Interview with Whistleblower Attorney Reuben A. Guttman on Using Complex False Claims Act Litigation to Fight Government Program Fraud

Nationally recognized and deeply respected by his peers for his work with the False Claims Act and other whistleblower litigation, his career is littered with landmark high impact cases.

A leader in fighting fraud, misconduct, and corruption through complex litigation, attorney Reuben A. Guttman knows exactly what it takes to bring these cases successfully.

We caught up with Mr. Guttman to discuss the fight against government program fraud and abuse, what it takes to litigate these complex cases, and more.

Listen to the complete interview here:

Can you share a little about your background and what made you choose this direction in law?

I graduated from Emory University School of Law in 1985 and before I went to law school, I worked for the local of a larger labor union, the Service Employees International Union was the union, and the local was the New York State Public Employees Federation. Graduated from college early, and I ultimately became the acting Director of Communications for the union and I got a sense of the needs of working people. Obviously, at the time we were doing work for 47,000 public employees, but understanding their issues of wages, their issues of benefits, their consumers that these public employee serviced. I got acclimated into the needs of consumers and workers and appreciated more than anything that in our world, if you want to make life better for people, you can mostly do it through the law.

Obviously it’s not just a question of passing law or getting regulation enacted, it’s a question of being able to litigate, so I went to Emory University Law School and I graduated in 1985. My first job out of law school was to work as a Washington counsel for the Service Employees International Union, which at that point had about 800,000 members and now it has grown to be probably the largest union in the nation, it’s got about two million members. I was extensively involved in litigation, complex litigation, involved in racketeering suits and involved in offensive or affirmative litigation with regard to the rights of workers.

In 1986, I completed litigation against Mellon Bank, which resulted in a three quarter of a million dollar settlement, which was a landmark at the time, which restored wages and benefits for 75 janitors working at Mellon Bank buildings in downtown Pittsburgh. That landmark settlement actually, from some perspective, began what was known for FCIU as the Justice for Janitors campaign. I also did work in the healthcare arena representing nursing home workers and other home healthcare workers across the country and public employees. I got some knowledge of the needs of these workers and the protections that they need on the job with regard to bloodborne pathogens and asbestos and so forth in the buildings and schools where you had school janitors.

When you work for a labor union, you get immersed in not only complex litigation, you get immersed in First Amendment issues, health and safety issues, wage and hour issues, antitrust issues, it’s a triage environment for a lawyer. I worked at FCIU from ’85 to ’90, and then I went into private practice in 1990, and I’ve always maintained some kind of involvement in the workplace. I was chief outside counsel to the Oil, Chemical and Atomic Workers for at least a decade, starting in 1992. The Oil, Chemical and Atomic Workers […], they represented all the workers in the nuclear weapons industry and of course, all the workers in the chemical and refining industries throughout the country.

I was involved in a complex litigation with regard to nuclear weapons plants, Hanford and Oak Ridge and Fernald in Ohio, some of the projects that were part of the Manhattan project, which most people are familiar with. Major litigation that I did, I brought environmental litigation, which essentially ended up blocking the distribution of radioactive nickel from the compressors at the Oak Ridge K25 Plant, that was in the late 1990s. I had a litigation that restored wages and benefits to a number of workers and a litigation that ultimately was the catalyst for Congress passing Nuclear Workers Compensation legislation in the 1990s.

Now everybody who works at a nuclear weapons plant or had worked at a nuclear weapons plant is […] for radiogenic diseases and they get certain benefits if unfortunately they get the disease, and of course they get health insurance. I’d like to say that the catalyst for that was litigation that I brought in Ohio, involving workers who were exposed to radio nucleides at a nuclear weapons plant. Through my work in that sector and obviously work in representing some other unions and workers, I began to understand the … or better appreciate at least, the interface between the United States government and the private contractor workforce, and the nuclear weapons industry is a model for the relationship between the public and the private sector.

It was a foregone conclusion, I suppose, that I would become involved with litigation under the federal False Claims Act. I brought my first False Claims Act suit probably 25 years ago, and obviously the False Claims Act is a mechanism to allow private citizens to bring litigation on behalf of the United States government where they believe that the government has been cheated as a result of some wrongful conduct by an individual, or a vendor, or a company and so forth, and I’ve not limited my litigation to the False Claims Act. We’ve been pretty creative, we’ve litigated under Title VII of the Civil Rights Acts, 42 USC 1981 with regard to race discrimination, we’ve brought in antitrust claims, we have brought claims under ERISA.

We like to creatively explore the use of legal remedies to help working people and to bring redress where there’s wrongful conduct that needs to be redressed, exposed and made transparent.

Explain the False Claims Act and It’s Impact In Your Opinion?

