An important opinion was issued today by Judge Cacheris in the U.S. District Court for the Eastern District of Virginia concerning qui tam litigation. 

By way of background, the first step in a qui tam case under the federal False Claims Act is to disclose the claim by serving a written disclosure memorandum on the Attorney General of the United States and also on the U.S. Attorney for the district in which the relator intends to file.  The FCA requires this written disclosure together with "substantially all material evidence and information the person possess..." in 31 U.S.C. 3730(b)(2).
 
An issue that comes up from time to time is the discoverability of these disclosure statements once the case is unsealed and litigation begins.  It is the general opinion of plaintiff-side qui tam lawyers that such disclosures are protected, and as such lawyers most include a paragraph on the first page along the lines of the following: 

This disclosure memorandum is subject to the attorney-client privilege and the privilege afforded to attorney work product.  This memorandum was prepared by attorneys for the relator for submission to the United States Department of Justice in anticipation of litigation, and is therefore also subject to the privilege afforded to communications between parties with a commonality of interest and/or the joint-prosecution privilege.  Submission of this document to the United States Government is not and shall not be construed to be a waiver of any privilege or a waiver of any exemption from discovery of this document that otherwise applies.

Judge Cacheris' opinion holds that disclosure statements to the government are protected.  Here, defendants did not satisfy their burden of demonstrating a substantial need for the factual information contained within the disclosure statement, nor did they demonstrate that they were unable to obtain the information contained in the disclosure by any other means. 

As an aside, I have often wondered why some defense counsel are so very interested in the disclosure statement served on the government.  Given the strict requirements federal courts have placed on FCA Complaints under Fed. R. Civ. P. 9(b) (namely, the allegations of the Complaint must be pled with particularity) there is normally not much difference between the disclosure statement and the Complaint filed under seal with the Court.  Certainly, if a relator's counsel chooses to leave out of the Complaint any facts included in the disclosure, he or she does so at his or her own peril. 

At any rate, congratulations to TAF member David Stone  for his fine work.  There is a split amongst the federal courts to consider this issue, and David's fine work helped to contribute one more decision in our favor.

        

On March 2, 1863 the 37th Congress passed the federal False Claims Act, making today the 147th birthday of the statute.  

And just think—after all that history, the best is yet to come! 

      

        

The Supreme Court of Virginia issued its first Virginia Fraud Against Taxpayers Act opinion in Ligon v. County of Goochland, in the process ending a misguided attempt to turn the statute into something other than a tool to fight fraud on the Commonwealth.<< MORE >>

Resistance to the idea of a Maryland False Claims Act appears to be crumbling. Maryland needs a true false claims act. << MORE >>

Today, TAFEF filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit in the case captioned ACLU et al. v. Eric Holder, et al., 09-2086.  A copy of the amicus is available here. 

My name is on the brief, but the credit for it belongs to Marc Vezina of Vezina & Gattuso, LLC, and to Cleveland Lawrence and Jeb White from TAFEF.

        

Missouri Attorney General Chris Koster said today that Missouri has earned the distinction of returning more money to the public fisc through Medicaid fraud prosecutions than any other state in the nation.  This is, however, only when the federal Medicaid grant to Missouri is considered:  according to national data from the federal Department of Health and Human Services (HHS), the Attorney General's Medicaid Fraud Control Unit obtained $18.81 for every federal dollar received in federal fiscal year 2008.

The Missouri Attorney General's Medicaid Fraud Control Unit received a grant of $1,582,000 from HHS in federal fiscal year 2008, and used that funding to recover $29,753,505, for the return rate of $18.81 per grant dollar and the number one ranking nationally.

As a lawyer practicing in the area of qui tam litigation under the federal False Claims Act and the various state false claims acts, I would not be doing my duty if I didn't point out some of the puffery in General Koster's statement. 

First, although Missouri does not have a state false claims act, it still benefits from the national cases filed by qui tam whistleblowers.  Missouri particularly benefited from the national drug settlements in 2008, several of which were in the billions of dollars, and all of which were initiated by qui tam whistleblowers with personal, first-hand knowledge of the fraud. 

Second, Missouri's achievement must be put in perspective.  The total amount recovered by Missouri in 2008 was $29.7 million—when compared to Virginia's $650 million in 2007 using the Virginia Fraud Against Taxpayers Act, we see that Missouri's achievements become a little more humble. 

General Koster said:  "Efficiency of government is critical, particularly during these challenging economic times," Koster said. "Missouri's Medicaid Fraud Unit has used all tools available to aggressively investigate and prosecute Medicaid fraud, and return those stolen health care dollars to Missouri."

They may well have used all of the tools available to them, but they did not push for the most important weapon—a state false claims act with qui tam whistleblower provisions.

