Advocates for Justice

Taxpayer money is seemingly everywhere. Sadly, where money goes, bad actors often follow, trying to game the system to pursue unjust profits at the expense of law-abiding citizens. Luckily, there are also people committed to doing the right thing. Whistleblower rewards are available as a tool against those who systematically try to make away with tax dollars.

Over the past two decades, California has recovered over $2 billion under California’s False Claims Act (“CFCA”). Enacted in 1987, it is one of the nation’s oldest qui tam statutes. The CFCA empowers private citizens ...

Taxpayer money is ubiquitous. Unfortunately, where money goes, unscrupulous people follow, and will take advantage of the system to unfairly profit at their nation’s ultimate expense. Fortunately, right-minded humans also exist–who call out these wrongdoers. Also fortunately, whistleblower rewards are available to help battle those trying to game the system and steal tax dollars.

How to be a whistleblower? The primary law used to assist those blowing the whistle on bad behavior is the federal False Claims Act. Whistleblowers may be eligible for an award when they ...

As explained in our prior posts, statutory penalties under the False Claims Act can reach extraordinary levels. Generally, however, they will not violate the Excessive Fines Clause of the Eighth Amendment to the Constitution. However, in order to avoid raising concerns about the Eighth Amendment, Relators (aka "Qui Tam Plaintiffs") may elect to seek an amount below the minimum statutory penalty. This type of volunatery reduction is referred to in legal terms as a "remittitur." As explained by the Fourth Circuit, relators are free to eschew the bounds of the FCA’s statutory ...

Several circuits have addressed the issue of whether statutory penalties under the False Claims Act implicate the Excessive Fines Clause of the Eighth Amendment of the Constitution. Those courts have held that FCA statutory penalties can potentially violate the Excessive Fines Clause, but have uniformly upheld such awards, even when dramatically in excess of the single damages award.

Most recently, in December 2021, the Eleventh Circuit upheld a healthcare fraud judgment under the FCA of $1.179 million, stemming from only $755.54 in single damages, on 214 false claims submitted ...

In addition to treble damages, the federal False Claims Act requires defendants to pay a statutory penalty for every false claim they submit. Statutory penalties under the False Claims Act are mandatory, even for claims that are not paid, or where there is otherwise no damage to the government. See U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 189 (5th Cir. 2009) (“Put plainly, the statute is remedial and exposes even unsuccessful false claims to liability.  A person that presented fraudulent claims that were never paid remains liable for the Act’s civil penalty.”); United ...

Taxpayer money is everywhere. And where there is money, there are people willing to cheat to get more than their fair share. Fortunately, there are also upstanding humans interested in calling out wrongdoers gaming the system and stealing tax dollars. Also fortunately, we have whistleblower rewards!

The primary law used to assist those blowing the whistle on bad behavior is the federal False Claims Act. The SEC also has a whistleblower program that has grown significantly over the past decade. The last year has brought a record number of whistleblower claims under the FCA and SEC ...

A recent trend among defendants in False Claims Act cases is to argue that their violations are not "material"--in other words, that even though they may be breaking the rules, the government doesn't care. This trend was spawned by a Supreme Court case typically referred to as "Escobar": Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 2001, 195 L. Ed. 2d 348 (2016).

In cases of upcoding and misbilling, defendants' emphasis on the Escobar materiality test is misplaced. The Escobar test was formulated to apply in “implied certification” cases, as explained by the ...

Upcoding and misbilling cases are "factually false" claims under the False Claims Act. The distinction between a "legally false” claim, and a “factually false” claim, was recently explained by the Fifth Circuit Court of Appeals, as follows:

FCA claims can be either legally false or factually false. E.g., United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1266 (D.C. Cir. 2010) (recognizing factually false claims as “the paradigmatic case” and legally false claims as the “certification theory”). A claim is factually false when the information ...

Most outpatient healthcare services are billed to Medicare, Medicaid, and other payers on a “CMS-1500” form, using Current Procedural Terminology (CPT) codes to identify the services performed. CPT codes, and their definitions, are published by the American Medical Association (AMA). Misbilling of CPT codes is one of the most common forms of False Claims Act violations in the healthcare field.

The Court of Appeals for the Sixth Circuit described the importance of CPT codes in poetic terms: “The Rosetta Stone for the billing codes is found in an American Medical Association ...

