Posts in False Claims/Whistleblower.
Healthcare Schemers Cannot Hide Behind the First-to-File Doctrine 

With a greater demand to access for healthcare services also comes the need for reliable and honest physicians and healthcare facilities. Unfortunately, throughout the country healthcare kickback schemes are becoming more prominent in the healthcare system.

Kickbacks are incentives, usually bribes or anything of value, paid to a physician or healthcare facility to induce the referral of items or services reimbursable by Medicare, Medi-Cal or private insurers. Now more than ever, whistleblowers are encouraged to exercise their duty and right to disclose fraudulent or wrongful conduct.

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The End Is Near for Another Clinical Laboratory Accused of Fraud: True Health Diagnostics

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.”

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CPM Wins in Whistleblower Award Decision in Virginia Supreme Court

In a decision of first impression in the state and federal appellate courts throughout the country, the Virginia Supreme Court issued an opinion in a case filed by CPM in 2007, Commonwealth v. Commonwealth ex rel. Hunter Laboratories, LLC (Va., Aug. 9, 2018, No. 170995) 2018 WL 3768538, holding that the whistleblower’s award under Virginia’s false claims act must be calculated based on the total amount of the settlement of a qui tam case, not just the portion retained by the state.

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Whistleblower Law for Whistleblowers: A Practical Guide

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

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Whistleblower Law for Whistleblowers: A Practical Guide

Part 5:  Whistleblower Rewards

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In a divided opinion, the Sixth Circuit Court of Appeal overturned a lower court order dismissing a $35 million whistleblower suit against Brookdale Senior Living Communities. The suit was filed by a former employee of Brookdale who was tasked with reviewing Medicare claims prior to their submission. The whistleblower alleged that it was Brookdale’s policy to enroll as many residents as possible in home health care services that were billed to Medicare, even when the treatments were not medically necessary. She also alleged that Brookdale submitted claims to Medicare without obtaining the required physician certification of need, or that Brookdale obtained the certifications after the fact.

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Whistleblower Law for Whistleblowers: A Practical Guide

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

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Whistleblower Law for Whistleblowers: A Practical Guide

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

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Whistleblower Law for Whistleblowers: A Practical Guide

Part 2: Protecting Whistleblowers From Retaliation

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Whistleblower Law for Whistleblowers: A Practical Guide

Part 1: Am I a Potential Whistleblower?

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Fraud Trends In the Medical Laboratory Industry

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.

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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.

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The U.S. Supreme Court on Friday announced that it will review a Seventh Circuit decision finding income from $13.3 million given to employees was taxable.

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On July 7, the Ninth Circuit issued an opinion in United States ex rel. Campie v. Gilead Sciences, laying out the standards for pleading plausible claims under Fed. R. Civ. P. 12(b)(6) in whistleblower cases filed under the False Claims Act.  United States ex rel. Campie v. Gilead Sciences, 2017 U.S. App. LEXIS 12163 (9th Cir. July 7, 2017) (“Campie”).

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The California Fair Employment and Housing Act (FEHA) protects the right to seek, obtain, and hold employment without discrimination because of race, religion, sex, age, disability, or sexual orientation, among other characteristics.  Under the FEHA, the definition of “employee” in Section 12926 of the Government Code previously excluded individuals with disabilities granted special licenses to work at nonprofit sheltered workshops, day programs, or rehabilitation facilities.  Employers are still permitted to pay these individuals less than the minimum wage, but before January 1, 2017, there was no recourse under FEHA if these individuals were being discriminated against or harassed.  Now, they are afforded the same FEHA protections, thanks to Assembly Bill No. 488.

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On December 6, 2016, the U.S. Supreme Court, in State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, Docket No. 15-513, slip op. (S.Ct. December 6, 2016) (“State Farm v. Rigsby”), found that failure to keep a False Claims Act (“FCA”) complaint under seal for the required 60 days was not sufficient to warrant a dismissal with prejudice.  

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Mylan Business Practices Harm Consumers, Insurers and the Government

Mylan NV's EpiPen has made headlines recently, and not in a positive way. Outrage grew in August at a jaw dropping 500% price hike for its EpiPen epinephrine auto injectors. The EpiPen is a lifesaving device used to treat severe allergic reactions, or anaphylaxis. The device is essentially a spring loaded syringe that injects a dose of epinephrine into the thigh, even through clothing. 

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Compounded Drug Fraud

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. 

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In federal and California state courts, defendants often look to the “public disclosure bar,” 31 U.S.C. § 3730(e)(4)(A) and Cal. Gov. Code section 12652, subd. (d)(3)(A), to shield them from liability from claims brought under the Federal and California False Claims Acts. Not surprisingly, defendants routinely argue that the public disclosure bar should be broadly construed to bar claims that are only tangentially related to information publicly disclosed before the whistleblower (also called the “relator”) filed their false claims action.

