Virginia Qui Tam Law

Virginia Medicaid Fraud Control Unit Recieves National Award; more than $650 million dollars recovered in FY 2007.

zkitts@cookkitts.com (Zachary Kitts) — Tue, 13 May 2008 15:48:23 GMT

Yesterday, the Virginia Office of the Attorney General's Medicaid Fraud Control Unit (MFCU) received the "Office of the Inspector General's State Fraud Award." To view the press release, click here.

On a related note, the Virginia Office of the Attorney General announced recently its plans to continue cutting its reliance on General Fund revenues. In the 2008 Executive Budget Document, the OAG confirmed that by utilizing the monies recovered via the Medicaid Fraud Control Unit, the OAG could continue to slash its budget.

Think about this--the false claims against Virginia Medicaid that the MFCU prosecuted to the tune of $650 million last year are just the tip of the iceberg when it comes to overall fraud on the Commonwealth. The Virginia Fraud Against Taxpayers Act could produce similar returns if it was used in other areas the same way it is used to fight fraudulent Medicare claims.

If a new Attorney General were to pursue all false claims with the same dedication as Virginia's Medicaid Fraud Control Unit, it would change the Commonwealth's Budget altogether--and John Brownlee is just the man for the job.

Zachary Kitts
Cook & Kitts, PLLC

And Then There Were Two: Paul Harris Decides Not to Run for Attorney General of Virginia in 2009

zkitts@cookkitts.com (Zachary Kitts) — Sat, 10 May 2008 12:34:53 GMT

This recent post from Charlottesville, Virginia's Daily Progress announces Paul Harris' decision not to run for Virginia Attorney General in 2009, clearing the way for a clean, straightforward contest between soon-to-be-former U.S. Attorney John Brownlee and Fairfax Sen. Ken Cuccinelli.

Some folks have mentioned that they thought my calling Mr. Brownlee a "qui tam hero" in a previous post was a little premature, as it is still not know exactly what his position would be on expanding the use of the Virginia Fraud Against Taxpayers Act by both the OAG and the private relator's bar.

In other words, my predictions that Brownlee will (1) run for Attorney General as someone who is actually interested in being Attorney General, as opposed to someone who is interested in being Governor, and that he will (2) make the VFATA one of the main planks of his platform--and then, one of the main planks of his administration--may not turn out to be true.

He could easily run for AG and spend all of his time and campaign energy focusing on the sorts of social issues that really have nothing to do with the job of the Virginia Attorney General. It has worked for many of his predecessors, thats for sure.

But I don't think he will, and so until such time as I am shown to be wrong, I will continue to have blog entries entitled "John Brownlee for Virginia Attorney General in 2009!"

Zachary Kitts
Cook & Kitts, PLLC

Rebuttal to D.C. Examiner's so-called "Editorial" of May 6, 2008

zkitts@cookkitts.com (Zachary Kitts) — Wed, 07 May 2008 09:18:42 GMT

While I am as big a fan of the D.C. Examiner as anyone--and I especially enjoy the work of William Flook, one of their staff writers--I cannot let the blather that was passed off as an editorial yesterday stand without comment.

Of course, I realize that editorials are specifically intended to take controversial positions on pressing issues of the day. Editorials are intended to spark letter writing, discussion, and debate. Moreover, there is no doubt that the False Claims Correction Act of 2007 is among the pressing issues of the day, regardless of whether you agree or disagree with it, so it is fair game for editorial writers.

My problem--and the reason I label the editorial as blather--is not that the article takes a position I disagree with. The article yesterday is blather because it is not an editorial at all. In fact, the article yesterday does a grave disservice to the art and tradition of editorializing in the American press. I would have enjoyed reading a well-written, intelligent editorial raising good arguments against the False Claims Correction Act--although I would still reserve the right to blog in response.

The simple fact is that this editorial was written by someone without any understanding at all of basic legal terminology and basic legal concepts--never mind the political history and economics of the False Claims Act. It was obviously written by someone with an obvious bias who was not concerned with being taken seriously by educated readers--in other words, someone with no business writing editorials for a D.C. area newspaper.

First, the author's complete ignorance of basic legal terminology is offensive. The article consists of 408 words total, and the words "class action" appear no less than seven times. This is complete stupidity, because the FCA does not, never has, and never will, have anything to do with class actions. Rather, I mention this first because it shows the author's obvious ignorance, and highlights his or her efforts to trot out the old familiar terminology instead of actually contributing something to the debate.  Any further discussion of this logical error would quickly devolve into dry legal stuff, so I will move on.