Last week, court documents were unsealed in the Eastern District of Texas laying out serious allegations of fraud against True Health Diagnostics, LLC.  The documents arise from a failed attempt by True Health to lift a freeze on Medicare payments put in place against it based on suspicions of serious fraud.  The documents include the written Declaration of a Special Agent from the Office of Inspector General, United States Department of Health and Human Services.  According to the Special Agent, Jack Geren, True Health arose out of the ashes of another laboratory company called Health Diagnostic Laboratory, Inc. (“HDL”), which was “driven out of business as a result of pervasive healthcare fraud.”

Part 6:  Are There Any Downsides to Becoming a Whistleblower? The Whistleblower Facts of Life

Part 5:  Whistleblower Rewards

Part 4: Who Can Be a Qui Tam Plaintiff? And What Is the Basic Process?

Part 3:  Whistleblower Rewards: An Introduction to the False Claims Act

Part 2: Protecting Whistleblowers From Retaliation

Part 1: Am I a Potential Whistleblower?

The clinical laboratory industry continues to be a hotbed for Medicare and Medicaid fraud, as well as fraud and overbilling in connection with tests covered by private insurance.

Potential whistleblowers are sometimes afraid that if they bring their employer’s fraudulent scheme to light, the government will come after them for being involved in the fraud. While certainly possible, it is exceptionally rare. After all, the vast majority of money recovered by the federal government in False Claims Act cases comes from cases initiated by whistleblowers; scaring off whistleblowers would not be good business for the Department of Justice.

Direct to consumer genetic testing promises that with a couple dollars and a test tube filled with saliva, anyone has the power to look inside their DNA to assess health risks. In contrast to a traditional genetic test performed and interpreted by a physician, a direct to consumer (DTC) genetic test allows individuals to test themselves and bypass the physician and insurance provider.

Lyme disease is the most common tick-borne disease in the United States. Diagnosis and treatment stir confusion and controversy among patients, doctors, and alternative care providers. Some have capitalized on this confusion, creating a market for laboratory developed tests to diagnose the disease.

As drug addiction in the United States continues to gain national attention, the drug addiction rehabilitation industry booms. The Substance Abuse and Mental Health Services Administration estimates the addiction rehabilitation market is about $35 billion each year. While most of the industry provides life saving services for individuals struggling with addiction, some run scams to profit off of addicts and their insurance policies.

Drug compounding is the process by which a pharmacist combines or alters ingredients to make medications tailored to individual patient needs. Common examples include putting medication in liquid form for elderly patients or excluding an allergen. Many people benefit from these services. 

Currently pending before the Supreme Court is an important False Claims Act case, Universal Health Services v. United States ex rel. Escobar. The complaint in the case alleges that Universal Health Services knowingly hired unlicensed, unqualified and unsupervised non-medical professionals to provide mental health services in violation of Massachusetts’ Medicaid rules. The company then billed the state and federal governments as if those services had actually been provided by professionals. The misconduct had tragic consequences. According to the complaint, after seeking mental health services and receiving inadequate care from untrained non-professionals, a seventeen year old girl suffered a fatal seizure and died. When her parents discovered Universal Health Services’ failures, they sued under the False Claims Act.

Effective January 1, 2016, Assembly Bill (AB) 1509 prohibits employers from retaliating against an employee who is a family member of a whistleblower. Specifically, the bill “extend[s] the protections of these provisions…to an employee who is a family member of a person who engaged in, or was perceived to engage in, the protected conduct.” 

The federal Fair Debt Collection Practices Act (“FDCPA”) provides significant protections to debtors, and allows claims to be brought individually or on behalf of a class.

Often in class actions brought against debt collectors under the Fair Debt Collection Practices Act (“FDCPA”), some absent class members will be subject to state court judgments obtained (often wrongfully) by the debt collection defendant. The question often arises as to whether those individuals can still be part of the class, or whether their inclusion in an FDCPA action is barred by the Rooker-Feldman doctrine. In the Ninth Circuit, at least, Rooker-Feldman does not apply in such circumstances.  

Under most federal and state False Claims Act statutes, successful relators are entitled to a percentage “of the proceeds of the action or settlement of the claim.” Unfortunately, in some cases, the government tries to twist this language to prevent whistleblowers from receiving a share of all of the proceeds of their cases. Whistleblowers and their attorneys should fight such efforts.

The United States Department of Justice has announced further criminal charges in connection with CPM’s spine surgery qui tam case. Federal prosecutors announced charges against five individuals, including Paul Richard Randall, a key defendant in CPM’s case. Randall has been charged with, and pleaded guilty to, the conduct described in CPM’s whistleblower complaint, filed in May 2012. CPM’s complaint, and the subsequent indictments, allege that Michael Drobot paid millions of dollars in bribes and kickbacks to doctors in order to steer spinal surgeries to his hospital—Pacific Hospital of Long Beach. Randall and several others were on the receiving end of those kickbacks.

