and whistleblowers to do these things. The proposed adjustments would by no 

means remove deterrence and jeopardy associated with civil False 

Claims Act liability. They would do nothing to change the criminal 

penalties for individual accountability that were talked about earlier. But they would create differences sufficient to incentivize the 

adoption of first-rate compliance programs by recognizing their significance in assessing any entity’s culpability and recidivism risk. 

These reforms are designed to incentivize individual employees 

to report wrongdoing internally and companies to act quickly to 

identify and halt wrongdoing and report it to the authorities. They 

are also designed to make the potential consequences more proportionate to the circumstances, including taking into account whether 

an entity has programs in place to prevent fraud. There is every 

reason to believe that the increased self-policing and voluntary disclosure that these reforms would encourage will mean less fraud, 

less harm, and less need for lawsuits. 

There is more detail in my written statement, Mr. Chairman. I 

appreciate the time and welcome your questions. 

[The prepared statement of Mr. Ogden follows:] 
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Mr. FRANKS. Well, I thank all the witnesses. 

We are told that they may call votes any moment, and that will 

give us a short period of time to respond. But if we proceed with 

questions quickly, we might actually get past this and not have to 

hold all of you over here. If we can do that, we will. 

So, Dr. Harned, I will begin with you. It seems sort of counterintuitive that we should attempt to rely on the perpetrators of 

False Claims Act violations to self-report when they violate the Act. 

Can you explain to me how it would be reasonable to expect businesses to detect and report their own violations of the FCA to the 

Federal Government? 

Ms. HARNED. Thank you, Mr. Chairman. One of the things that 

we have seen in our research as we have looked at different kinds 

of organizations and what motivates them to implement ethics and 

compliance programs, it is the case that the majority of companies 

want to implement very good programs because it is a preventive 

measure for themselves. The majority of companies that have good 

programs and strong cultures in place have leaders that are very 

committed to ethical conduct. They want to avoid overstepping the 

law, and that is why those programs are very effective. 

So it is not so much a case of the perpetrators monitoring themselves so much as it is the case that most companies that are implementing these good programs are doing it for all the right reasons. 

Mr. FRANKS. Mr. Clark, I might ask you, do you think that the 

efforts that have been discussed related to trying to get self-compliance by these companies could bring harm to the existing protocol? 

Mr. CLARK. Mr. Chairman, compliance programs are fine. I certainly have no quarrel with compliance programs. But we have 

seen that quite a number of entities that have resolved False 

Claims Act cases, which means that they entered into a corporate 

integrity agreement, and that required a strong compliance program, went right back to the same bowl and were lapping at it 

again. I think compliance programs certainly can help, but if a 

company plastered Justice Holmes’ admonition over their entrance 

as their motto and lived up to it, that would help. 

Integrity is the key, and law enforcement, which is my background, is what enforces that. 

Mr. FRANKS. Mr. Ogden, you had suggested that there was clear 

evidence that these compliance programs could work, and I know 

that you have authored some programs in that vein. Can you tell 

us what would be the top anecdotal or clear evidence that you 

would report that would indicate that these programs do work and 

don’t harm the private whistleblower enforcement? 

Mr. OGDEN. Absolutely, Mr. Chairman. I think Dr. Harned’s 

work for the Ethics Resource Center is extremely strong support 

for the proposition that these programs work. As she says, no program can entirely eliminate wrongdoing in any institution. The key 

is to have measures in place—and as Dr. Harned says, we know 

what these measures are that are working well—have measures in 

place at a company that make clear that Justice Holmes’ admonition is the rule of the day there, that empower employees to come 

forward, encourage them to, make clear to them they are going to 

be protected, make clear that when they report wrongdoing it will 
96 

be taken seriously, investigated and, where valid, reported, and 

that there is prompt reporting. 

We know these systems work, and where they are in place—— 

Mr. FRANKS. You say we know these systems work. What evidence would you cite, just briefly? 

Mr. OGDEN. I would rely first on the evidence that Dr. Harned 

has put forward, the research of the Ethics Resource Council. 

Mr. FRANKS. All right. 

Well, listen, I am going to yield to the Ranking Member of the 

Committee for 5 minutes. We might actually beat the vote here. 