Second, the politics and history of the False Claims Act was profoundly botched. The author fails to recognize that the FCA is a bipartisan issue that crosses party lines. The author refers to Sen. Grassley (R-IA) and Sen. Specter (R-PA), both Republicans, as if they were turncoats who are hurting their own party in an effort to cater to "plaintiffs lawyers." (By the way, the phrase "plaintiffs lawyers" is used no less than eight times in the 408 word essay.)

Leaving aside the fact that the FCA enjoys bipartisan support, Republicans have often been at the forefront of the FCA. The primary proponent of the original statute was Abraham Lincoln, the very founder of the Republican Party. In fact, the FCA was known for years as "Lincoln's Law." In 1986, Ronald Reagan breathed new life into the FCA by signing the 1986 FCA amendments. John Ashcroft, the first Attorney General under President Bush, was a zealous advocate for the FCA--and he was in no way in favor of class actions or plaintiffs lawyers. These are just two examples that occur to me off the top of my head--the list could go on and on.

The most offensive part, however, is the following:

   The details [of the FCA] are a bit abstruse; what’s important is that the bill would enrich
    the class action plaintiffs’ bar, while encouraging witch hunts against businesses
    for alleged fraud that in most cases doesn’t even exist.

Fraud against the federal government doesn't exist? The author obviously has no clue--about government contracting, healthcare, social security, the budget process, politics, or anything else. I wonder why the Department of Health and Human Services bothers to publish all of those work plans for fraud investigations if there is no fraud? Why do we even have an Office of the Inspector General at all? Why do we have so many criminal laws criminalizing Medicare and Medicaid fraud if there is so little fraud?

And then I saw the next page, and everything became clear. The next page features a quarter-page advertisement from the U.S. Chamber of Commerce and the Institute for Legal Reform, two voices against the FCA. Obviously, this ignorant editorial was quickly written to pander these deep-pocket advertisers, whom the D.C. Examiner can scarcely afford to lose.

I cannot resist the urge to throw in a jab at the U.S. Chamber of Commerce here. Government, in all of its forms, does not create wealth; rather, government redistributes wealth. A large part of politics today turns on the who, where, when, why and how the wealth of the American people is redistributed. Players like the U.S. Chamber of Commerce, I think it is fair to say, are generally against increased government, and in favor of the privatization of government functions.

The U.S. Chamber of Commerce would, I think, agree with me that private industry is, as a rule, more efficient and cost effective than government. So I find it interesting that the U.S. Chamber of Commerce protests so vehemently against the privatization of law enforcement by statutes such as the FCA.

Could we not get more efficient and cost effective law enforcement through privatization? You bet, and that is why we have laws such as the FCA. The U.S. Chamber of Commerce is only in favor of some privatization, however, and they are all in favor of redistribution of wealth, so long as the money is redistributed to business.

The False Claims Correction Act of 2007, like everything in civil society, is and should be the subject of intelligent debate and discussion. The D.C. Examiner's Editorial of May 6, 2008 contributes nothing to the public debate about the False Claims Correction Act. Moreover, by trotting old familiar emotion-laden words like "class action" that have nothing to do with the FCA, the editorial became nothing more than a rant--and a pandering one designed to keep a deep pockets advertiser happy, at that.

What a shame.

Zachary A. Kitts
Cook & Kitts, PLLC

DRAFT VIRGINIA QUI TAM HERO JOHN BROWNLEE FOR ATTORNEY GENERAL OF VIRGINIA!!!

zkitts@cookkitts.com (Zachary Kitts) — Mon, 28 Apr 2008 11:33:54 GMT

Okay, maybe the headline is a little premature. Still, the single most exciting development in the 2009 Virginia Attorney General race since my Open Letter has been John Brownlee's resignation from his position as United States Attorney for the Western District of Virginia.

Why? Because Brownlee is rumored to be considering a run for Virginia Attorney General.

As you may or may not recall, Brownlee was responsible for the single largest false claims recovery in the history of Virginia in May of 2007. The recovery, on the order of $634 million dollars, included criminal guilty pleas by three top Purdue executives, in which they admitted that Purdue fraudulently marketed Oxycontin. Virginia received more than $34 million dollars from these three Purdue executives, and an additional $25.3 million dollars as part of the settlement.

In other words, John Brownlee returned almost $60 million dollars to the Commonwealth by his focus on qui tam and the False Claims Act.

That alone would be enough to qualify him for Virginia's top law enforcement job. But when we consider the courage and character Brownlee displayed to obtain the settlement, his candidacy gets much stronger.

Brownlee showed exceptional courage in obtaining the Purdue settlement because, by some accounts, it almost cost him his job. In a little known turn of events, Brownlee rebuffed an apparent attempt from DOJ to obtain more time for Purdue to consider the agreement. The date was October 24, 2006. Brownlee stood firm, and the settlement/plea agreement was accepted that day.

