Whistleblower Law Blog : Whistleblower Lawyer & Attorney : LaBovick Law Firm, Florida : Federal False Claims Act, Qui Tam

Today, Justice Thomas delivered the opinion in the much anticipated case United States,  ex rel. Irwin Eisenstein, Petitioner, v. City of New York, et, al..  Unfortunately, the opinion, was a fatal blow for the Relator, Irwin Eisenstein, since the lower court's decision was affirmed that there is only a 30 day time limit for appeal on qui tam cases where the government decides not to intervene.

 In his opinion, Supreme Court Justice Thomas wrote:

"The question presented is whether the 30-day time limit to file a notice of appeal in Federal Rule of Appellate Procedure 4(a)(1)(A) or the 60-day time limit in Rule 4(a)(1)(B) applies when the United States declines to formally intervene in a qui tam action brought under the False Claims Act (FCA), 31 U. S. C. §3729. The United States Court of Appeals for the Second Circuit held that the 30-day limit applies. We affirm."

Petitioner filed a notice of appeal 54 days later. While the appeal was pending, the Court of Appeals sua sponte ordered the parties to brief the issue whether the notice of appeal had been timely filed. Federal Rule of Appellate Procedure 4(a)(1)(A)–(B) and 28 U. S. C. §§2107(a)–(b) generally require that a notice of appeal be filed within 30 days of the entry of judgment but extend the period to 60 days when “the United States or an officer or agency thereof is a party,” §2107(b). Petitioner argued that his appeal was timely filed under the 60-day limit because the United States is a “party” to every FCA suit. Respondents countered that the appeal was untimely under the 30-day limit because the United States is not a party to an FCA action absent formal intervention or other meaningful participation.

The Court of Appeals agreed with respondents that the 30-day limit applied and dismissed the appeal as untimely. See 540 F. 3d 94 (CA2 2008). We granted certiorari, 555 U. S. ___ (2009), to resolve division in the courts of appeals on the question,1 and now affirm."

One question at the forefront of everyone's mind is, why shouldn't all cases have 60 days to appeal? Relators without government intervention in the qui tam case have only 30 days to appeal. However, when the government decides to intervene in the case, there is a 60 day time limit for an appeal. Since the government is the beneficiary of successful qui tam litigation, doesn't it make sense to give more time to bring an appeal, whether or not the government intervenes?

 

 

 

According to the President of the National Whistleblowers Center, Stephen Kohn:

"The Supreme Court in Eisenstein has once again chipped away at the ability of whistleblowers to challenge corrupt contracting practices under the False Claims Act. The ruling demonstrates a fundamental misconception of the purposes behind the False Claims Act, the most important anti-fraud law in the United States. The Court ruled that FCA cases pursued by whistleblowers are similar to private lawsuits. This is wrong. Whistleblowers under the FCA have a powerful right to file cases on behalf of the United States, and the vast majority of any recovery in these cases is paid to the U.S. Treasury -- not the whistleblower. Taxpayers are the main beneficiaries of these cases -- the rules concerning filing deadlines should reflect the intent of the law, and should also reflect the fact that the United States, recovers no less then 70% of all monies obtained in an FCA case. In today's environment, the Supreme Court should be strengthening anti-fraud laws, not continuously chipping away at the ability of whistleblowers to present their cases."

Time will tell if this decision will affect other qui tam litigation pending appeal. Maybe we should seek relief from the legisature to help increase the time limit in bringing a False Claims Act Appeal for Relators. As a nation, we can't afford to allow the guilty to get away with fraud and use loop holes in the court to escape justice.  Let's hope that this case will help raise awareness that we need to continue to strengthen our False Claims Act, not "Chip away at it".

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I want to laugh when people buy into corporate propaganda. Don't you just love people who believe in a "trickle down" theory will actually trickle down to them. I also laugh when the oil companies cry that OPEC is charging too much and Exxon posts multi-Billion dollar profits. Do you believe them? How about the insurance industry that cries about how lawsuits are killing them, and turn around and post multi-billion dollar profits year after year. Corporations spin this propaganda until the average American believes it. Isn’t it Amazing?

The new spin from Beck/Herman legal bloggers for the Drug and Device Law blog claims that The False Claims Act is a "stealth tax". I was shocked by this sentiment when I came across their post “By Litigation - A Dubious Proposal To Expand False Claims Act Liability”. I am not sure what they are reading, but the last time I read the act, the purpose of the act was to catch companies and individuals that are ripping off the Federal Government. How anyone can refer to the False Claims Act as a Stealth Tax is an act of spin that is worth memorializing.

The Beck/Hermann post acts as if the poor company is being looted by pirates instead of realizing that it is the pirates who are being brought to justice. So, don't let the “spinmeisters” confuse you. What would you prefer, letting the poor companies continue to rip off your tax dollars so they can get richer and richer while you pay more and more in taxes?