On June 1, 2015, District Court Judge John Walter of the Central District Court of California dismissed whistleblower James Swoben’s federal False Claims Act (FCA) case, finding that he was not the “original source” of the information. This dismissal effectively barred Swoben from receiving a portion of a $322 million settlement between the U.S. Department of Justice and Swoben’s former employee, Scan Health Plan.  

In an order issued August 14, 2015, Judge Curtis E.A. Karnow of the San Francisco Superior Court cleared the path for CPM and California Attorney General Kamala Harris to pursue whistleblower claims against BP (formerly British Petroleum) for overcharging the State of California on purchases of natural gas. The case was filed in 2012 by a former-employee of BP, under the California False Claims Act. California Attorney General Kamala Harris joined the case in late 2014. The case accuses the oil company of massive overcharging of California cities, counties, universities, and government agencies on purchases of natural gas over the course of the past decade.

CPM attorneys Justin Berger and Eric Buescher completed a jury trial on August 5, 2015, winning a unanimous verdict awarding damages of half a million dollars on behalf of a local small business owner in a hotly disputed breach of contract case.  The lawsuit centered around a lease agreement for an advertising billboard owned by Defendant Ad-Way Signs that is located on the plaintiff’s property.  The plaintiff, CPM’s client, alleged that Ad-Way had failed to pay full rent according to the lease between the parties, believing that Ad-Way was delaying and underpaying rent in an attempt to leverage the small business owner into entering into long term lease that was more beneficial to Ad-Way.  CPM’s client never budged, relying on the legal protections provided to commercial landlords by Civil Code sections 827 and 1945 to prevail.  CPM often represents small business owners who are victimized by greed.

On June 9, 2015, the FBI arrested Los Angeles-based chiropractor Bahar Gharib-Danesh, the alleged ringleader of a vast healthcare conspiracy first made public in a whistleblower lawsuit filed by Cotchett, Pitre & McCarthy (“CPM”). According to CPM’s lawsuit, which became public early this year, Danesh controls seven pain management clinics in Southern California. Together, these Clinics see hundreds of patients per day under the guise of “pain management” diagnosis and treatment. 

The United States Department of Justice and Cotchett, Pitre & McCarthy, LLP announced today a $75.5 million settlement of claims against VMware, Inc. and Carahsoft Technology Corporation, in a False Claims Act case prosecuted by Cotchett, Pitre & McCarthy, LLP and the Law Office of Jeffrey F. Ryan on behalf of Relator Dane Smith. VMware is the market leader in “virtualization” technology, and the fifth-largest software company in the world. The action was filed in 2010 by Dane Smith, the former Vice President of Americas Sales for VMware. The settlement represents one of the five largest recoveries against a technology company in the history of the False Claims Act. 

One of the most important factors in any case under the False Claims Act (federal or California), is whether the government decides to “intervene.” Oftentimes, however, when the government intervenes, it does not intervene on all of the qui tam plaintiff’s theories. The question then sometimes arises of how the non-intervened theories or claims should be treated. Defendants have argued that non-intervened claims must be dismissed. In fact, under both federal and California law, the qui tam plaintiff has full authority to proceed with non-intervened claims.  

In this day and age, virtually all federal and state government agencies have integrated computer systems and technologies into their everyday business. As a result, technology companies are selling computer systems and data management products to the government on a level that rivals, and often exceeds, their sales to other commercial organizations. To manage government purchases and effectively utilize taxpayer monies, the federal government’s General Services Administration (GSA) utilizes the Multiple Award Schedule (MAS) to set pre-negotiated prices for government agencies to purchase products from commercial companies, including entering into larger purchasing agreements, known as “blanket purchase agreements” (BPAs). 

With the mounting costs of higher education, students are increasingly relying on federal financial aid to finance their education. As a result, taxpayer monies are increasingly being advertised and used by higher education institutions, both non-profit and for-profit, to maintain student enrollment. As discussed in an earlier post, for-profit schools must certify they are in compliance with various federal statutes and regulations in order to receive federal financial aid, including: (1) being accredited by an approved agency; (2) that they do not derive at least 10% of their revenues from non-federal sources, known as the 90-10 Rule; (3) that they do not pay recruiters bonuses or other incentives payments based on student enrollments; and (4) that students are making satisfactory progress toward completing their course of study.  