Exactly one week later, on November 1, 2006, Brownlee showed up on the infamous Kyle Sampson's "black list" of U.S. Attorneys to be dismissed. (He was eventually removed from the list and not terminated.)

So everyone, pass the word--the effort to draft John Brownlee to run for Virginia Attorney General is under way!

Zachary A. Kitts
Cook & Kitts, PLLC

The Utility of Private Law Enforcement: Academic Support from the University of Chicago

zkitts@cookkitts.com (Zachary Kitts) — Tue, 22 Apr 2008 16:56:16 GMT

An article published by two professors at the University of Chicago should be of some interest to readers of this blog. See, Blowing the Whistle: Which External Controls Best Reveal Corporate Fraud?

The link is to a newsletter distributed by the University of Chicago and not to the paper itself. While the sub-title of the linked article says, "New research suggests that the best way to promote fraud detection is to extend the Federal False Claims Act to corporate fraud." At the risk of sounding snobby, I would like to point out that is not, strictly speaking, an accurate way to conceptualize what the study says.

The Federal False Claims Act, of course, applies to any person--whether a natural person or a corporation or both--who makes a false claim to the government for money. What the subheading means to say, I think, is that the unique qui tam structure of the Federal False Claims Act--which allows private citizens to prosecute cases on behalf of the government and calls for a percentage of the government's recovery to be paid to the party who blew the whistle on the fraud--should be extended to the corporate governance sphere.

And thus the article strikes upon one of the themes of this blog: the utility and effectiveness of private law enforcement generally. We do not need to go so far as qui tam to see that private law enforcement is effective.

At any rate, check out the study, and I welcome your comments.

ZAK
http://www.cookkitts.com

Assessment of penalties against parties liable under the Virginia Fraud Against Taxpayers Act and Federal False Claims Act

zkitts@cookkitts.com (Zachary Kitts) — Sat, 26 Apr 2008 11:32:23 GMT

It is well known that the Virginia Fraud Against Taxpayers Act--like its counterpart the Federal False Claims Act--provides for treble damages against anyone submitting false claims to a government entity for payment.

Both the VFATA and the Federal False Claims Act also create civil penalties for each violation of the law--that is, for each false claim submitted for payment. These civil penalties are, for all practical purposes, a liquidated damages provision that encourages individuals to blow the whistle, and encourages lawyers to learn about and prosecute these claims, even in cases where the dollar amount of each individual false claim might be very small.

Civil penalties under the VFATA and the FCA are mandatory. A trial court may exercise its discretion as to whether the higher or lower amount of penalties is awarded, but the Court does not have discretion to reduce the number of penalties. See, United States v. Cato Bros. Inc., 273 F.2d 153 (4th Cir. 1959).

Civil penalties have been a feature of the Federal False Claims Act since it was first passed during the American Civil War in 1863. The civil penalties called for in the first Federal False Claims Act were $2,000 per claim. Currently, the VFATA provides for civil penalties of between $5,000 and $10,000 for each false claim submitted to the Commonwealth. The Federal False Claims Act provides for penalties of between $5,500 and $11,000 for each false claim.

As proof of Congress' intent to add teeth to the FCA by adding civil penalties, consider that after adjusting for inflation, in today's dollars the original False Claims Act called for penalties of $41,000 for each false claim.

Comments?

ZAK
Cook & Kitts, PLLC

A Breif History of Qui Tam Litigation Under the Virginia Fraud Against Taxpayers Act

zkitts@cookkitts.com (Zachary Kitts) — Mon, 21 Apr 2008 15:29:01 GMT

One of my stated purposes in starting this blog was to create interest in the Virginia Fraud Against Taxpayers Act and in qui tam practice in general. In order for statutes such as the Federal False Claims Act and the Virginia Fraud Against Taxpayers Act to achieve their goals, it is necessary to build a public-private partnership between qui tam attorneys in private practice and our counterparts in the Virginia Office of the Attorney General and the United States Department of Justice.

Today's blog will focus on the history of litigation under the VFATA since January 1, 2003 when it became law. I have attached to this entry a list maintained by Guy Horsley, who serves as the co-ordinator for the VFATA in Virginia Office of the Attorney General. I obtained this list from Guy via a FOIA request for publicly available information on cases filed under the VFATA.

A few items of note about this list.

First, note the volume of the redacted material on the list. The material was redacted because these cases are still under seal, either in Virginia or somewhere else in the country. (For those of you new to state qui tam statutes, claims under the VFATA are often included as pendent state claims in qui tam cases filed in federal courts throughout the United States.)