I’ve taught law in China, I’ve been to China about 10 times, and taught law in Mexico. The one thing that is really unique about the US rule of law is that we believe in two things, we believe in having substantive law, in other words, a law in the book that says you can or can’t do certain things. Then we also believe in process, that is process regarding not only the rights of the accused, but also the mechanisms to bring and enforce the law or leverage compliance with the law.

We see this notion of leverage in, for example, federal statutes that allow for consumer litigation, consumer litigation with regard to a product that may be defective or for example, enforcement of the antitrust laws or enforcement of the civil rights laws, or enforcement of the environmental laws. All of these statutes have what are known as private attorney general components that allow individuals to bring suit to enforce the law where they themselves have sustained some kind of injury. In other words, the wrong has to impact them personally. These procedural leverage mechanism has really distinguish our rule of law from other rules of law in the sense that not only do we say something’s illegal, but we’ve also recognized that attorney generals at the state and federal level don’t necessarily have the resources to completely enforce the law, so we’ve created mechanisms for private citizens to get involved.

Now, in addition to these private attorney general provisions, we actually have something called the qui tam provision in one statute called the False Claims Act. Qui tam means bringing suit in the king in the name of the king. The False Claims Act originally goes back to the 1860s, the Civil War era and it was passed at a time when the Civil War was going on. And, and there was a concern in Congress that vendors, contractors doing work with the union army were not necessarily being as candid or honest with the government as they should be. Whether it was carrying from Union Army mules or providing muskets or rifles or other armaments, the statute was passed to allow for litigation against the wrongdoers, the statue was reinvigorated in 1986 and it was amended several times thereafter.

The ultimate impact of the statute is that we have a law on the books, which allows private citizens who have information about conduct that causes the government to wrongfully expend money. They can take that information, they can ball it into a lawsuit and they can file suit in a United States District Court, and they can sue where federal money is involved, US government money. There are at least 20 states that have similar statutes that allow for students to be brought where there are state money. How does this work? You have a worker, for example, who is working on a helicopter project and he or she sees that the helicopters are being purchased by the government, they’re not being made according to specifications.

The person may see a certificate provided to the government, which says, “I hereby certify these helicopters are delivered and they’re manufactured in accordance with specifications.” Hence a false claim has been made in support of payment. That person comes to you as a lawyer and says, “They weren’t made in accordance with specifications, there was a false claim submitted to the government in order to get the payment for the helicopters that were in fact delivered not in accordance with specification.” Therefore, there’s a wrong, and you take that information and you bring a lawsuit in the name of the United States government.

Individuals can bring these type of suits even though they themselves have not sustained actual injury, the government sustained an injury. Why is this okay under our constitution, which requires that in order to be in federal court a person must actually sustain individual injury? Well, the Supreme Court said that because the government gives these people a bounty, assigns a portion of the recovery to what we call relators or whistleblowers, then they actually have a stake in the action and they have what is known as injury in fact, they can bring suit in the name of the government. They cannot bring the suit if the information they’re relying on is a matter of public information, public meaning, it’s a term of art, it means in a newspaper report, it means in a government audit, it means in a congressional investigation.

It doesn’t mean that everybody generally knows about it, you actually have to trace the source. If in fact it’s public, an individual still can bring the suit, have standing or be allowed to go forward with the suit if they’re what’s known as an original source, meaning that perhaps they were the ones who made the information public or yes, it was a matter of public information, but they independently know of the wrong outside the context of the public disclosure. The False Claims Act is really this remarkable statute at the federal level that’s been emulated by at least 20 states, that allows for private citizens to be the watchdogs for federal monies or state monies, bring suit in the name of the government.

It’s resulted in literally, since the 1980s, in recovery of billions and billions of dollars to federal and state treasuries but more importantly, these actions have exposed wrongs that the government would not have otherwise known about. We have situations where whistleblowers have brought cases that have exposed illegal marketing tactics by the pharmaceutical industry, tactics that have put drugs in people that don’t need them, put drugs in people that caused risks, that have exposed situations where drugs have been adulterated, that is manufactured not in accordance with specifications, they don’t do what they’re supposed to do.

We’ve had cases where whistleblowers have brought to the government’s attention through litigation the procurement of Defense Department goods and services that are not adequate, helicopters that have parts that may cause soldiers injury, fighter jets that have engines that are defective, fighting vehicles or reconnaissance vehicles that are defective, all kinds of cases involving goods and services sold to the government. Situations where even in the education sector, we had a case where a university was paying kickbacks to recruit students who were coming to the university and having their education financed with federal loans. That’s a violation of regulations, it can’t be done. It’s a violation of the False Claims Act.