On Monday, May 4, 2015, courts unsealed two health care fraud cases and revealed settlement amounts totaling over $461.5 million. In Carlisle v. Pacific Ambulance et al., Case No. 3:09-cv-02628-L-BLM (S.D. Cal.), whistleblower Kelvin Carlisle alleged that several ambulance companies engaged in an unlawful kickback scheme by providing heavily discounted ambulance services in exchange for exclusive rights to provide services to the hospitals. Carlisle stated that the scheme incentivized hospitals to order excessive and unnecessary medical services and seek reimbursement from Medicare. This case settled for $11.5 million, with Carlisle receiving $1.7 million. 

The United States Department of Justice today announced a $48.5 million settlement of claims against Health Diagnostic Laboratories (“HDL”) and Singulex, Inc., in a False Claims Act case filed by Cotchett, Pitre & McCarthy on behalf of a whistleblower in late 2011.  HDL is a Richmond, Virginia-based laboratory that specializes in coronary heart disease testing.  Singulex is a laboratory based in Alameda, California.  CPM prosecuted the case jointly with two other whistleblower actions filed by the law firms of Phillips & Cohen LLP, and Pietragallo Gordon Alfano Bosick & Raspanti, LLP.  CPM was assisted in the case by the Steven N. Berk, of Berk Law PLLC, based in Washington D.C.

California Labor Code §1102.5 protects employees from retaliation when employees report—either internally or to an outside law enforcement agency— employers that violate local, state or federal laws. Under this statute, employees who report unlawful employer activities (“whistleblowers”) are protected from employer retaliation such as discipline, reassignment, salary reduction, demotion, and termination. On November 21, 2014, a California appellate court broadened these whistleblower protections to include employees who were terminated because their employer “mistakenly believed” that the employee engaged in the protected activity of reporting employer misconduct.

Last week, the United States Department of Health and Human Services, Office of Inspector General (“OIG”) posted an Advisory Opinion addressing several issues of importance in the medical laboratory industry. OIG Advisory Opinions provide useful guidance to industry participants and potential whistleblowers in understanding what categories of conduct cross the line from legitimate business practices to fraud and abuse.  

The False Claims Act can be a powerful tool against for-profit educational institutions that exploit students, and bilk taxpayers. Under the Higher Education Act of 1965 (“HEA”), Congress established various student loan and grant programs, including the Federal Pell Grant Program (“Pell”), the Federal Family Education Loan Program (“FFELP”), and the Federal Direct Loan Program (“FDLP”) in order to financially assist eligible students in obtaining a post-secondary education. These loan and grant programs are only supposed to be offered to students who attend educational institutions that meet strict federal and state requirements. Unfortunately, many for-profit institutions fail to meet those requirements, and conceal that fact to continue receiving federal student loan proceeds. Many schools rely almost entirely on federal student aid to keep their programs running, and are willing to do and say anything, no matter how fraudulent, to keep those funds flowing.

Defendants in federal False Claims Act (“FCA”) cases often attempt to get cases dismissed by alleging that the whistleblower’s claims are based on information that was “publicly disclosed.” This type of defense is commonly referred to as a “public disclosure bar” defense. 

When a company charges the government for goods or services that were provided in a manner that violates laws, regulations, rules, or contractual provisions, those charges may violate the False Claims Act. This type of violation is often characterized as a “false certification” violation. As described by a California Court of Appeals, under the California False Claims Act, “a vendor impliedly certifies compliance with its express contractual requirements when it bills a public agency for providing goods or services.” San Francisco Unified School Dist. ex rel. Contreras v. Laidlaw Transit, Inc. (2010) 182 Cal.App.4th 438, 442. In Laidlaw, for example, the defendant—a school bus company—was found to have violated the California False Claims Act because it failed to comply with maintenance standards and pollution controls that were required in its contract with the government.

On December 23, 2014, Judge Troy L. Nunley of the Eastern District of California ruled in plaintiffs’ favor, denying defendants’ motion to dismiss. See United States ex. rel. Dalitz v. AmSurg Corporation, No. 2:12-cv-02218-TLN-CKD, 2014 U.S. Dist. LEXIS 177374 (E.D. Cal. 2014). This effectively allowed plaintiffs’ False Claims Act (FCA) case to continue.  

Earlier this month, the federal Fourth Circuit Court of Appeals issued a landmark decision broadening liability for False Claims Act violations. The decision, United States ex rel. Badr v. Triple Canopy, Inc., No. 13-2190, -- F.3d -- (4th Cir. 2015), is particularly important, given that the Fourth Circuit covers areas surrounding Washington D.C. that are replete with government contractors.