The chart attached shows a total of nine cases under the VFATA that have been unsealed since January 1, 2003. There appear to be close to 100 cases that are still under seal and were thus redacted. Even if the vast majority of these redacted cases are nationwide complaints filed in a federal court somewhere, the volume of cases under seal is surely a good trend for the VFATA.

Second, notice that of the nine cases unsealed since 2003, the Commonwealth moved to dismiss four, four were settled immediately after unsealing, and in only one cases did the Commonwealth not intervene and not move to dismiss.

More to follow in future postings.

Zachary A. Kitts
Cook & Kitts, PLLC

Blog Review and Comments: Lean and Mean Litigation Blog

zkitts@cookkitts.com (Zachary Kitts) — Sat, 19 Apr 2008 12:07:21 GMT

I recommend everyone interested in this blog check out Stewart Weltman's Lean and Mean Litigation blog. While it does not address qui tam or false claims practice in particular, its focus on efficient litigation practices is invaluable to those interested in qui tam practice.

Weltman's blog ranges over a wide variety matters relevant to trial practice, from effective deposition techniques to the psychology of litigation, but in my mind one point is woven throughout his blog: in litigation, just like in any other competitive professional endeavor, lawyers who want to win cases focus on the fundamentals, because they know that the case is won or lost on those basic elements of this profession.

By that I mean the following.

People who really know football will agree, I think, that every football team in the NFL has basically equal talent. I know, not every quarterback is Dan Marino, and not every running back is Barry Sanders, but no one gets into the NFL without having a rare combination of skills and abilities, and on any given day, any team in the NFL has the ability to beat the daylights out of any other given team.

On the other hand, if you matched the very worst professional team against the very best Division I college team, I would put my money on the pros, and I think most people would agree with me. The disparity in skill and ability would be too great for the college team to compete.

But in a competition between two professional teams, the side that executes better on the fundamentals will and does win. If an NFL team with 12 straight losses plays an undefeated team, and the undefeated team proceeds to throw three interceptions and fumble the ball twice, they are almost certainly not going to win.

The legal profession, in my estimation, is more like the NFL. There are certainly a wide variety of skill levels present in the legal community, but at the end of the day anyone with a law license and a little experience can successfully get a case resolved against the best there is if they focus on the fundamentals, avoid sloppy mistakes, and work hard.

I have never met a lawyer that was not intelligent enough to handle a case well. I have met many, many lawyers who were too lazy to handle a case well. I have heard that the three most feared words in any lawyer's vocabulary are "pro se litigant." I can see the logic behind that, but I submit that the words "lazy opposing counsel" are right behind pro se litigants.

A lazy opposing counsel who fails to take the time to understand his or her case fails to be able to accurately assess the situation, fails to work with the other side in narrowing the issues for trial, and fails to be of any use whatsoever to his or her client. In my view, they also fail to live up to their oath as officers of the Court.

At any rate, if more people litigated cases the way Stewart Weltman describes, disputes between parties would be resolved more efficiently, litigants would spent less money on litigation, our court dockets would be less crowded, and life as a litigator would be much easier. Please check his blog out.

Zachary A. Kitts
Cook & Kitts, PLLC

False Claims Corrections Act of 2007 sent to the full Senate

zkitts@cookkitts.com (Zachary Kitts) — Fri, 18 Apr 2008 08:40:00 GMT

Senate Bill 2041, also known as the False Claims Act Corrections Act of 2007, has received overwhelming bipartisan support from the Senate Judiciary Committee, which has reported it out to the full Senate for consideration.

    "This is common sense legislation that we expect to sail through the House and Senate," said Jeb White, President of Taxpayers Against Fraud. "This bill has broad bi-partisan support. It's hard to be opposed to building a better rat trap to catch corporate cheats, chiselers, and con artists."


   Proponents of S. 2041, note that the new bill clarifies the existing scope of False Claims Act liability, while closing a small number of loopholes that have allowed companies to steal taxpayer dollars with impunity. Specifically, S.2041 would:

    Clarify that False Claims Act liability protects all federal funds;

Solely vest the Government with the power to dismiss whistleblower-filed False Claims Act lawsuits that are based on public allegations;

Remove the confusion over the statute of limitations period by adopting a straightforward 10-year period;

Explicitly clarifies that the False Claims Act applies to those who discover an overpayment and decide to pocket the funds; and provide strengthened employment protection for whistleblowers.


     S. 2041, and its analog in the U.S. House of Representatives, is supported by leadership in both parties, including Sen. Charles Grassley (R-IA), Senator Richard Durbin D-IL), Senator Patrick Leahy (D-VT), and Senator Arlen Specter (R-PA).

