The Civil War started 150 years ago, and we are seeing books, movies, and re-enactments commemorating the start of that conflict.  We also are seeing lawsuits, the origins of which go back to that war and beyond.  During the Civil War, President Lincoln urged Congress to pass a whistleblower statute, because of rampant fraud in government contracting, which was hurting the war effort.  That law, which has been revised repeatedly, is still in place.  It allows a private individual to bring a lawsuit against a person or business that is defrauding the government, typically through false claims for payment.  The whistleblower usually is a person working inside the offending company.  Such lawsuits, which were known in British law, are referred to as qui tam actions. The phrase “qui tam” is short for “qui tam pro domino rege quam pro si ipso in hac parte sequitur,” which means roughly “Who sues on behalf of the King, as well as for Himself.”  The current version of the federal law is the False Claims Act, 31 U.S.C. Section 3729 et. seq.

A whistleblower who files such a civil lawsuit must do so under seal with a U.S. District Court.  That is so that the target does not know about what might be about to happen.  The Department of Justice then investigates the matter and decides whether or not to prosecute.  The Justice Department also decides whether or not to take charge of the civil lawsuit.  If the Justice Department does not take over the civil case, the whistleblower who brought the case in the first place can continue the lawsuit, but only after any federal criminal case has concluded.  If the civil case is successful, the whistleblower can receive 15 to 25 percent of the total recovery, including damages for the false claims, as well as civil penalties. Whistleblowers who win also are entitled to reimbursement for their own expenses, including attorneys fees.

Earlier this month, the Justice Department announced that it has filed a complaint against Texas-based Health Ltd. under the False Claims Act. The government alleges that the pharmaceutical company submitted false statements to obtain coverage of an unapproved and Medicaid/Medicare ineligible drug.  The government also announced that it had “filed a notice of intervention in an action against Healthpoint that was commenced under the qui tam or whistleblower provisions of the False Claims Act.”  In other words, a whistleblower had alerted the government to the false claims, and the Justice Department’s press release expressly noted that, “[i]f the government is successful in resolving or litigating its claims, a proper whistleblower can receive a share of between 15 percent to 25 percent of the amount recovered.”

A couple of years ago, in another Texas case, the Justice Department announced that a “hospital group based in McAllen, Texas, has agreed to pay the United States $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1999 and 2006, by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group.”  The government also announced that the settlement resolved allegations raised in a qui tam or whistleblower lawsuit filed by a former employee of the defendants, and that the private individual who brought the whistleblower lawsuit will receive $5.5 million from the settlement.

Returning to its roots in alleged wartime contracting fraud, just this week a whistleblower lawsuit resulted in a settlement of $8.7 million to resolve allegations that two companies submitted or caused to be submitted false claims for payment under a contract to provide civilian police training in Iraq.  The government announced that the lawsuit originally was brought by two former company employees under the qui tam or whistleblower provisions of the federal False Claims Act, and that the two whistleblowers “will receive up to $481,710 as their share of the government’s recovery.”

In the words of an assistant attorney general, “The hard work of stabilizing Iraq is challenging enough without contractors and subcontractors inflating the cost of rebuilding by making false claims at taxpayers’ expense.”  So if you are working for a company that is defrauding the government, you can perform a patriotic service and can be rewarded financially by calling an attorney and blowing the whistle.

Whistleblower Update: The twist in the following set of cases is that a pharmacy – not an individual working for the defendant – was the whistleblower that sued a pharmaceutical company on behalf of the governments of the U.S., Florida, and Texas.

Par Pharmaceutical Companies Announces Settlement in Principle Regarding Certain Drug Pricing Lawsuits

By Par Pharmaceutical Companies, Inc.
Published: Wednesday, Apr. 27, 2011 – 2:07 pm

WOODCLIFF LAKE, N.J., April 27, 2011 — /PRNewswire/ — Par Pharmaceutical Companies, Inc. (NYSE: PRX) announced today it reached a settlement in principle to resolve claims brought by the pharmacy Ven-A-Care of the Florida Keys, Inc. on behalf of the United States, Texas, and Florida under state and federal law, as well as claims brought by the Attorneys Generals of Alaska, South Carolina, and Kentucky under state law for $154 million (pre-tax).

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