I must say that I find it strange that Koster did not mention qui tam whistleblowers as part of his equation—and he also didn't use this press opportunity to push for passage of a state false claims act. 

General Koster is no doubt a very capable AG, and he no doubt has a very fine staff, but they need the proper tools to really be able to make a difference.

Below is the ranking of recovery rates per federal grant dollar spent:

RANK, STATE, PER GRANT DOLLAR 

1.        Missouri $18.81
2.        North Carolina $18.38
3.        Tennessee $17.13
4.        West Virginia $15.69
5.        Ohio $15.38
6.        Maine $14.73
7.        South Carolina $14.25
8.        Minnesota $13.67
9.        Nebraska $11.36
10.       Georgia $10.79
11.       Texas $10.77
12.       Kentucky $10.13
13.       Kansas $ 9.21
14.       Massachusetts $ 9.18
15.       Indiana $ 8.92
16.       Oklahoma $ 8.83
17.       Washington $ 8.61
18.       New Jersey $ 8.07
19.       Vermont $ 8.02
20.       New Hampshire $ 7.52
21.       Oregon $ 7.34
22.       Maryland $ 7.27
23.       Pennsylvania $ 7.12
24.       Louisiana $ 6.83
25.       Florida $ 6.76
26.       New York $ 6.65
27.       Alabama $ 6.54
28.       Virginia $ 6.04
29.       Michigan $ 5.75
30.       California $ 5.70
31.       Illinois $ 5.55
32.       South Dakota $ 5.51
33.       Mississippi $ 5.17
34.       Connecticut $ 4.80
35.       Utah $ 4.56
36.       Iowa $ 3.99
37.       Wisconsin $ 3.91
38.       District of Columbia $ 3.69
39.       Colorado $ 3.66
40.       Rhode Island $ 3.40
41.       Arkansas $ 2.65
42.       Nevada $ 2.15
43.       Arizona $ 2.07
44.       Wyoming $ 1.96
45.       Hawaii $ 1.15
46.       Alaska $ 1.02
47.       New Mexico $ 1.00
48.       Montana $ .92
49.       Delaware $ .78
50.       Idaho $ .06

        

Over the next several weeks, state legislatures across the country will convene and begin the 2010 legislative session.  We will follow those states considering passing false claims-style legislation and provide updates where available. 

In particular, on the watch list for this year are Maryland and Arizona, where there have been specific efforts to organize our folks this year. 

Stay tuned.     

        

The Maryland legislature has failed to pass a Maryland False Claims Act in each of the last two legislative sessions.  Each time, the bill failed by a single vote in the state Senate. 

This year will be different.  We have a bona fide champion in the Maryland state Senate for the first time—state Sen. Jamie Raskin, who fired the opening salvo yesterday.  

Although Gov. O'Malley strongly supported the bill last time around, what we lacked was a true champion in the legislature.  Raskin—who many see as a strong future candidate for Attorney General—is just the man for the job.  

Stay tuned....
  



 

        

The WaPo political blog has important updates about the staffing of Attorney General-elect Ken Cuccinelli's office.

It appears Ken has made some good choices, picking people with significant legal experience. Perhaps most significant for the FCA/qui tam world is Cuccinelli's selection of Steve  Buck—who spent the last three years as Section Chief of the Health Care Fraud Section of the OAG—to head up Public Safety and Enforcement.

Charles E. James will serve as ... << MORE >>

The Washington Post today has this story about deaf entrepreneur John Yeh and a false claims act case filed against him by the U.S. Department of Justice.

Yeh is a graduate of Gallaudet University, and has been at the forefront of the deaf community for some years.  His company, Viable Communications, provides services to the deaf, including services which allow deaf individuals to place calls.

DOJ alleges that Viable and Yeh defrauded the federal government for tens of millions of dollars by "ginning up bogus calls," among other things. 

As an aside, we also see a typical response from a friend or associate of an individual accused of FCA violations.  WaPo quoted:   

Robert Mason, a deaf blogger who met Yeh through Gallaudet, is among those who said the charges seem out of character. Yeh has supported the university, Mason said, even inviting students to his home. "I personally found John Yeh to be a person of integrity and compassion and sincerity," he said. "Yeh always had been an ardent supporter of deaf people to be successful in their own right."

Well guess what?  Just because someone is an "ardent supporter of deaf people" doesn't mean they won't rip off the government if they get the chance.  The simple fact is that good people sometimes do bad things—and as anyone who has ever attended more than a few criminal sentencings can tell you, bad people even do good things sometimes. 

The case was apparently filed in a U.S. District Court in New Jersey; no word on whether the case was initiated by a whistleblower.