If you are new to qui tam and the False Claims Act, it is a piece of legislation that involves privately owned companies doing business with the Federal Government that are caught defrauding the government. If found guilty, the private business must pay back the money stolen from the government, plus three times the stolen amount, plus attorney fees, plus costs, plus a fine. The goal of the False Claims Act is to send a warning message to the corporate community that stealing from the government does not pay.

Tough love, right? But it makes sense. If you are caught defrauding the government, you should pay up. Not pay back, but really pay up. A company needs to be penalized hard because it is easy and sometimes profitable (until caught) for a company to defraud the government. So much so, that many companies do it every year. However, it does not make it right for companies to make “billions” of dollars from defrauding from our government. Now, how does the government get the money to pay these defrauders? TAXES. How else?

Is it a "stealth tax" to get money back from companies that stole it in the first place? Isn't that absurd! Yes, there is severe punishment as well. But is that the "stealth tax"? Of course not. Taxes are not punishment. They are the social compact investment in the infrastructure of our nation. Some people may believe we need less infrastructure. Some people want more. That is not the issue. The issue is that we have a solid foundation of representative government that works when the people at the top are honorable and working for the people. (That is a whole other issue I simply can't digress into here). Taxes are simply not punishment and the False Claims Act has nothing to do with taxes.

The fact that the False Claims Act rewards Whistleblowers with between 15% and 30% of the take is not relevant to the act itself because the government uses the False Claims Act all the time without whistleblowers. However, private whistleblowers are awesome. They dig out the fraud and the report it to the authorities. For this, they usually lose their job, lose their homes, and lose their standing in the professional community. They turn their lives upside down. Then 7 years later when the case settles, most of them get a small payout of about 16% (that is a common statistic used for the typical payout) of whatever the government collects. Yes, collects. Not "sues for", collects, which can be hundreds of millions shy of the original fraud claim. Why would anyone do it, If there were no hope for the whistleblower to recover anything,. Who would report the fraud? The intent of the law is to motivate people with money to report fraud.


What happened last year was that the Supreme Court changed the rules. They created a situation where the company doing the fraud could set up a fall guy companies to act as subcontractor intermediaries. These subcontractors would then dilute the fraud between the layers of corporate chaos and by the time, you get to the underlying fraud scheme it is so diluted and mixed up that no fraud charges can be made. The new law cleans up that loophole. Nothing more then a stopgap to a great fraud scheme that our very literal Supreme Court felt they could not stop without a change in the law.

Sorry for the rant, but the position that this is a "Tax" is so absurd as to deserve both the sarcasms and the diatribe.

Off the soapbox till next time: I would love to know your thoughts on this. Drop me a line or post a comment on the Whistleblower Law Blog.

Brian

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New York Attorney General Andrew M. Cuomo and New York City Mayor Michael Bloomberg joined forces this week in the fight against Medicaid fraud. Yesterday they filed a joint lawsuit against Merck for the drug Vioxx. Their suit claims Vioxx misrepresented the dangers the drug posed to its users. The lawsuit seeks damages and civil penalties in addition to restitution for tens of millions of taxpayer dollars wrongfully spent on Vioxx prescriptions, and marks the first time the State and City have brought a joint action to fight Medicaid fraud.

Attorney General Cuomo issued strong words in a statement on the case  "Merck's irresponsible and duplicitous conduct endangered the health of New Yorkers and wasted our tax dollars. As alleged in the complaint, even as evidence was piling up showing just how dangerous this drug was, Merck put profits above all else and put thousands at risk by continuing to push Vioxx inappropriately on doctors and patients.We will hold accountable those who put our families at risk, and we will fight back when New Yorkers are harmed and fleeced.”

According to Ed Silverman of the Pharmalot Blog, did a great job covering this story. He brings out in his recent post that this the lawsuit comes just five months after the newly appointed Jim Sheehan came aboard as New York State’s Medicaid Inspector General. Jim Sheehan is former Assistant Attorney General in Philadelphia. We owe him tremendous gratitude for his efforts in the Medco case. A company that was once owned by Merck.

This is the only the beginning. New York has jumped out first in using their new State False Claims Act to help prosecute this alleged fraud against the residents of New York.  Companies across the U.S. should be on notice that they will be prosecuted by more states for any State False Claims Act violation.  There are about 22 states with a Sate False Claims Act on their books.  Florida recently modified the the Florida False Claims Act to be in line with the Deficit Reduction Act and to receive additional funds.

Stay tuned for more news on this case with New York and the makers of Vioxx, Drug giant, Merck.  They probably will settle to get this case closed and behind them as quick as possible, before more start cropping up. This probably will not be the last Vioxx case we will hear about. 

On a side note: Merck stock closed at $50.57 an increase of $1.10 from previous trading. I guess the Shareholders are confident that Merck can handle this new law suit.

It makes me think of the two baseball teams Boston and the Yankees. Boston took the Boys of Summer for granted and did not protect their lead.  The Yankees appear to be closing in on the narrow lead Boston has over them.  One word to the wise, never take New York and New Yorkers  for granted.  

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