Mr. COHEN. Thank you, Mr. Chair. I apologize for coming in a 

little late. Sorry I missed Senator Grassley. I have read his testimony, and it was certainly compelling, and I commend him for the 

work he has done on this issue. 

The False Claims Act has been responsible since 1987 for bring- ing in $39 billion in recoveries from corporations that cheated the 

American taxpayer, according to the Justice Department, and $27 

billion came from qui tam plaintiffs. So it seems like a lot of money 

we are talking about, and if we are talking about concern for the 

budget deficit, we would be giving up a lot of money that is involved, and money is an effective way of seeing that people do comply with the law, and Senator Grassley is to be commended for his 

work in bringing this to the fore. 

I would like to ask Mr. Clark—and I appreciate your testimony. 

Mr. Ogden suggests that his reforms are sufficient to correct the 

injustices that he sees and yet keep the program strong. Do you believe if we adopt the amendments that have been proposed here 

and that Mr. Ogden endorses, and I presume Dr. Harned does as 

well, that the qui tam law and the False Claims Act will remain 

as strong a deterrent to government fraud? 

Mr. CLARK. Sir, I do not think so. I think it would have two effects, or maybe one effect and one non-effect. I am skeptical about 

the degree of help that some kind of reliance on a compliance program would bring. But I am also cognizant that whistleblowers and 

the counsel who represent them have to make tremendous investments of time. The whistleblower has to take a big risk to come forward, a big risk of retaliation, and some of these proposals would 

increase the whistleblower’s risk and diminish the whistleblower’s 

incentive to go forward. 

These cases can take—I spend months and months and months 

sometimes after I interview a client deciding whether the client is 

a reliable and trustworthy and straightforward person, investigating for myself as best I can to find out what the facts are. I 

invest—any qui tam lawyer does—months of time often, and lots 

of money to investigate these cases. To diminish the incentives, 

which some of these things would do, I think would be a step backward. 

Mr. COHEN. I missed most of the testimony of the doctor, even 

though I read some of it, and I just wonder, Mr. Clark, if there 

were oversteps or improprieties by the attorneys in an action 

against an individual, as I guess the doctor suggests there might 

have been in his case, does not Rule 11 bring an adequate and appropriate sanction against an attorney for pursuing a claim that is 

not appropriate? 
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Mr. CLARK. There are several rules and several entities that hold 

sanctions for things like that. A lawyer who files a frivolous case 

first of all is going to be in trouble with the judge in whose court 

the case was filed. Federal judges have no patience with frivolous 

lawsuits. 

The statute allows the defendant, like the doctor, to recover his 

attorney’s fees, and Rule 11 applies, and the attorney would also 

be in trouble with his bar association. He might lose his license 

over something like that. 

Mr. COHEN. Thank you, sir. 

Dr. Harned, your group is—what is the name of your group? The 

Ethics—— 

Ms. HARNED. The Ethics Resource Center. 

Mr. COHEN. Who are the major funders of the Ethics Resource 

Center? 

Ms. HARNED. About 95 percent of our funding comes from the 

private sector, not for lack of trying to see if we can get public support for our work. The companies that invest in us, they tend to 

do it for one of three reasons. They ask for our help in assessing 

their ethics and compliance programs, or they are a part of a fellows program that we have for chief ethics and compliance officers, 

along with academics and government officials, and then a portion 

of our funding comes from research to do the work that we do 

through the National Business Ethics Survey and other studies. 

Mr. COHEN. And you are an attorney, or are you not? 

Ms. HARNED. No, I am not. 

Mr. COHEN. You are not. I see. 

Mr. Ogden, you are, I know, and you have a distinguished career. 

Have you ever brought any actions on behalf of whistleblowers? 

Mr. OGDEN. I have not brought actions as a private lawyer on behalf of whistleblowers, Congressman Cohen. I have brought any 

number of actions as a public official, intervening in actions 

brought by whistleblowers on behalf of the United States in pursuing their claims. And as I mentioned, as Assistant Attorney General I defended the constitutionality of the Act that gives whistleblowers the right to bring these claims. 

