Source: https://www.clarkfountain.com/the-whistleblower-report/
Timestamp: 2019-04-26 00:35:29+00:00

Document:
Providing current information and analysis for whistleblowers throughout the United States.
Federal law prohibits the payment of healthcare expenses under Medicare that “are not reasonable and necessary for the diagnosis or treatment of illness or injury to improve the functioning of a malformed body member.” See 42 U.S.C. § 1395y(a)(1)(A). This means that medical providers who bill Medicare for unnecessary medical procedures may be in violation of the False Claims Act. This issue – the unnecessary billing of Medicare – was one of the issues addressed by the Fifth Circuit Court of Appeals in its 2004 decision U.S. ex rel. Riley v. St. Lukes Episcopal Hospital, et al., 355 F.3d 370 (5th Cir. 2004).
A plaintiff, or relator, in whistleblower litigation must establish causation. Causation requires the whistleblower show that the false statement or certification by the defendant was the actual cause of the government’s payment of the false claim. The Ninth Circuit Court of Appeals addressed causation in a whistleblower context in U.S. v. Eghbal, 548 F.3d 1281 (9th Cir. 2008). Eghbal arose from the sale of homes by real estate investors who falsely certified to the U.S. Department of Housing and Urban Development (HUD) that the sellers would not pay any part of the buyers’ down payments. The investor/defendants fraudulently signed HUD addendums which ultimately resulted in HUD paying out $2.8 million in balances owed on defaulted mortgages. Id. at 1282-83.
Section 3729(a)(2) of the False Claims Act creates civil liability against a defendant who “knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid by the government.” In 2008, the United States Supreme Court in Allison Engine Co. v. U.S. ex rel. Sanders, 128 S.Ct. 2123 (2008) addressed the intent requirement under the False Claims Act (“FCA”), as well as the FCA’s requirement that a payment be made “by the government” in order to establish liability. In Allison Engine, government contractors allegedly sought fraudulent payments not directly from the United States, but instead from private shipyards which had contracted with the government. The contractors contracted with the shipyards to build equipment (Gen-Sets), which the shipyards incorporated in the construction of Navy destroyers.
The False Claims Act contains a “public disclosure bar,” which prevents a federal court from hearing a whistleblower action if the whistleblower’s allegations of fraud have already been publicly disclosed. See US ex rel Mateski v. Raytheon Co., 816 F.3d 565, 569 (9 th Cir. 2016). The public disclosure bar does not apply, however, if the whistleblower qualifies as a “original source”. The purpose of the public disclosure bar is to encourage whistleblowers to bring suits where they can offer genuinely valuable information, yet at the same time discourage lawsuits where the plaintiff has no significant information of his own to contribute. Id. at 570.
In a typical claim under the False Claims Act, the whistleblower alleges that a person or company submitted a bill to the government for work that was not performed or was performed improperly, resulting in an undeserved, or unearned payment flowing to the person or company. A reverse false claim, however, is not premised on the improper submission of a claim for payment. Instead, the reverse claim is based on the theory that a company has retained money it should have otherwise paid to the government. See United States ex rel., Customs Fraud Investigations, LLC v. Victaulic Company, No. 15-2169 (3 rd Cir. Oct. 5, 2016).
James Garbe is a pharmacist who began working for Kmart in 2007. While working at Kmart, Garbe went to another retailer, one of Kmart’s competitors, to fill one of his personal prescriptions. In reviewing his receipt, Garbe noticed that the competitor pharmacy billed his Medicare Part D insurer less than Kmart billed Medicare for the same prescription. Garbe conducted further investigation and found that it was Kmart’s practice to charge customers with insurance higher prices for prescriptions when compared to customers who paid cash for their prescriptions. See U.S. ex rel., Garbe v. Kmart Corp., 824 F.3d 632 (7 th Cir. 2016).
The Tariff Act of 1930 was enacted by Congress to raise revenue, regulate commerce with foreign countries and protect American labor. One of the requirements of the Tariff Act is that articles imported into the United States from foreign countries must be properly marked with their country of origin. If an importer releases unmarked or improperly marked goods into the United States, the improper is fined 10% on the improperly marked goods. On October 5, 2016, the U.S. Third Circuit Court of Appeals considered whether a U.S. importer who allegedly imported millions of pounds of improperly marked pipe fittings was liable for a “reverse false claim” under the False Claims Act. See United States ex rel., Customs Fraud Investigations, LLC v. Victaulic Company, No. 15-2169 (3rd Cir. Oct. 5, 2016).
