1. QUI TAM - QUI WHAT?
Perspectives From Experienced Government Counsel,
Relator’s Counsel & Defense Counsel
17th Annual FLABOTA Convention Friday, July 18th, 2014
The Breakers
Palm Beach, Florida

2. SPEAKERS Government Counsel Relator’s Counsel Defense Counsel
Jeffrey W. Dickstein, Esq.
Assistant United States Attorney, United States Attorney’s Office for the Southern District of Florida
Relator’s Counsel
Marc S. Raspanti, Esq.
Partner, Pietragallo Gordon Alfano Bosick & Raspanti, LLP in Philadelphia, PA
( / /
Defense Counsel
Meredith S. Auten, Esq.
Partner, Morgan Lewis & Bockius, LLP in Philadelphia, PA (

3. THE FALSE CLAIMS ACT OVERVIEW
Enacted during the Civil War by Abraham Lincoln to combat Defense Contractor fraud
Also called the Qui Tam Statute, the Whistleblower Law or the “Lincoln Law”
Strengthened in 1986 during the Cold War
Expansive reach – all goods/services provided with any federal funds, now heavily focused on fraud in Healthcare programs
Vibrant Future – Recently amended substantially by Congress
Can affect any institution, entity or individuals doing business directly or indirectly with the government

4. THE FALSE CLAIMS ACT
False Claims Acts apply to all types of goods, services and Government contracting, and have been particularly effective in combating
Healthcare (Medicare and Medicaid) Fraud
Pharmaceutical Fraud
Financial Industry Fraud
Defense Contracting Fraud
Energy (Oil and Gas) Contracting Fraud
Iraq Reconstruction Fraud
Environmental Fraud
Disaster Relief Fraud
Construction and Procurement Fraud
Research Fraud

5. STATE FALSE CLAIMS ACT
29 states currently have their own False Claims Act
The Florida FCA was passed in 1994 and amended in 2007
Morgan Lewis partner Bobby Brochin was a drafter

6. 29 States now have their own FCAs
STATE FALSE CLAIMS ACT
29 States now have their own FCAs
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Illinois
Indiana
Iowa
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
Montana
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Oklahoma
Rhode Island
Tennessee
Texas
Virginia
Washington
Wisconsin

7. MUNICIPALITY FALSE CLAIMS ACT
The following municipalities have their own False Claims Acts:
Chicago
New York City
District of Columbia
Philadelphia
Allegheny County, PA

8. FEDERAL FALSE CLAIMS ACT
Qui tam cases produced $39 billion in settlements - hundreds of millions to over $1 billion in some cases
Examples of top civil recoveries:
GlaxoSmithKline - $2 billion
Johnson & Johnson - $1.7 billion
Pfizer - $1 billion
Bank of America - $1 billion
Tenet Health - $900 million
Abbott - $800 million
Home America Mortgage - $320 million

9. FEDERAL FALSE CLAIMS ACT
What it does NOT cover:
FCA does NOT cover tax fraud
New IRS Whistleblower Provision
26 U.S.C. § 7623
New SEC Whistleblower Program
15 U.S.C. 78a et seq.

10. FEDERAL FALSE CLAIMS ACT PROHIBITED CONDUCT
FCA prohibits:
Knowing submission or causing submission of false or fraudulent claims for payment
Knowing submission or causing submission of false or fraudulently records in support of a false claim
Conspiracy to submit a false claim
Submission of false records to reduce money owed to the United States
31 U.S.C. § 3729

11. FEDERAL FALSE CLAIMS ACT PROHIBITED CONDUCT
Not limited to classic fraud
“Knowing” falsity broadly defined
Actual knowledge
Reckless disregard / deliberate ignorance of the truth or falsity of the information – “ostrich with its head in the sand”
Regulatory / contractual violations can be recast as knowing falsity

12. WHAT IS A CLAIM UNDER FCA?
Any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the U.S. provides or reimburses any portion of the money or property
Examples of Claims Under the Act:
Direct requests for payment
Indirect requests for payment
Obligations owed to the Government
Bids
Loan applications
Grant documents
Cost reports

13. FEDERAL FALSE CLAIMS ACT
What Defendants can owe if held liable:
Defendant liable for mandatory treble damages sustained by the Government
Defendant also liable for penalty of between $5,500 and $11,000 per claim for each false claim to the Government
Defendant liable for attorney’s fees and litigation costs
Joint and several liability with no right of contribution or indemnity

14. FEDERAL FALSE CLAIMS ACT
Who can be a “relator?”
A relator can be any “person,” including individuals, entities, and companies

15. QUI TAM LITIGATION How will investigation generally proceed?
Civil Investigative Demands
Inspector General Subpoenas
Search Warrants
Grand Jury
Interviews – voluntary
Criminal HIPAA Subpoenas