Mr. COHEN. Senator Grassley said that your proposal for gold 

standard compliance certification program was ‘‘pie in the sky ideas 

with no specifics,’’ and that it is a ‘‘pipedream’’ to suggest such a 

program would magically increase the amount of taxpayer dollars 

the government recovers. The Senator also said that his staff was 

told by the Chamber regarding the proposal for compliance certification program that ‘‘we had to come up with something, so we just 

put it in.’’ 

How do you respond to Senator Grassley on those assertions? 

Mr. OGDEN. Thank you, Congressman. I have the highest respect 

for Senator Grassley and what he has done with this statute. What 

we are trying to do is build on that statute. With respect to the ‘‘pie 

in the sky idea,’’ as I said, effective compliance programs that protect and encourage internal whistleblowers, companies that have 

fine ethics cultures and report violations to the government, that 

is not pie in the sky, as the work that Dr. Harned and her group 

has done shows. 
98 

The fact is good companies do try very hard to comply with the 

law, and we can encourage them. We can set standards. We can encourage more companies to perform that way. 

As far as Senator Grassley’s report of his staff’s comment, I 

wasn’t present for the meeting that was had with his staff, but I 

can tell you we didn’t just put this forward and just come up with 

something. I have spent a lot of time on this statute. I have a great 

belief in it. I believe in whistleblowers. I believe in the incentives 

of the Act. But I think it does a lot of harm, and it does harm in 

the ways we have described. 

Dr. Prabhu is not the only one. The Act can be improved, and 

we are suggesting some very structured ways. They are not going 

to interfere with the Act’s effectiveness, but they are going to ameliorate some of these effects. 

Mr. COHEN. I want to thank you and everybody else. This is an 

outstanding panel. 

I would like to ask for unanimous consent to allow my opening, 

which has become my midterm, statement to be put in the record. 

Mr. FRANKS. Without objection. 

[The prepared statement of Mr. Cohen follows:] 
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Mr. COHEN. Thank you. 

Mr. FRANKS. Mr. DeSantis? 

Mr. DESANTIS. Thank you, Mr. Chairman. 

Dr. Prabhu, what happened to your patients when you had these 

False Claims Act filed against you? 

Dr. PRABHU. Well, my patients were very sick. They had a lung 

transplant and a lung volume reduction surgery, after which they 

would come back to our office for specialized, structured rehab program. After I was forced to shut down, I had to send my patients 

to outside facilities which are just not as good. As a matter of fact, 

two of my patients died. I also had to stop going to a clinic we had 

in the Town of Parum, which was very under-staffed and they 

needed us to help them out. 

Mr. DESANTIS. Now, are you against—are you just against—you 

are not against whistleblowers generally. You just think that this 

statute can lead to bad consequences for innocent people. Is that 

your correct position? 

Dr. PRABHU. I am not—I am basically here to tell you my story 

and what happened to me. 

Mr. DESANTIS. Right. 

Dr. PRABHU. Just based on my experience, if those three people, 

my employees, came to me and told me what problems they detected, I would have addressed it right away and the government 

wouldn’t have lost so many millions of dollars, and I wouldn’t have 

lost millions of dollars. 

Mr. DESANTIS. Now, do you—what were your litigation costs in 

dealing with these two claims? 

Dr. PRABHU. Six million dollars. 

Mr. DESANTIS. Okay. And were you able to recover any of those 

costs? 

Dr. PRABHU. Well, the second case was so unjustified. So we were 

able to file a motion to recover attorney costs, but the judge only 

gave us $500,000 out of $6 million I spent. 

Mr. DESANTIS. So you got a judgment for $500,000. Have you actually been able to collect that money? 

Dr. PRABHU. Yes. The government paid us a check. 

Mr. DESANTIS. Okay, so they have given it to you? 

Dr. PRABHU. Yes. 

Mr. DESANTIS. Okay. So you actually won your cases, basically, 

but it doesn’t seem like those were victories. 

Dr. PRABHU. Well, I wouldn’t call it victory. My life is ruined. I 

can’t get all the time back that I have lost in the last 20 years, one 

case after the other. My reputation is damaged. A lot of things I 

wanted to do in life. I was doing medical research, working with 

lung volume reduction surgery. I was advancing in my profession 

while taking care of a large number of patients, and I had some 

political ambitions, and nothing was possible. 

Mr. DESANTIS. So basically, this detracted from your ability to 

help sick people? 