What’s remarkable about the False Claims Act is it not only gets to the individual or entity that files a false certification or provides a product or service with the implicit understanding that it was procured consistent with the regulations or contract, but it gets to the individual entity that actually causes the false claim to be filed. For example, if I have a subcontractor on a jet fighter contract and the subcontractor manufacturers the wing of a plane, not in accordance with specification and the general contractor submits an invoice to the Defense Department saying that the plane was made in accordance with specifications not even knowing that the wing wasn’t, you have a situation where a subcontractor caused a false claim to be filed.

There’s liability that’s quite extensive and the liability is broad and can be … the statute can be creatively applied. There are provisions in the statute which allow for false claims cases to be brought or an individual where an entity owes the government money and doesn’t provide the money that it should provide under a contract or a regulatory obligation.

For example, sometime ago we represented whistleblowers who understood that the oil industry was not properly rebating or paying to the government oil royalties that it owed on 21 million acres of land, leased for the pumping of oil and it was shorting the government on oil royalties. That what’s known as a reverse false claim, they’re not paying money that should be owed.

False Claims Act generally doesn’t apply to taxes that are owed, there are some exceptions with regard to a couple of states, New York is one of them, of somebody who understands that an individual or entity has tax liability that’s not been paid that’s potentially a false claim in the state of New York. The False Claims Act really applies to any situation where there’s government money involved, federal money, state money, local money, and state money and local money, or at least where you have a state statute that is in effect, Florida, for example, has one that applies only to healthcare. The ability to apply this statute is incredibly expansive, education, defense, healthcare, environment.

You think of any cabinet position and any agency that flows from that cabinet position, transportation for example, then you’re going to have False Claims Act situations or be able to use the False Claims Act.

Who is eligible to bring a False Claims Act suit, and could you briefly walk us through the process?

People ask me whether the False Claims Act is really just about employees and my answer is, “No, it’s anybody who has information about wrongdoing that affects the United States government with regard to the payment of monies or the state governments with regard to the payment of monies, anybody who has information that’s not public information.”

You could, for example, have … you could have somebody who’s a consumer, a patient and he is a Medicare recipient and he’s treated by a doctor and he knows that the doctor has upcoded, that is billed Medicare for services that he never got. That would be a classic example of where you don’t necessarily have to be an employee to be a whistle blower. You could have somebody who’s a family of a patient in a nursing home and the patient is either a Medicare patient or it’s a private pay patient but there are Medicare patients in the nursing home, and every time this family goes to visit the nursing home, they see improprieties. They begin to look the improprieties and they understand that the nursing home is not being run in accordance with the Medicare quality of care and quality of life regulations.

These people, although they’re not employees, they can technically be whistleblowers, but for the most part, a lot of the whistleblower cases are going to be brought by employees, people who are inside the workplace and they experience something day in and day out that they just don’t feel comfortable with. It’s a tough call because the average person goes… the average person spends most of their life split between work and home and work is an important part of your life. Nobody wants to feel that their employer is a crook, nobody wants to feel that they’re part of something that’s improper. For the most part, the average worker is going to give his employer some benefit of the doubt at least, because if the employee is happy, he or she is not going to want to rock the boat.

But after a while, there may come a time when the employee says, “You know what, morally, this is just bothersome. I can’t go to work every day knowing what I know and not doing something about it.” What that person knows may be a situation where the government’s being overbilled, the government’s being billed for a product that’s not made in accordance with specifications. The employer is doing something that’s not only costing the government money that it shouldn’t cost, but individuals are being put at risk because the product’s not being made according to specification or representations about the product or false.

We see this in off label marketing cases and the pharmaceutical industry where a sales representative, um, makes representations about a drug that are outside the scope of the drugs approved regulation. Typically, what will happen is the employee will do some soul searching, he or she may keep it quiet for a time being and keep it to themselves. They may begin to ask co-employees pointed questions, which at least enable that thought process, they may go to family members or friends and vet it by them. At a certain point it’ll be too hard for them to deal with by themselves. They’ll search out for a lawyer and they’ll want to find a lawyer first, who can guarantee confidence that whatever information is provided at least in the consult stage is going to be subject to the attorney client privilege.

The obligation of the lawyers at least to provide level of assurance and a good lawyer will do that. The initial goal of the employee will be to determine whether they have something to worry about. Three things, one is do they have personal liability for what’s going on? In other words, have they been part of the wrongful conduct. Two, can they continue to work in the workplace? And three, what if any action can they take? The what if any action they can take is maybe they are assured through their conversation with a lawyer there’s nothing wrong and their concerns are without basis, that’s a not action, I suppose.

