- Pharmaceutical Industry Hit by Layoffs
The country's ongoing economic distress has produced layoffs in many industries, and pharma appears to be feeling the pain as well.
Recent layoffs reported in the drug industry include Sanofi (650 sales reps);Novartis (550 U.S. salespersons);Merck (8,000); Wyeth (2,440); GSK (1,000); Schering-Plough (5,500);and Boehringer Ingelheim (200).
- Whistleblowers, TARP, and Other Wall Street "Bailout" Measures--Why the False Claims Act and IRS Whistleblower Program Are More Essential Than Ever
On the same grey November day when President Bush visited Wall Street's Federal Hall to address the ever-morphing "bailout," I was in lower Manhattan meeting with IRS officials about an IRS Whistleblower matter. The tax evasion scheme we discussed was yet another that has cost taxpayers dearly.
As NYPD officers scurried about to help protect the President that day, I wondered who and what would protect our taxpayer funds--the hundreds of billions the government was now about to dole out--from fraud and abuse.
Fraud is rampant, as proven by the evidence brought to light by so many of our whistleblower clients under the qui tam statute, the False Claims Act, and now under the new IRS Whistleblower Program.
A few days later, Sen. Chuck Grassley hammered the same point in a November 17, 2008 letter to Treasury Secretary Paulson and Attorney General Mukasey. Grassley has insisted on effective oversight of the Troubled Asset Recovery Program (TARP) and the Capital Purchase Program (CPP), as well as on encouraging "whistleblowers" to come forward:
In the meantime, taxpayer dollars are at risk and I believe it is important to discuss alternative procedures and measures that can be taken to ensure taxpayers aren’t taken to the cleaners by unscrupulous individuals. One proven and effective method of overseeing taxpayer funds has been to support courageous whistleblowers who risk their jobs and livelihoods to bring forth allegations of fraud, waste, and abuse of taxpayer monies. As a longtime supporter of whistleblowers, I can attest to the fact that whistleblowers are often the key to uncovering schemes to defraud the government. With their inside knowledge of how businesses, corporations, or government agencies operate they are often privy to information that is often the necessary component to piece together how a fraud is perpetrated. As such, I believe you should both work to ensure that all entities participating in the TARP and CPP are made aware that any allegations of fraud, waste, or abuse will be treated seriously and properly referred to the Treasury Inspector General or the Attorney General for review until a Special Inspector General for the TARP is appointed.
Grassley also emphasized the importance of the False Claims Act, the nation's primary civil weapon for combating fraud against taxpayer funds, in preventing and penalizing fraud in the bailout:
[E]ntities who receive federal funds under the TARP and CPP are subject to the provisions of the FCA should they use false or fraudulent submissions in order to obtain federal funds. For instance, any entity that submits false or fraudulent information in an application to Treasury in order to obtain federal funds available through the CPP would be liable to the Government under the FCA. Further, while it has been reported that the Treasury does not currently plan to utilize authority under the Act to use the TARP to purchase distressed assets either directly or indirectly, should Treasury exercise its authority to do so, any fraudulent statements or submissions made to induce the Government to purchase those assets would also subject the fraudfeasors to liability. As a result, these individuals and corporations could be subject to civil penalties and treble damages for committing fraud against the Government.
- Offshore Tax Evasion Investigations by IRS and Justice Department Expand, As IRS Whistleblowers Continue to Come Forward
The Justice Department has announced that its investigation of offshore tax evasion will expand to include Europe's largest bank, HSBC in London, and Credit Suisse in Zurich. The increasing scrutiny of illegal offshore tax schemes comes as the Wall Street bailout and turmoil in the banking and financial services industries generate more interest in IRS Whistleblower Program claims.
DOJ and IRS continue to investigate UBS, Switzerland's largest bank. Last month saw the unsealing of the an indictment of Raoul Weil, a UBS senior executive, who faces charges of conspiring to defraud the United States by concealing American clients' taxable assets.
Scrutiny of Credit Suisse and HSBC reportedly includes whether the two banks may have helped U.S. clients hide up to $30 billion from U.S. tax authorities.
The IRS and DOJ investigations highlight differences in U.S. and Swiss law. Switzerland does not criminalize routine tax evasion, and bank secrecy rules in Switzerland prohibit disclosure of account holder information in these cases.
U.S. officials have already obtained previously "secret" UBS bank information reportedly revealing that some 20,000 U.S. citizens have maintained offshore accounts with UBS, and that approximately 17,000 of those accounts were never disclosed to the IRS. Estimates of willful tax evasion of $300 million per year have been reported previously.
These investigations also underscore problems in compliance with the IRS qualified intermediary program. Foreign financial institutions and foreign branches of U.S. financial institutions can agree with the IRS to be qualified intermediaries, and thus be subject to simplified withholding and reporting rules. The program seeks to make sure that the IRS is informed of foreign accounts with taxable assets, but many of these assets continue to be concealed from the IRS.
As U.S. taxpayers face an ever-increasing cost to "rescue" or bail out financial institutions, tax evasion and tax fraud schemes revealed by whistleblowers through the IRS Whistleblower Program will attract greater and greater scrutiny. Perhaps some of these whistleblowers can help offset the bailout's ultimate costs by reducing the several hundreds of billions in unpaid tax liability each year (the "tax gap").
- Justice Department Announces 2008 Fraud &"Qui Tam" False Claims Act Recoveries, with Medicare, Medicaid, and Other Health Care Fraud Alone Topping $1 Billion in Recoveries of Taxpayer Funds
Will Wall Street Bailout Produce the Next Round of Whistleblowers Reporting Fraud?
The U.S. Department of Justice this week announced its FY 2008 recoveries in fraud and False Claims Act cases, with more than $1 billion in health care fraud recoveries alone, and a total of more than $1.3 billion. (As explained below, we believe the $1.3 billion figure is low and understates the actual fraud recoveries this year.)
Cases brought by "relators" or whistleblowers under the nation's primary whistleblower statute, the False Claims Act, accounted for 78% of the money recovered. Since the False Claims Act took its current form in 1986, this law has recovered more than $21 billion of taxpayer funds from those who defraud the government.
As health care costs have grown as a percentage of the federal budget, so have recoveries for health care fraud. Recoveries of federal dollars were made because of fraud not only in Medicare and Medicaid, but also other federal programs such as Tricare and the Federal Employees Health Benefits Program.
The largest recoveries were from pharmaceutical companies--Cephalon Inc., Merck & Co. and CVS Caremark Corp. paid more than $640 million. Pharmaceutical fraud cases also repaid $430 million to state Medicaid programs.
DOJ also cited recoveries in cases of fraud affecting defense procurement contracts, disaster assistance loans and agricultural subsidies.
The actual recoveries were greater if you compare DOJ's announcements of its settlements, as well as include dollars recovered under the various State False Claims Acts. (We have written extensively about