Dr. PRABHU. Yes. 

Mr. DESANTIS. How did the civil penalties and damages the government sought from you compare to the actual amount of money 

you received that allegedly violated the False Claims Act? 
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Dr. PRABHU. That is so absurd. They basically said every time I submitted an invoice and got paid—I got $50, they wanted me to 

pay them back $11,000. They calculated that over 6 years I submitted the code 2,000 times. They said I had to pay them $22 million. 

Mr. DESANTIS. Wow. 

Mr. Clark, I guess the criticism I have heard about how this operates in practice is that 90 percent of the cases in which the U.S. 

doesn’t ultimately intervene when individuals are bringing the qui 

tam cases, that they are just abandoned or dismissed. So how 

would you address—is that a misallocation of resources, that cases 

that, once the government makes a decision, are going to kind of 

wither on the vine? Or do you think that everything should continue to go the way it is going? 

Mr. CLARK. Well, I think there are a number of reasons why, in 

the first place, why the Department of Justice declines cases. Part 

of it is lack of resources. They have to prioritize what they are 

going to do because of the resources they have to do it with. I am 

sure that they concentrate first on the larger, the cases that look 

like they are going to be the biggest to intervene in. And whenever 

they decline one, they write a letter to the court and to everybody 

concerned not to take this as an indication of the merit of the case. 

They have declined it and they don’t have to state their reasons. 

Mr. DESANTIS. But is that, in fact, happening, though, given the 

statistics that it is over 90 percent? 

Mr. CLARK. I would say it probably is. I don’t know. I don’t have 

the statistics on that. I don’t know that they are published any 

place. A lot of them are declined. Probably three out of four, anyway, are. But why they don’t go forward could be for any one of 

a number of reasons. 

The Department of Justice may have discovered something in 

doing its due diligence survey of the case after it is filed during the 

period it is under seal that makes it clear that the case is not going 

to succeed for one reason or another, and that may be apparent to 

the attorney who filed the case after Justice declines it. 

Second, going forward with a False Claims Act case against a 

Fortune 500 company when you are a 9-man law firm that has two 

lawyers who do False Claims Act work is not an enticing prospect, 

and the client has to be apprised of that, and the client has to 

make a decision, do you want to continue to fight this thing, here 

is what it is going to entail, because it takes years to get one of 

these cases litigated. 

Mr. DESANTIS. Great. 

I am out of time. I thank the witnesses. I appreciate your comments. 

I yield back. 

Mr. FRANKS. And I thank the gentleman. 

And I would now recognize Mr. Conyers, the distinguished Ranking Member of the full Committee. 

Mr. CONYERS. Thank you, Chairman Franks, and I thank the 

witnesses. 

I would like to have someone explain why the False Claims Act 

penalties that allow for treble damages and additional penalties for 

each violation is important. Let me just start with you, Mr. John 
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Clark, and then I will ask the others, at least two of the witnesses 

the same question. 

Please. 

Mr. CLARK. Thank you, Mr. Conyers. 

Mr. CONYERS. Is your mic on? It is? Pull it up closer, then. 

Mr. CLARK. Thank you, sir. Both damages and penalties are important as deterrents. Penalties are not sought in all cases. Penalties are sought in some cases, the egregious cases, and there are 

constitutional limits on the amounts that can be assessed in a 

False Claims Act case. The Eighth Amendment protects someone 

from excessive penalties. But they are important because they can 

be invoked. And when they are invoked, then they are a powerful 

deterrent. 

They are not invoked in all cases, but they are there. That is a 

tool that the government can use if it chooses and if the court 

agrees with it, but they are not assessed in all cases. 

Mr. CONYERS. So it isn’t that they are identified at the beginning 

of the case. It is after a determination and a conviction has been 

arrived at. Is that the case? 

Mr. CLARK. That is correct. 

Mr. CONYERS. So do you think that they are excessive or that 

they are used in a way that is not beneficial for us protecting the 

government against false claims and fraud? 

Mr. CLARK. Sir, I think penalties should remain as a deterrent, 

and as I say, they are not always imposed. Particularly if a case 

is settled, they are not going to be imposed, typically. 

Mr. CONYERS. Mr. Ogden, do you share approximately the same 

view? 

