Wednesday, March 22, 2006

Massachusetts seeks $108 million in Big Dig refunds

Massachusetts Attorney General Thomas F. Reilly has sent demand letters to contractors involved in the Boston area highway project known as the Big Dig. In the letters the office demands $108 million in refunds for shoddy work.

Among the companies receiving the letters are Bechtel/Parsons Brinckerhoff, the manager of the project, and two dozen smaller design firms they supervised. The state will file a lawsuit if a settlement is not reached, according to the AG's office.

The state's settlement claim is based on tort and contract legal theories but the state has the option of proceeding under the Massachusetts False Claims Act, which can make a government contractor who accepts payment for substandard work liable for triple damages.

The Boston Globe of March 18, 2006 reported on the demand letters.

Monday, March 20, 2006

Government investigates Cell Therapeutics

Cell Therapeutics disclosed in a filing with the Securities and Exchange Commission that a private party has made claims against it under seal on behalf of the government. This is the language frequently used when a whistle-blower has a filed a suit under the qui tam provisions of the False Claims Act.

Cell Therapeutics first said last summer that it was being investigated for promotion of off-label uses of its leukemia treatment Trisenox. Physicians may prescribe drugs for uses other than those approved by the Food and Drug Administration but it is illegal for drug companies to promote those unapproved uses.

For more details, see the Seattle Times of March 17, 2006.

Thursday, March 16, 2006

Canada considers adopting a False Claims Act

Conservative members of Canada's Parliament are considering a law based on the United States' False Claims Act. The U.S. law allows a whistleblowers who suspects fraud against the government to file a lawsuit against the defrauding company in his name and on behalf of the government. The claim is filed in secret in court and the government, after reviewing the evidence, has the option of joining the case as co-plaintiff. If not, the whistleblower can proceed alone. If the suit is successful, the whistleblower may receive up to 30 percent of the recovery.

Conservative MP Pierre Poilievre said, "In the U.S., there is a growing sector of entrepreneurial waste-busters who see it in their self-interest to scrutinize all aspects of government spending to root out fraud and waste. That's a very good thing." He will be meeting with U.S. legislators to see about adapting the law for Canada.

For more details, see the Ottawa Citizen of March 13, 2006.

Tuesday, March 14, 2006

Government Accountability Office report shows results of False Claims Act litigation

The U.S. Government Accountability Office has posted on its website a copy of the briefing they prepared for Congress on False Claims Act litigation.

The report shows that health care and procurement fraud consitute about 79 percent of all qui tam cases; that the median relator share was $123,885; and the median FCA recovery in a qui tam case was $784,597.

5,129 qui tam cases have been filed in federal court from 1987 through 2005, as well as 3,740 non-qui tam FCA cases.

Ten percent of qui tam cases were filed in Los Angeles, more than in any other district, with the four California district courts accounting for nearly 19 percent of all qui tam filings.

The full text of the report, GAO-06-320R, can be found at the GAO website.

Thursday, March 09, 2006

Jury finds defense contractor liable in Iraq False Claims Act case

A whistle-blower case against defense contractor Custer Battles has resulted in a jury verdict against the company and its owners.

The suit, brought under the qui tam provisions of the False Claims Act, alleged that the company defrauded the government in the distribution of new Iraqi currency following the collapse of Saddam Hussein's government.

The jury trebled the $3 million dollars in actual damages, added penalties and came back with a judgment for $10 million.

Another trial against Custer Battles, brought by the same whistle blowers, will decide whether the company also defrauded the government on a $16.8 million security contract for Baghdad International Airport.

The Corporate Crime Reporter reported on the verdict on March 9, 2006.

U.S. seeks to join False Claims Act suit against Gabelli

The Federal government has filed a motion to intervene in a whistleblower suit against Mario Gabelli and his firm.

The suit, brought under the qui tam provisions of the False Claims Act, alleges that the money manager used sham companies to bid for FCC cellphone licenses at a discount under rules favoring minority and small businesses, then sold the licenses at a profit.

The whistle-blower, Russell C. Taylor III, is represented by the law firm of Phillips & Cohen.

Developments in the suit were reported on in the March 9, 2006 edition of the New York Times (registration required).

Tuesday, March 07, 2006

Deficit Reduction Act encourages whistle-blowers

An article in Modern Healthcare by Mark Taylor outlines some of the provisions in the federal Deficit Reduction Act that are intended to cut fraud by encouraging whistleblowers.

One provision requires organizations receiving more than $5 million in Medicaid money to train employees, vendors, managers, agents and contractors on state and federal false claims laws. Another provision gives states additional incentives to pass their own false claims acts by allowing them 10 percent of the federal share of any recoveries made under the Act.

The article was posted on the Modern Healthcare website on February 27, 2006.

New York State Senate considers Medicaid False Claims Act

New York State Senate Majority Leader Joseph Bruno says that a proposed reform of the state's Medicaid system could save more than $2 billion a year.

Bruno says that the Republican majority's proposals have a lot in common with changes proposed by Democratic Attorney General Eliot Spitzer, including a false claim provision.

The recently enacted federal Deficit Reduction Act encourages states to adopt False Claims Acts mirroring the federal False Claims Act by providing the state with 10 percent of the federal share of any recovery achieved under the Act.

The Senate Republicans issued a press release on March 7, 2006.