Source: http://www.falseclaimsactlawblog.com/2011/12/
Timestamp: 2019-04-25 06:08:51+00:00

Document:
False Claims Act liability based on an implied false certification can be quite broadly applied, and the circuit courts, as the blog False Claims Alert noted, have not applied a consistent test for implied false certification liability. We recently discussed United States ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295 (3rd Cir. 2011) and the Third Circuit's adoption of the implied certification theory of liability. In Wilkins, the Third Circuit found the False Claims Act was not a “blunt instrument” to enforce compliance with all regulations, just those “regulations that are a precondition to payment.” In that case, as in other circuits, the Court found that the claimant's violation of the Anti-Kickback Act legally tainted its claims for payments, regardless of whether the services billed were actually rendered. See e.g., McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005).
False Claims Act recoveries, the government's promise of more enforcement, and the crucial role played by whistleblowers in enforcing the False Claims Act have been making the news these last ten days.
Second, Deputy Attorney General James Cole recently spoke at a December 13th press conference on the subject of cutting waste in federal spending. The Department of Justice, Cole noted, "recovered over $5.6 billion in criminal and civil fraud proceeds," which is "more than has ever been recovered in a single year in the history of the Department of Justice." The $5.6 billion in fraud recoveries included everything from "healthcare fraud to grant fraud, from mortgage fraud to procurement fraud." Fraud recoveries, Cole explained, occurred across the nation: "Between fiscal years 2008 and 2011, the Department has doubled fraud recoveries in twenty-one states, as well as the District of Columbia and the Virgin Islands." Health care fraud enforcement not only resulted in significant recoveries --$900 million from 8 drug companies alone-- but generated revenue as well: Cole noted that "[f]or every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven."
Finally, today Assistant Attorney General Tony West of the Department of Justice, Civil Division, announced $3 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2011. Of the$3 billion total, West explained, $2.8 billion "came from suits filed under the qui tam, or whistleblower, provisions of the False Claims Act." West went on to state that in the last 25 years "whistle blowers have filed more than 7,800 actions under the qui tam provisions" and "qui tam suits hit a peak of 638 this past year, after hovering in the 300s and low 400s for much of the decade." Of the $3 billion recovered, nearly $2.2 billion came from in civil claims against the pharmaceutical industry.
In short, the message is clear: the federal government will continue to target waste in federal spending, with special enforcement devoted to health care spending. Whistleblowers and the qui tam suits they file will continue to play a crucial role in investigating fraud and obtaining recoveries against those who commit fraud against the federal government. We can expect False Claims Act suits to continue to grow.
As discussed previously, courts increasingly refuse the request of relators to seal their False Claims Act (“FCA”) cases when the government declines to intervene and they seek to dismiss. See blog entries 11/14/11, 10/31/11. The U.S. Tax Court recently addressed this issue of protecting the identity of a tax whistleblower in a Tax Court case and arrived at a very different conclusion: the tax whistleblower may remain anonymous but it refused to seal the case. See Whistleblower 14106-10W v. Commissioner of Internal Revenue, United States Tax Court, 137 T.C. No. 15. The Tax Court based its decision in large part on the fact that the Internal Revenue Service’s Whistleblower Program does not protect whistleblowers from retaliation and that the Internal Revenue Service (“IRS”) treats whistleblowers as confidential informants.
The case arose out of claim made to the IRS by a whistleblower that his former employer had underpaid its tax. The IRS denied the petitioner’s claim for a whistleblower award, and the whistleblower challenged that denial in Tax Court.
As described on its website, the IRS has a “Whistleblower Program,” 26 U.S.C. § 7623(b), that “pays money to people who blow the whistle on persons who fail to pay the tax that they owe. See 26 U.S.C. § 7623(b). If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.” The IRS program further provides that if “the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court.” Unlike the False Claims Act, however, if the IRS declines to pursue the claim, the whistleblower does not have an independent right to proceed with the claim against the defendant.