Mr. OGDEN. I don’t, Ranking Member Conyers, and thank you for 

asking. First of all, it is required under the statute that in a case 

that goes to judgment these civil monetary penalties be imposed in 

addition to treble damages. So we have not only the treble damages 

required under the statute, as under antitrust law, for example, 

but in addition to that there is a requirement that for every socalled claim, between $5,500 and $11,000 be assessed. That is what 

is required if you go to judgment. It is simply not true that they 

are not applied in every case. They are applied in every case that 

goes to judgment. 

As Dr. Prabhu said, it is for that reason possible for you to have 

merely a couple of hundred thousand dollars, in his case, of business with the government. The total possible damage the government would have suffered in his case if he had done anything 

wrong, which he did not, would have been a couple of hundred 

thousand dollars. And yet the penalties, because they are assessed 

at $5,500 to $11,000 per invoice, per prescription, can amount to 

$22 million in a case of $200,000 in business. For a corporation 

with $50 per prescription, for example, a total amount of business 

around $10 million can result literally in penalties of over $1 billion. That is completely irrational. 

A similar offense, no different, that has a single invoice issued 

to the government for the same amount of money would be 

$11,000, in this other case $1 billion. It is irrational and it drives 

companies to settle frivolous, weak cases, and it should be changed. 
105 

It doesn’t make any sense. There is no other law like it that I am 

aware of. 

Mr. CONYERS. Well, Attorney Ogden, are there cases that we can 

name in which this kind of extreme result has happened? 

Mr. OGDEN. There are cases, and I mentioned a couple of them 

in my testimony. But the very important function is connected to 

what Mr. Clark correctly said. Frequently what happens is that 

these penalties are threatened and a company that actually took a 

case to trial would suffer them if it lost, but the government settles 

the case without them. So that you face a billion dollars of liability 

if you take it to trial and lose. But you can settle it for $20 million. 

Companies do that even if they think the claim is worth nothing, 

as would be rational. Dr. Prabhu bravely fought it and won, but 

many companies don’t, and that is not good for the country. 

Mr. CONYERS. Dr. Harned, where do you stand on this subject? 

Ms. HARNED. Congressman, my center is a research organization. 

Our task and our mission is to better understand how to improve 

workplace conduct. So in many ways, the specifics of the legislation 

and enforcement of it is beyond the scope of what our center’s expertise is. 

Mr. CONYERS. I see. Do you have any further comments, Attorney Clark? 

Mr. CLARK. Just one matter. Thank you, sir. Penalties, if a case 

goes to trial, and I have seen this happen, a judgment can be structured so that if the penalties would amount to more than the Constitution would allow, I have seen judges and attorneys on both 

sides work those things out so it does not happen that way. But 

the penalties are important as a deterrent. They are there, and if 

it is proper to invoke them, they can be invoked. 

Mr. CONYERS. Thank you, gentlemen and lady. 

My time has expired, and I yield back, Mr. Chairman. 

Mr. FRANKS. Well, I want to thank—I am sorry, Mr. Johnson. I 

didn’t mean to look past you, sir. 

Mr. Johnson? 

Mr. JOHNSON. I am sorry. I am just getting to the hearing, just 

getting a little acclimated here. 

I would ask Mr. Clark—well, I would ask Dr. Prabhu, do you 

consider yourself to be a free market economic adherent? 

Dr. PRABHU. No, sir. I am just a physician. I am not a policy expert. I just came here to share my experience with you. 

Mr. JOHNSON. Well, you know the difference between a free market and a regulated market? Economics? Perhaps not. 

Let me move on to Dr. Harned. Do you consider yourself to be 

a free market person, or do you believe in government regulations 

on the economic sector? 

Ms. HARNED. Certainly I do what I do because I am interested 

in trying to promote productive and effective and ethical business 

and government and non-profit organizations. It is the case that for 

many organizations misconduct is a reality, and there should be 

regulation so that we are able to promote better practice. 

Mr. JOHNSON. How about you, Mr. Ogden? 

Mr. OGDEN. I am certainly a believer in government regulation. 

I think it is critical in a free-market economy. 

Mr. JOHNSON. And Mr. Clark? 
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Mr. CLARK. Sir, I am a believer in as big a government as is necessary, but no bigger than necessary. Government has to regulate 

some things for our safety and to protect itself, but I am not an 

advocate of over-reaching government regulation. 