    More Good news to follow!

An Open Letter to Bob McDonnell and Ken Cuccinelli (as well as all other Potential 2009 Candidates for Attorney General of Virginia)

zkitts@cookkitts.com (Zachary Kitts) — Tue, 15 Apr 2008 16:18:34 GMT

Now that Senator Cuccinelli (R-Fairfax) has announced his intentions to run for Attorney General of the Commonwealth next year, I figured the time was right for this open letter.

Sen. Cuccinelli has a sterling opportunity before him to embrace the Virginia Fraud Against Taxpayers Act and make it part of his campaign. While Bob McDonnell has silently taken steps to support and strengthen the VFATA and the world-class attorneys in his office that prosecute these matters, he has failed to accept the credit for it publicly for reasons that escape me.

Since taking office as Attorney General, Bob McDonnell has improved upon a Medicaid Fraud Control Unit that was already first-class. The OAG obtained approval for the Virginia Fraud Against Taxpayers Act from the United States Department of Health and Human Services Office of the Inspector General, thus qualifying Virginia to relieve an additional 10% of the recoveries from all Medicaid fraud prosecutions. See my previous post: The Deficit Reduction Act of 2005 and the Virginia Fraud Against Taxpayers Act: One Year Anniversary.

On Bob McDonnell's watch, Virginia has recovered literally hundreds of millions of dollars using the VFATA, and before his term is out the number will probably have a "b" after it (i.e., a billion dollars).

So why, with his campaign for Governor in full swing and with the Commonwealth pressed for money in this economic downturn, has McDonnell not been talking about the VFATA? I can't ever remember a politician before Bob McDonnell who failed to take credit for his work, especially when he or she was seeking election to a higher office.

There have been mentions, of course. An excellent presentation was given the Finance Committee of the Virginia Senate, for example, on the Purdue Settlement, which accounted for tens of millions of dollars being returned to Virginia taxpayers.

But as evidence of McDonnell's missed opportunities to claim credit that is rightfully his, I offer the following:

On March 18, 2008, the U.S. District Court for the Southern District of Illinois announced a settlement with CVS Pharmacy on the order of $37 million dollars, of which more than $15 million went to several states. One of these states was Virginia.

Press releases by the various state Attorney Generals indicated that Kentucky relieved $1.36 million; California received $3.4 million; and Massachusetts received $3.7 million. States without a False Claims statute certified by the HHS Office of the Inspector General received the following: North Carolina, $900,000; Missouri, $929,987, and Maryland, $830,490.

Noticeably missing from the list is Virginia. On the day the CVS settlement was announced, most state AGs--being the elected officials that they are--did press releases to announce the good job they had done for their respective states. Virginia's Attorney General, however, did a press release to announce the continuation of an anti-gang initiative in the Shenandoah Valley.

I could not find a press release from the OAG indicating that this settlement even took place. With our OIG-approved Fraud Against Taxpayers Act, Virginia's share will of course be more than Maryland's share--which would put the recovery in the seven figures--but my point is something else entirely.

I'm not trying to knock anti-gang initiatives, and I am certainly not trying to knock the Shenandoah Valley. What I am pointing out is that the OAG could and should do a better job of promoting its successes using the VFATA. Such efforts could lead to more interest on the part of the Virginia Bar in the VFATA, and in turn to more information flowing into the OAG.

The OAG did press releases for a Pennington Gap dentist who pled guilty to Medicaid fraud, and also for a Giles County physician who pled guilty to similar charges. Meanwhile, the Commonwealth has recovered tens of millions of dollars from big pharmaceutical companies as part of nationwide settlements, without so much as a whisper.

I find it interesting that McDonnell would want to trumpet small cases against individuals for stealing money from Medicare and Medicaid, and ignore the tens of millions recovered from large pharmaceutical companies who stole money from the Commonwealth.

To do so ignores the hard work and dedication of Virginia's world-class Medicaid Fraud Control Unit and the entire Office of the Attorney General. But it also ignores the possibilities for the Commonwealth if civil case filings under the VFATA were increased.

It is true, of course, that McDonnell is hostile to trial lawyers, and that he can be said to be in favor of tort reform. I must say, however, that if his hostility to trial lawyers plays any role in his failure to promote the VFATA, he should make it clear now.

Meanwhile, Sen. Cuccinelli, if you are serious about not only winning the Office of Attorney General, but also about fulfilling your duties, you should make the Virginia Fraud Against Taxpayers Act one of your chief campaign planks.

If you don't, someone else surely will.

Zachary A. Kitts
http://www.cookkitts.com