16. HOT BUTTON SECTIONS OF LAW
First to File Bar - 31 U.S.C. § 3730(b)(5)
Public Disclosure Bar - 31 U.S.C. § 3730(e)(4)(A)
Original Source - 31 U.S.C. § 3730(e)(4)(B)
Fair, Adequate & Reasonable - 31 U.S.C. § 3730(c)(2)(B)
Relator Share Award - 31 U.S.C. § 3730(d)(1)
Attorney Fees Award - 31 U.S.C. § 3730(d)(1)
Anti-Retaliation Provision - 31 U.S.C. § 3730(h)

17. FEDERAL FALSE CLAIMS ACT
Attorney’s Fees and Costs
If found liable, Defendant must pay the Relator’s reasonable attorney’s fees and costs
Attorney’s fees and costs are in addition to Relator’s share of the recovery by the Government

18. FEDERAL FALSE CLAIMS ACT
Whistleblower Protection – 3730(h)
FCA protects any employee, contractor or agent discriminated against because of lawful acts done in furtherance of an FCA action
Entitled to “all relief necessary to be made whole,” including two times back pay, special damages, attorney’s fees and costs

19. FEDERAL FCA ANTI-RETALIATION PROVISION 31 U.S.C. 3730(h)(1)
Relief From Retaliatory Actions —
(1) In general — Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of other efforts to stop 1 or more violations of this subchapter

20. RELATOR’S PRIVATE CAUSES OF ACTION
Under Common Law
Intentional torts
Breach of Contract
State Statutes
New Jersey Conscientious Employee Protection Act
Watch preemption issues

21. FEDERAL FALSE CLAIMS ACT
Important Legal Issues
6-year statute of limitations, but can be extended to 10 years in certain cases
Only the Relator who is the “First-to-File” eligible to share in the recovery

22. QUI TAM LITIGATION Whistleblower – a.k.a. “Relator”
Files in the name of the Government
Complaint filed under seal
United States has 60 days to investigate and decide whether to intervene or not – declination is 75% - 80% of cases
Decline and allow the private person to pursue the case on their own
File a notice of non-intervention at this time
Relator shares in recovery (15% - 30%)
Relator recoveries are currently higher in DOJ-intervened cases

23. QUI TAM LITIGATION Relator and his information:
Employee or ex-employee of defendant
May have been involved in fraud to limited extent
May be Government employee
Cannot be a member of the Armed Services for actions arising out of military service
Second qui tam on same facts is barred
Public disclosure bar unless “original source”
Now government discretion to oppose dismissal

24. QUI TAM LITIGATION Intervention:
Government may elect to intervene or decline
In some or all of allegations
Can file an amended complaint / common law causes of action
Seal is lifted
If Government declines, it still remains real party in interest
Relators may pursue case on behalf of the government unless government moves to dismiss

25. QUI TAM LITIGATION Relators’ shares:
If Government intervenes, 15% - 25% plus attorney fees and costs
If Government declines, 25% - 30% plus attorney fees and costs
Awards reduced for relators who planned and initiated fraud; no recovery if criminally convicted of fraud

26. THE MODERN FEDERAL FCA Two separate Causes of Action
Fraud Cause of Action – Whistleblower essentially shares with the Government
31 U.S.C. § 3730(h) allegation – Relator’s Cause of Action only

27. HEALTH CARE FRAUD
Since the 1986 amendments to the federal FCA, the federal Government has recovered over $30 Billion from False Claims Act cases.
More than 67% of qui tam cases in the last decade have been health care fraud qui tam cases.
Typical health care defendants: pharmaceutical companies; medical device companies; hospitals; durable medical equipment; physicians; medical suppliers

28. TYPICAL QUI TAM HEALTH CARE FRAUD WHISTLEBLOWERS
Pharma Sales Reps & Managers
Medical Device Sales Reps
Any Sales Reps
Medical Directors
Physicians
Hospital Executives
Quality Control Personnel
Pharmacists
Nurses
Accountants
Contractors
Compliance Officers
Counsel

29. TYPICAL HEALTH CARE FRAUD ALLEGATIONS
Drugs – (off label marketing; kickbacks; inflated pricing; PRM fraud)
Upcoding
Excessive or unnecessary medical / diagnostic tests being performed on patients
No health care services actually provided to the patient
Kickback to illegally induce physician referrals
All types of hospital based fraud
Stark Violations
Ghost patients billed
Quality of health care services provided
Overcharging Government health programs for DME, services
Unlawful sales and promotion
Research grant fraud

30. TYPICAL HEALTH CARE FRAUD ALLEGATIONS
Regulatory violations: any will do?
Conflicts of interest, violations of industry codes of ethics, state laws
Various certifications of compliance

