Perspectives From Experienced Government Counsel,

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QUI TAM - QUI WHAT?

• Perspectives From Experienced Government Counsel,
• Relators Counsel Defense Counsel

17th Annual FLABOTA Convention Friday, July
18th, 2014 The Breakers Palm Beach, Florida
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SPEAKERS

• Government Counsel
• Jeffrey W. Dickstein, Esq.
• Assistant United States Attorney, United States
  Attorneys Office for the Southern District of
  Florida
• (jeffrey.dickstein_at_usdoj.gov)
• Relators Counsel
• Marc S. Raspanti, Esq.
• Partner, Pietragallo Gordon Alfano Bosick
  Raspanti, LLP in Philadelphia, PA
• (www.Pietragallo.com / www.FalseClaimsAct.com /
  www.FraudWhistleblowersBlog.com)
• Defense Counsel
• Meredith S. Auten, Esq.
• Partner, Morgan Lewis Bockius, LLP in
  Philadelphia, PA
• (www.MorganLewis.com)

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THE FALSE CLAIMS ACT OVERVIEW
1863 - 2014

• 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

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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

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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

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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

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MUNICIPALITY FALSE CLAIMS ACT
The following municipalities have their own False
Claims Acts

• Chicago
• New York City
• District of Columbia
• Philadelphia
• Allegheny County, PA

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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

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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.

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FEDERAL FALSE CLAIMS ACTPROHIBITED 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

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FEDERAL FALSE CLAIMS ACTPROHIBITED 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

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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

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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 attorneys fees and
  litigation costs
• Joint and several liability with no right of
  contribution or indemnity

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FEDERAL FALSE CLAIMS ACT

• Who can be a relator?
• A relator can be any person, including
  individuals, entities, and companies

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QUI TAM LITIGATION

• How will investigation generally proceed?
• Civil Investigative Demands
• Inspector General Subpoenas
• Search Warrants
• Grand Jury
• Interviews voluntary
• Criminal HIPAA Subpoenas

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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)

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FEDERAL FALSE CLAIMS ACT

• Attorneys Fees and Costs
• If found liable, Defendant must pay the Relators
  reasonable attorneys fees and costs
• Attorneys fees and costs are in addition to
  Relators share of the recovery by the Government

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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, attorneys fees and costs

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FEDERAL FCA ANTI-RETALIATION PROVISION31 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

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RELATORS PRIVATE CAUSES OF ACTION

• Under Common Law
• Intentional torts
• Breach of Contract
• State Statutes
• New Jersey Conscientious Employee Protection Act
• Watch preemption issues

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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

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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

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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

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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

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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

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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 Relators Cause
  of Action only

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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

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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

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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

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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

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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
• KICKBACKSKICKBACKSKICKBACKS

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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

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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 2013- 2.9 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

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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

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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 dont always
  interact
• Knowing where to find the answer is not always
  easy

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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

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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

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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

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DEFENSE PERSPECTIVES

• Goal 1 manage companys 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

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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

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QUI TAM LITIGATION ITS COMPLICATED!

• Intricacies of Federal Programs/Agencies
• Complexity of Liability and/or Damages Creates
  Difficulties
• Relationships/Reputation with Government and
  Other Relators Counsel
• Qui Tam Litigation Relator Government
  Defendant Complicated³

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COMPLEXITY CREATES OPPORTUNITIES

• The process of a qui tam lawsuit
• A potential whistleblowers first consideration
• False Claims Act lawyers screening of the
  Relators evidence
• Special aspects in drafting the FCA Complaint and
  statutory disclosures
• Filing the case and presenting the matter to the
  Government
• Companys response to an investigation
• Governments determination of whether to join the
  case
• Relators involvement during the seal period and
  beyond
• Settlement and/or litigation phase of the action

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QUESTIONS