In the Tax Court case, the Whistleblower filed a motion for protective order requesting the court to protect his identity and to seal the tax case. The Whistleblower alleged that even though he no longer worked for the taxpayer, he feared retaliation by his former employer. He also claimed that he would be professionally ostracized if his identity as a whistleblower were disclosed.
In a lengthy and well-reasoned decision, the Tax Court surveyed federal law on whether and when courts can permit litigants to remain anonymous and can seal a case. The Tax Court further noted that the IRS treats whistleblowers as “confidential informants” and that courts frequently protect the identify of informants.
petitioner has demonstrated a risk of harm that far exceeds in severity mere embarrassment or annoyance. The retaliation, professional ostracism, and economic duress which petitioner reasonably fears are, we believe, no less severe than the harm posed to attorneys and doctors suing to enjoin disciplinary proceedings, unsuccessful job applicants suing to protect their reputation, public aid recipients, or Native Americans joining in a lawsuit pitting their personal interests against those of their communities--all cases in which plaintiffs have been allowed to proceed anonymously.
the False Claims Act contains an antiretaliatory provision. See 31 U.S.C. sec. 3730(h). Moreover, almost all the States have enacted statutes protecting employees in the public and/or private sectors who report illegal conduct. In stark contrast, section 7623 contains no antiretaliatory provisions.
A recent court opinion here in the Middle District of Florida illustrates that normal rules for settlement do not apply to qui tam relators, even if a relator has purportedly induced a defendant into entering a settlement based in part on the relator’s false representation to the defendant that they have not filed a qui tam against the defendant.
Essentially, the Court held that absent the Attorney General’s “written consent,” the relator could not voluntarily dismiss a filed qui tam case, even if the relator had previously released the defendant. In turn, the Court relied on United States ex rel. Dillahunty v. Chromalloy Oklahoma, 2011 WL 227648, at * 1 ( W.D.Okla. Jan. 21, 2011), which also held that the relator was not permitted to waive his qui tam claim without the Government's and court's consent.
Several facts make this case and its holding especially troubling for defendants and others who enter into settlements on collateral issues with persons who may have secretly filed a qui tam.
First, though not reflected in its Order, while not opposing the motion to dismiss, the Government apparently could not bring itself to actually consent to dismissal or even break its silence on a matter in which an action was brought on its behalf. Rather, the Government informed the defendant that the U.S. Attorney’s Office did not take a position on the Defendant’s Motion to Dismiss, and the defendant related the Government’s position to the Court. See Defendant’s Motion to Dismiss at 3 n. 2.
Third, faced with what defendant termed as the “duplicity” of the relator in signing an agreement in which she made “blatant misrepresentations and clearly false, and likely made . . . to induce [defendant] to agree to the confidential settlement amount,” neither the Government nor the Court expressed any reservation about the plaintiff’s conduct. The Court did observe that defendant could seek “appropriate relief in the separate employment action to set aside the Settlement Agreement . . . based on any misrepresentations or fraud.” As to defending its own court and docket from such alleged conduct, however, it said nothing. The Government, as noted above, did not file anything, thus giving the appearance that it was untroubled by a relator engaging in such conduct in a matter brought on behalf to the United States.
In her response to the Motion to Dismiss, the relator explained her silence and representations in the settlement as a result of the seal pending in her recently filed qui tam. Additionally, the relator relied on the adage that the "False Claims Act is principled on 'setting a rogue to catch a rogue,'" and she further relied on Mortgages, Inc. v. U.S. District Court for the District of Nevada, 934 F.2d 209, 213 (9th Cir. 1981), which provides that the False Claims Act is "in no way intended to ameliorate the liability of wrongdoers by providing defendants with a remedy against a qui tam plaintiff with 'unclean hands.'" Seeking relief from the settlement she signed, the relator amended her qui tam complaint to add a count for declaratory judgment and obtain a determination of her qui tam rights in light of the settlement that she signed.
The Cancio case and the issue of settlement merit further analysis and reflection, and I will return to this in my next blog entry.

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