- 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 why states are enacting their own State False Claims Acts to mirror the federal False Claims Act, given the federal law's successes.)
With whistleblowers reporting fraud infecting in the Wall Street bailout funds (because no federal program is immune), it will be interesting to see how these billions of federal dollars show up in future statistics of fraud recoveries.
We have reprinted below DOJ's "fact sheet" about its FY 2008 significant recoveries. We congratulate Justice on another very successful year in fighting fraud and false claims.
- Tax Court Prepares for IRS Whistleblower Cases by Adopting New Proposed Amendments to Rules of Practice and Procedure
One of the hallmarks of the new IRS Whistleblower Rewards Program is that whistleblowers have an enforceable right to rewards, and can appeal the IRS Whistleblower Office's rewards decisions to the U.S. Tax Court.
The Tax Court has taken a step forward in issuing new proposed amendments to its Rules of Practice and Procedure to prepare for IRS whistleblower cases. The amendments are reprinted below.
A critical improvement is that the Tax Court has listened to concerns expressed by whistleblower attorneys about the need to allow whistleblowers to proceed "anonymously" and not reveal their identity publicly. The explanation of New Rule 340 would allow anonymous filings to endeavor to preserve confidentiality:
"Pursuant to section 7461(b)(1), the Court may issue protective orders, upon motion by a party or any other person and for good cause shown, to prevent or restrict the disclosure of trade secrets and other information. See Tax Court Rule 103(a). As result of this authority, in appropriate cases, the Court may permit a petitioner to proceed anonymously and seal the record in that case. See, e.g., Anonymous v. Commissioner, 127 T.C. 89 (2006). The Court contemplates that these generally applicable statutory provisions, Rule 103, and related case law, while they do not require the Court's records in all whistleblower actions to be sealed or require the Court to permit all petitioners in those cases to proceed anonymously, do provide authority for the Court to allow a petitioner to proceed anonymously and to seal the record when appropriate in whistleblower actions."
The full text is as follows:
- IRS Addresses Deductibility of Payments by Defendants to Settle False Claims Act Cases
In our former life as lawyers defending False Claims Act cases, our defendant clients had to consider whether the payments made to settle qui tam cases under the False Claims Act were deductible for tax purposes, and to what extent.
The IRS recently issued a paper on the subject: whether a defendant's payment to the Department of Justice to resolve False Claims Act allegations is "deductible in its entirety as a section 162(a) ordinary and necessary business expense, or includes non-deductible penalty amounts under section 162(f)."
This paper, LMSB-4-0908-045, is reproduced below:
- With Wall Street Bailout, Whistleblowers to Reveal Fraud and Abuses Through IRS Whistleblower Claims and Qui Tam False Claims Act Cases?
Will the IRS Whistleblower Program and the False Claims Act be powerful weapons in redressing the fraud and abuse that led to the current financial crisis--and to the future fraud and abuse that is certain to target the "bailout" billions of taxpayer funds?
Fraud and abuse have never been in short supply. The ongoing financial crisis points to staggering amounts of past financial abuses that now threaten to wipe out Americans' savings, if not undermine the world economy.
Now, the federal government's stated plans to spend hundreds of billions of taxpayer funds for the "bailout"--largely because of the lack of past oversight--will create countless opportunities for more fraud against the taxpayers.
In the Savings and Loan debacle, a judge asked, "Where were the lawyers?" Where were those who could have spoken out and stopped those abuses before they caused ruinous harm?
Today, the toxic loans, collateralized debt obligations, and credit default swaps that infect our financial system raise a broader question: how many persons failed to speak out to try to stop their corrupting misuse?
Scoundrels depend on silence from others while they loot the public fisc. To stop the looting, Americans (and others) must stand up, and speak up.
Whistleblowers will be essential to minimizing the theft of the bailout billions, through the IRS Whistleblower Program and the qui tam provisions of the False Claims Act, on which we have written extensively. Each allows private citizen whistleblowers to help the government recover taxpayer funds, and rewards the whistleblowers with what is typically 15-30% of the funds recovered.
It will be justice to see those whistleblowers courageous enough to speak up share in the government's recovery of the billions already lost, and the billions more of taxpayer funds that are about to be spent.
- 1st Annual Report on New IRS Whistleblower Program Issued by Secretary of the Treasury
When Congress authorized the new IRS Whistleblower Program in December 2006, it required annual reporting to Congress about how the new whistleblower provisions have been used, what results were obtained, and what recommendations to improve the program should be considered.
The Secretary of the Treasury has recently issued the first such Report, which summarizes the first 12 months of the new IRS Whistleblower Office.
For those who follow the IRS Whistleblower Program, the Report provides a look into the substantial progress made in a short time by this very small group within the IRS. These developments have been followed on this whistleblower lawyer blog since the infancy of the IRS Whistleblower Office.
Much-anticipated data about recoveries and rewards paid under the