31. TYPICAL ALLEGATIONS AGAINST MEDICAL DEVICE AND DRUG MANUFACTURERS
Cozy financial relationships between and among owners;
Aggressive “off-label” marketing practices;
Inappropriate marketing efforts;
Unapproved or adulterated devices and drugs;
Safety issues;
Industry sponsoring and paying for research;
Clinical trial issues;
FDA indications;
Direct consumer advertising issues;
Shortcuts in quality of care;
KICKBACKS…KICKBACKS…KICKBACKS

32. ENFORCEMENT LANDSCAPE
Skewed industry focus on one industry sector: health care
Other industries ripe for focus: financial services, technology, retail, defense contractors, energy, educational institutions
Financial Fraud Enforcement Task Force
Procurement Fraud Task Force
Well over 1,000 qui tams currently under seal – majority are health care, but many financial institution defense contractors as well

33. ENFORCEMENT LANDSCAPE
Most civil and criminal cases have been and will continue to be driven by qui tam plaintiffs and their counsel
3.8 billion recovered in 2013
752 qui tam filed in million in recoveries
2.6 billion of 3.8 billion recovered from health care matters
Much better coordination between Feds and many State AGs
High Level of coordination between civil and criminal prosecutors
Over 160 federal qui tam actions spread across many judicial districts against medical device and pharmaceutical manufacturers
$385 million to whistleblowers in 2013

34. ENFORCEMENT LANDSCAPE
Judicial impatience with length of DOJ investigations under seal in some jurisdictions – internal DOJ 9-month rule
Consortiums of relator counsel banding together
Professional whistleblowers
More sophisticated attorneys, more aggressive, more willing to fight at all levels
More cases going through discovery to the courthouse steps

35. HEALTH CARE FRAUD INVESTIGATIONS: UNIQUE CHALLENGES
Complex regulatory framework
Complex payment and reimbursement system
Medicare, 49 Medicaid programs, other health care programs – SCHIP, TRICARE, FEHB, VHA, HIS
Centers for Medicare and Medicaid Services, i.e. CMS/OIG/FDA
CMS policies and the FCA law don’t always interact
Knowing where to find the answer is not always easy

36. HEALTH CARE FRAUD INVESTIGATIONS: UNIQUE ASPECTS
Health care first or second largest expenditure of funds in the country
Relators / whistleblowers are everywhere from the lunch room to the board room
Nature of health care is “interaction” with all aspects of society
Lots of claims / millions of submissions / billions of dollars
Many disgruntled, downsized, displaced or demoted employees
Exclusion from the Medicare and Medicaid program is a powerful deterrent

37. KEY STATUTES Federal False Claims Act – 31 USC 3729 et seq.
False Claims Act Anti-Retaliation Provisions – 31 USC 3730(h)
29 State False Claims Acts
Anti-Kickback Statutes – State and Federal
The Stark Law, 42 USC §1395nn
FERA (2009) and PPACA (2010) amendments

38. DEFENSE PERSPECTIVES
Well-developed body of case law favorable to defense – significant battlegrounds
Scienter standard – negligent, innocent mistakes not enough; ambiguous regulations not rise to level of knowing violations
Public disclosure and first-to-file bar – series of defense-favorable recent decisions to prevent parasitic suit
Proper measure of damages – good recent decisions that proper measure damages takes into account benefit government received
Penalties – can violate 8th Amendment; maybe not per claims, but per act
Enforceability of releases – more courts enforcing
Rule 9(b) requirement to plead fraud with particularity

39. DEFENSE PERSPECTIVES
Goal #1: manage company’s credibility in all communications and strategic actions from first call to government forward
Define strategy early
Determine what to fight about substantively on legal issues: not on document production unless abuse through CID process
Goal is always DOJ declination as well as relator dismissal

40. DEFENSE PERSPECTIVES
Recent FCA amendments confirm proactive strategies are necessary before intervention
CIDS and information sharing with relators and states may require defense interaction with the court
Robust compliance programs remain the best defense
Encourage employees, agents and contractors to use internal channels to address concerns
Investigate all of those calls

41. QUI TAM LITIGATION – IT’S COMPLICATED!
Intricacies of Federal Programs/Agencies
Complexity of Liability and/or Damages Creates Difficulties
Relationships/Reputation with Government and Other Relator’s Counsel
Qui Tam Litigation: Relator + Government + Defendant = Complicated³

42. COMPLEXITY CREATES OPPORTUNITIES
The process of a qui tam lawsuit:
A potential whistleblower’s first consideration
False Claims Act lawyer’s screening of the Relator’s evidence
Special aspects in drafting the FCA Complaint and statutory disclosures
Filing the case and presenting the matter to the Government
Company’s response to an investigation
Government’s determination of whether to join the case
Relator’s involvement during the seal period and beyond
Settlement and/or litigation phase of the action

43. QUESTIONS