The qui tam provisions of the False Claims Act compensate whistleblowers who report different forms of fraudulent claims made against the government. In addition to paying whistleblowers, the False Claims Act also prohibits employers from retaliating against employees who report fraud. Under 31 U.S.C. § 3730(h), an employee can bring a retaliation claim against an employer who discriminates against the employee for attempting to stop the employer from submitting a false claim.
The United States Department of Justice recently issued a press release stating that the government has filed a complaint under the False Claims Act against nursing care facilities owned and operated by Vanguard Healthcare, LLC. Based in Brentwood, Tennessee, Vanguard operates 14 long term nursing care facilities throughout the United States. The government alleges that various Vanguard facilities violated the False Claims Act by submitting pre-admission forms containing forged physician and nurse signatures.
Statistical sampling is a method of using a selection of data (a subset or sample) from a larger set in order to provide a reliable estimate of the data as a whole. Courts have allowed statistical sampling in different forms of litigation for decades. The method is now finding its ways into whistleblower litigation under the False Claims Act. In U.S. ex rel. Martin v. Life Care Centers of America, Inc., No. 1:08-cv-251, slip. op. (E.D.Tenn. Sept. 29, 2014), the United States District Court for the Eastern District of Tennessee considered a challenge to the government’s reliance on statistical sampling to prove its case under the False Claims Act.
False Claims Act (“FCA”) cases are often thought of in terms of a contractor billing the government for services that were never provided. What if the services that were not provided consist of substandard medical care or treatment? Does a provider or insurer’s failure to adhere to a standard of care as spelled out in Medicare and Medicaid’s statutes, rules and regulations result in the submission of a fraudulent claim under the FCA? In U.S. v. NHC Healthcare Corp., 115 F.Supp.2d 1149 (W.D.Mo. 2000), the United States District Court for the Western District of Missouri found that the federal government did allege a claim under the False Claims Act where the government claimed it paid a health care provider to care for elderly patients and the provider failed to meet the standard of care by not performing “all necessary acts.” Id. at 1155.
In order for colleges and other schools to receive federal subsidies under Title IV of the Higher Education Act (“HEA”), the school must complete a Program Participation Agreement with the United States Department of Education. Under 20 U.S.C. § 1049(a), each Program Participation Agreement (“PPA”) “shall condition the initial and continuing eligibility of an institution to participate in a program [for Title IV subsidies] upon compliance with [certain] requirements.” Section 1049(a)’s PPA provisions require schools comply with various statutes and regulations, commonly referred to as “Title IV Restrictions.” See U.S. v. Sanford-Brown, Ltd., 788 F.3d 696 (7 th Cir. 2015).
Many courts require plaintiff/whistleblowers, or “relators,” in False Claim Act litigation allege in their complaints the “who, what, where, when and how” of the fraudulent conduct that shows that a defendant is liable under the FCA. These courts reason that relators under the False Claims Act must satisfy more stringent pleading requirements than other plaintiffs under the Federal Rules of Civil Procedure, as the rules create a higher pleading hurdle for allegations of fraud. This heightened standard requires False Claims Act plaintiffs allege actual “presentment” of a false claim, meaning the relator must allege that a false claim was actually presented to the government for payment. As the Eleventh Circuit Court of Appeals explained, the relator’s complaint must contain “some indicia of reliability … in the complaint to support allegations of an actual false claim for payment being made to the government.” Clausen v. Lab. Corp. of Am. Inc., 290 F.3d 1301, 1305 (11th Cir. 2002).
There are many different ways businesses and individuals seek to defraud the government. In mortgage financing, one of the ways lenders can subject themselves to False Claims Act liability concerns FHA insured loans. The FHA, or Federal Housing Administration, provides mortgage insurance on loans issued by lenders approved by the United States Government. The FHA provides mortgage insurance on loans in case the borrower defaults.
The False Claims Act does not explain how courts should calculate the amount of damages when a defendant is found liable for violating the act. Under 31 U.S.C. § 3729(a), defendant who violate the FCA are subject to civil penalties ranging from $10,781 to $21,563 per claim, as well as three times the amount of damages sustained by the United States Government (commonly referred to as “treble damages”). The purpose of the FCA’s treble damages provisions is make sure the federal government is made whole by a defendant’s fraudulent conduct.