Procurement fraud—overcharging the government on some of the millions of products and services that government agencies purchase from private companies every year—is one of the most common schemes giving rise to whistleblower cases under the False Claims Act. On the federal side, an agency called the General Services Administration, or GSA, oversees the procurement of many goods and services on behalf of the federal government. Companies that want to sell their goods to federal agencies go through an application process to get their products listed on the federal GSA “schedule.” Many successful cases have been brought under the False Claims Act based on fraud committed on the GSA. For example, in one of the biggest recoveries, the software company Oracle paid $199.5 million to settle claims that it overcharged the government on the purchase of software products listed on the GSA schedule.

In a complaint filed this week, California Attorney General Kamala Harris added detailed allegations to a whistleblower case filed by Cotchett, Pitre & McCarthy against BP (formerly British Petroleum) that accuses the oil company of massive overcharging of California cities, counties, universities, and government agencies on purchases of natural gas over the course of the past decade.

Another area of healthcare that is rife with fraud is hospice care. Hospices aim to provide palliative care, as opposed to curative care, to patients in the last six months of their lives. Palliative care is aimed at relieving the pain, symptoms, and/or stress of terminal illness and includes a comprehensive set of medical, social, psychological, emotional, and spiritual services provided to a terminally ill individual. Medicare recipients of palliative care agree to forego curative treatment of their terminal illness.

After an hour long hearing on Thursday, December 11, 2014, Judge Elihu M. Berle of the Los Angeles Superior Court rejected defense challenges to a CPM whistleblower complaint alleging that they engaged in a vast fraudulent scheme involving spinal surgeries in Southern California. The plaintiffs assert that the defendants have defrauded the government and various California workers compensation insurance carriers by systematically arranging and performing spinal surgeries that: (1) were medically unnecessary; (2) used non-FDA-approved, counterfeit surgical hardware, including rods and screws that were implanted in patients’ back; (3) result from a vast array of kickbacks; and (4) were billed to insurance carriers and government payers at illegally inflated rates. 

The U.S. Court of Appeals for the Sixth Circuit held last week that the FCA does not bar prospective employers from discriminating against job applicants for having served as whistleblowers against different companies in the past.

It was publically revealed yesterday that the California Attorney General’s Office is joining a whistleblower case against BP (formerly British Petroleum) that accuses the oil company of massive overcharging of California cities, counties, universities, and government agencies on purchases of natural gas over the course of the past decade.

On October 29, 2014, the Ninth Circuit issued a published opinion in Malhotra v. Steinberg, et al. that contains a detailed discussion of the public disclosure bar, and the original source exception, of the False Claims Act. The opinion is helpful in reiterating the Ninth Circuit’s approach to the public disclosure bar, and provides a bit more guidance on a few open issues, including the definition of “outsiders” as it relates to the public disclosure bar. 

A recently published Ninth Circuit case interpreting the California False Claims Act proved relatively non-controversial, despite involving a dispute at the fringes of the abortion wars. In the case, Gonzalez v Planned Parenthood, 759 F.3d 1112 (9th Cir. 2014) (“Gonzalez”), a former Planned Parenthood director sued the organization’s Los Angeles branch under the federal False Claims Act and the California False Claims Act, alleging that Planned Parenthood overcharged California’s Medi-Cal program (specifically, Medi-Cal’s “Family PACT” program) for contraceptives provided to low-income individuals. The relator was represented in the case by the American Center for Law & Justice, a conservative Christian law firm founded by Pat Robertson. The lawsuit was presumably inspired (at least in part) by ideological disdain for the work of Planned Parenthood.

The Center for Investigative Reporting published a 4,000-word article yesterday detailing a Southern California medical equipment supplier’s scheme to use private plane rides, international vacations and cash-stuffed envelopes to recruit doctors to use his company to buy spinal surgery screws – many of which were apparently counterfeit. 

Even as recent federal rulings threaten to narrow the scope of anti-retaliation protections provided to individuals who report violations of America’s securities law, the Dodd-Frank Act’s whistleblower program continues to grow – both in the raw number of apparent violations brought to the attention of federal authorities and in the size of monetary rewards issued to whistleblowers. 

Defendants often attack actions brought under the California False Claims Act by arguing that the complaint does not provide sufficient specificity. Such attacks ignore two fundamental principles of pleading.

More than five years have passed since President Obama signed into law several important, relator-friendly amendments to the False Claims Act as part of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), S. 386 (introduced by Senators Leahy and Grassley). Those amendments, however, are as important today as they were then, and thus a review of those changes—and how they affect FCA whistleblowers (“relators”) and whistleblower attorneys—is warranted.