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Court of Appeal Limits Public Disclosure Defense under the California False Claims Act

Under the California False Claims Act, like its federal counterpart, defendants often seek to have claims against them dismissed on the basis of the “public disclosure” bar, Cal. Gov. Code section 12652, subd. (d)(3)(A). The scope of the California False Claims Act’s public disclosure bar was recently considered by the Second District Court of Appeals, which explained that the bar is intended “to prevent parasitic or opportunistic actions by persons simply taking advantage of public information without contributing to or assisting in the exposure of the fraud.” State ex rel. Bartlett v. Miller (2016) 243 Cal.App.4th 1398, 1407.

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The federal government spent roughly 14% of its overall expenditures on Medicare in 2014. Included in those costs were significant money paid to rehabilitation companies and skilled nursing facilities to provide rehabilitation and care services to seniors. Given the massive amount of money being spent on those services, there is also an increasing amount of fraud, abuse and deception occurring, where dishonest providers are seeking to line their pockets with taxpayer dollars.

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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.

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AB 1509 Expands California Whistleblower Protections to Family Members of Whistleblowers

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.” 

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Attorneys who litigate in Federal Court need to be aware of the recent amendments to the FRCP, which went into effect on December 1, 2015, in particular changes to  Rule 26, which governs the “duty to disclose” information in discovery.

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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.

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Whistleblower Barred From Receiving Portion of $322 Million Settlement

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.  

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Judge Allows Whistleblower Case Against BP to Proceed

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.

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Ringleader Of Healthcare Fraud Conspiracy Arrested

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. 

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$75.5 Million Settlement In Whistleblower Lawsuit Against Vmware, Inc.

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. 

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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.  

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Fraud in Government Procurement of IT and IT Services

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). 

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Fraud in For-Profit Education: Sufficient Particularity and Causal Connections

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.  

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Unsealed Cases Reveal $461.5 Million Settlements in Health Care Fraud

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. 

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$48.5 Million Settlement in Whistleblower Lawsuit

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.

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California Appellate Court Expands California Whistleblower Protections

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.

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OIG Issues Advisory Opinion Regarding Free Laboratory Services

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.  

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Fraud in For-Profit Education

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.

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Public Radio Airs Story on CPM’s Counterfeit Screws Litigation

The Center for Investigative Reporting this weekend aired a story detailing CPM’s counterfeit screws litigation on hundreds of public radio stations around the country.  You can listen here.  The story covers 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.

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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. 

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“False Certification” Claims Under the California False Claims Act

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.

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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.  

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Another Circuit Endorses “Implied Certification” Theory of FCA Liability

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.

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Blowing The Whistle On Procurement Fraud Under The California False Claims Act

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.

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California A.G.'s Office Files Complaint Against BP in CPM Whistleblower Case

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.

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Medicare Fraud in the Hospice Industry

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.

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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. 

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Only Six Years Removed from Subprime September, Congress Acts to Undermine Dodd-Frank

Mixed news this week for Dodd-Frank whistleblowers and attorneys working in that space: As we already know from the Securities and Exchange Commission’s annual report to Congress (released last month), foreign-based whistleblowers are coming forward in ever-growing force to report Dodd-Frank violators to the Commission.

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6th Circuit Says FCA Only Protects Whistleblowers in “Employmentlike Relationships"

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.

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SEC’s Dodd-Frank Whistleblower Program Grows Significantly - and Consistently - for Third Straight Year

The U.S. Securities and Exchange Commission (“SEC”) released its annual report to Congress on its Dodd-Frank whistleblower program last week. As in years past, the results are heartening for prospective whistleblowers, shareholders, and good governance advocates worldwide: For fiscal year 2014, the SEC’s Office of the Whistleblower (“OWB”) received 3,620 tips—nearly 400 more than in fiscal year 2013, and about 20 percent more than the agency received in fiscal year 2012, which was the program’s first full year in operation.

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California Attorney General Joins Cotchett, Pitre & McCarthy in Whistleblower Case Against BP

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.

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California Legislature’s Changes to Labor Code Finally Paying Off for Whistleblowers

The Legislature has enacted several changes to the California Labor Code designed to protect employee-whistleblower activity. Many of these changes relate directly to areas in which CPM practices. The Legislature’s changes are beginning to pay real dividends to whistleblowers who expose the corporate wrongdoing of their employers.

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“The Outsiders”: New Ninth Circuit Ruling on the Public-Disclosure Bar and Original Source Exception

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. 

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Newly Published Ninth Circuit Case Non-Controversial, Despite Abortion-Debate Undertones

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.

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Center for Investigative Reporting Covers CPM's Spinal Screw Case

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. 

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Dodd-Frank Whistleblower Program Continues to Thrive As Courts Debate Extent of Protections

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. 

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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.

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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.

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