In order for a whistleblower, or “relator”, to successfully prove that a defendant violated the False Claims Act, she must first plead the elements necessary to establish a “plausible” claim. Unless the relator properly alleges a claim, her complaint will not survive a motion to dismiss under the Federal Rules of Civil Procedure. The relator’s allegations in her complaint must contain facts that allow the court to believe the defendant’s conduct was unlawful.
Federal Statute 31 U.S.C. § 3730(b) requires persons who wish to file a whistleblower action (“relators”), under the False Claims Act do so in the name of the United States Government. The relator must prepare and file a complaint and written disclosure statement, both of which are filed under seal, meaning the documents are not available for public view. Once filed, the complaint remains sealed for at least sixty (60) days and cannot be served on the named defendants until the court removes the seal and orders that the complaint be served.
The False Claims Act (FCA) imposes liability on persons or entities that “knowingly present … a false or fraudulent claim for payment or approval” to the United States. 31 U.S.C. § 3729(a)(1)(A). The FCA is the federal government’s primary tool for the recovery of fraudulently induced payments made by the government to third parties. The False Claims Act was signed into law over 150 years ago, in 1863, by President Lincoln to combat fraud stemming from Civil War defense contracts.
Whether a whistleblower’s claim against a defendant is covered by insurance depends on many factors, most significant being language contained within the insured’s policy and the facts in the underlying case. Many insurers have provided coverage for whistleblower actions brought under the False Claims Act. Similarly, there are many instances where insurers deny coverage for such claims.
This summer, the United States Attorneys’ Office for the Southern District of New York announced a $2.95 million settlement with a group of hospitals due to their alleged willful delay in repaying over $800,000 in Medicaid overpayments. The settlement is the result of a lawsuit filed by a whistleblower alleging the hospitals violated the False Claims Act and the New York State False Claims Act.
Earlier this year, the United States Department of Justice released its figures for fiscal year 2015 showing the total amount of recoveries from settlements and judgments in civil cases involving fraud and false claims against the government. In its press release, the Department of Justice reported that this was its fourth consecutive year where recoveries under the False Claims Act exceeded $3.5 billion. Total recoveries by the government since 2009 total $26.4 billion.
Article III of the United States Constitution includes a “case or controversy” clause which limits the types of cases federal courts can and cannot consider. The clause limits jurisdiction of federal courts to only those cases the court is competent to hear. Under Article III, a plaintiff in federal court must establish he or she has standing in order to proceed with a case. It was this issue – whether a whistleblower had standing to bring a qui tam action – that was before the United of States Court of Appeals for the Federal Circuit in Stauffer v. Brooks Brothers, Inc., 619 F.3d 1321 (Fed. Cir. 2010).
Section 3729(a)(1) of the False Claims Act imposes liability against a government contractor who “knowingly presents, or causes to be presented… a false or fraudulent claim.” In order for the government or plaintiff to establish knowledge under the False Claims Act, or FCA, under the theory of implied certification, the plaintiff must prove that the defendant knows (1) that it violated a contractual obligation, and (2) that its compliance with that obligation was material to the government’s decision to pay. If the plaintiff proves both elements, “then it will have established that the defendant sought government payment through deceit, which is the very mischief the FCA was designed to prevent.” U.S. v. Science Applications Int’l Corp., 626 F.3d 1257, 1271 (D.C. Cir. 2010).
There are many different types of false claims that are actionable under the False Claims Act, or FCA. At its most basic form, a false claim involves a government contractor making a request for payment for goods or services which the contractor never provided. Another type of false claim is commonly referred to as the “certification theory of liability”, also known as the legally false certification. Under the certification theory of liability, a claim constitutes a false claim for payment when it relies on the false representation of compliance with a particular federal statute, federal regulation or contractual term. The validity of a false certification claim was at issue before the DC Circuit Court of Appeals in U.S. v. Science Application Int’t Corp. 626 F.3d 1257 (D.C. Cir. 2010).
In U.S. v. Cooper Health System, 940 F.Supp.2d 208 (D.N.J. 2013), the United States District Court for the District of New Jersey addressed the reasonableness of an attorney’s contingent fee agreement in a qui tam whistleblower case. In 2008, the relator, Dr. Nicholas DePace, initiated a qui tam action against Cooper Health System and related entities. Dr. DePace brought his claims under the federal False Claims Act and the New Jersey False Claims Act. DePace alleged the defendants paid millions of dollars in kickbacks to physicians in order to induce the physicians to refer patients to Cooper’s medical network.

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