Mr. JOHNSON. Well, let me ask this question. When we are cutting government in the name of establishing a free market economy 

and we are cutting out the ability of government to ferret out 

fraud, doesn’t it follow that private whistleblowers would be consistent with a free market approach to the economy? 

Mr. CLARK. Sir, I think whistleblowers are the essence of preserving the free market economy. They look for the things or they 

encounter the things that distort a free market. They look for 

things that happen, they find things that happen to them, for example, things that they experience on the job that are just not 

right, cheating the government, and that employer, if it is cheating 

the government, is probably cheating its competitors as well and 

distorting the market. 

Mr. JOHNSON. So, thank you, Mr. Clark. 

Mr. Ogden? 

Mr. OGDEN. On behalf of the Chamber and our proposals here, 

we support whistleblowers, and I totally agree that their function 

is essential. What we are proposing—— 

Mr. JOHNSON. But you want to cut down on the economic incentive for whistleblowers to come forward. 

Mr. OGDEN. We want to preserve the economic incentive for them 

to come forward. We want to create along with that an incentive 

for their companies to implement state-of-the-art compliance that 

will protect them when they do report internally to create increased compliance and self-reporting in addition to the enforcement regime and incentives we have for whistleblowers. 

Mr. JOHNSON. So you would want to limit the whistleblowers and 

put the fox in charge of securing the chicken coop. 

Mr. OGDEN. What we would like to do is to ensure that the way 

entities are operated encourages whistleblowers, protects them to 

come forward, and we see that compliance programs, here they 

would be certified by independent authorities under standards approved by the government. We know that they work to protect internal whistleblowing. When an internal whistleblower comes forward to the company, the company can stop anything wrong that 

is happening right away. 

Mr. JOHNSON. Without firing the employee? 

Mr. OGDEN. Absolutely without firing the employee. 

Mr. JOHNSON. I will tell you, the U.S. Chamber of Commerce 

now is in favor of cutting government. They are in favor of cutting 

off access to the courts. And I am sure that you would agree with 

me that those are the things that the U.S. Chamber holds dear. So 

when we start cutting the ability of a private citizen or cutting the 

incentive for a person to put their livelihood on the line to ferret 

out fraud in a private sector that would create financial disincentives for every other stakeholder involved, I don’t see where that— 

I see whistleblowing as being consistent with free market principles, and I find that if there is some inconsistency in terms of— 

you can’t have it one way. You can’t have it all. 
107 

The Chamber is going to have to have some kind of a check and 

balance. It is going to have to have either government with the 

ability, the financial resources to investigate and ferret our fraud, 

or there is a need for the private whistleblower to come along. If 

you don’t have either one of those and you put the fox in charge 

of the henhouse, then we know exactly what is going to happen 

there. There won’t be any fraud ferreted out, and the free market 

will be distorted. Competition will be eliminated, and that is just 

not good for our economy. 

Mr. FRANKS. The gentleman’s time has expired. The witness will 

be allowed to answer the question. 

Mr. OGDEN. Thank you. Thank you, Congressman. Thank you, 

Mr. Chairman. 

I hope that, Congressman, you will take a very hard look. I know 

you already looked at it, but I hope you will look hard at these proposals. Our goal here really is not to disincentivize whistleblowers. 

Our goal is to remove fear of retaliation, to ensure that companies 

protect and encourage whistleblowers to come forward, and to preserve these incentives for them to bring claims where the company 

hasn’t self-reported. That is really the spirit of these changes, and 

to make the Act a little more rational, so things don’t happen like 

what happened to Dr. Prabhu. 

Mr. JOHNSON. Thank you, sir. 

Mr. FRANKS. Well, this concludes today’s hearing, and I want to 

thank all of the witnesses for attending. I know you folks have 

many things that you have to do, and we appreciate you coming 

here today. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. 

And again, I thank the witnesses. I thank the Members and the 

audience. 

This hearing is adjourned. 

[Whereupon, at 2:22 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
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Response to Questions for the Record from John E. Clark, Of Counsel, 

Goode Casseb Jones Riklin Choate & Watson, Taxpayers Against Fraud 
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