The other is that it’s so bad that they just can’t be in the workplace anymore and the third is that there’s a possibility of bringing a lawsuit and if the lawsuit is brought and it’s brought under the False Claims Act because there’s government money involved, obviously that person becomes what’s known as a relator. The case is filed under seal, before the lawsuit is filed, disclosure is made to the United States government. The disclosure is a document that becomes the roadmap for federal agents to continue to look at the case and it includes witnesses, lists of documents, the basic factual allegations. The lawsuit itself, when I say it’s filed under seal, but I mean it’s filed in the United States district court and it’s not served on the defendant.

It served on the United States government and where state monies involved the lawsuit will name the states and it will be served on the states. The government and the states will get together, the federal government and the states will get together and they’ll investigate the case, initially for a period of six months. Then they will ask for what’s known as an extension of the seal generally and this me and this may go on for two years. During the two year process civil investigative demands for information may be issued to the defendant and others that have information, the applicable agencies that are involved. If it’s an education case or a vendor for the Department of Education, the Department of Education’s Inspector General’s office may issue what are known as agency subpoenas.

If there is a termination that what’s alleged also has criminal implications where there’s criminal conduct involved, mail fraud, wire fraud, violations, criminal violations of the Food, Drug, and Cosmetisc Act, anti-trust violations, we’ve seen what are known as parallel prosecutions meaning that there’s not only an investigation under the False Claims Act, but the criminal division of the United States Department of Justice or the criminal sections for state attorney generals offices get their marching orders and send their troops out. There may be criminal liability that will be investigated and we’ve had cases where the end result is the defendant will pay money under the False Claims Act.

They’ll execute it in agreement with the applicable agency outlining their conduct going forward, what they can and can’t do, it’s called a corporate integrity agreement, and there may or may not be a guilty plea, where fines are paid, people go to prison or a company is put on probation for example. That’s generally the process that occurs first, it’s a person trying to reconcile what they’re seeing as being improper, there’s some soul searching. That soul searching may be internal to the person, external in terms of the individuals they consult. Ultimately they’ll reach out to an attorney, the attorney will investigate the matter fully to make sure that the case has some merit, if it’s to be filed.

Then it will be brought to the attention of the United States government Justice Department and the various state attorney generals, a lawsuit will be filed under seal, there’ll be cooperation with the government, the government will do its investigation, the case will remain under seal. If the government determines that the case has merit, it will intervene, and it’ll intervene either to settle the case or to litigate the case. If it litigates the case, it will litigate the case alongside the relator and its counsel or the government may simply say, “You know what, we were going to pass on intervening but you’re free to take up the case.”

In rare circumstances where the case has absolutely no merit but extremely rare circumstances, the government may move to dismiss the case, but generally if a lawyer is doing his job at the investigation stage, they’re not going to be taking one of those types of cases, they’re going to weed those cases out pretty quickly.

Who is NOT eligble to bring a qui tam action under the FCA?

Who really has the ability to bring a False Claims Act case? Here’s the first question, the first question is, is there government money involved? The second question, is the conduct causing the government to wrongfully pay out money? The third question is, do I, as a potential whistleblower, know this because it’s a matter of public record?

What do I mean by a matter of public record? I mean that a person cannot bring a False Claims Act when the allegations as alleged in the potential action are publicly disclosed in a federal, criminal, civil or administrative hearing in which the government or its agent is a party, in a congressional government accountability office or other federal report hearing, audit or investigation or from the news media. That is called the Public Disclosure Bar, you cannot bring a suit if it was publicly disclosed. When I say publicly disclosed, I mean exactly as I’ve defined public disclosure.

The exceptions to public disclosure is the original source rule, meaning, do I know the information independent of this public disclosure? Do I have privity with the wrongdoing, in the sense I’ve witnessed it, was I in the workplace, do I know about it from my own eyes? And ears as opposed to reading it secondhand in a newspaper?

Why do companies violate the law, shouldn’t they know better?

My experience is that companies violate the law because it’s part of their business model because it’s cheaper for them to violate the law than comply with the law. Even if they’re caught, it’s cheaper for them to pay the penalty than to take the prophylactic actions necessary to comply with the law. For example, suppose you’re a nursing home in Florida and the regulations require that you have to have a backup generator in case there’s a power failure, and obviously Florida knows that there are power failures when there are hurricanes.

Suppose the backup generator costs $30,000, but the nursing home determines that rather than pay the $30,000, the fine for not having a generator may be $5,000. They’ve made a determination that they’d rather pay the penalty, which is essentially the fee for the license to break the law, and we see this over and over and over again. It’s not just corporations, it’s average people. Suppose you’re driving your car down the street and you can’t find a parking space, there’s no parking space but there’s a parking lot and the parking lot will charge you $30 to park, but you see a no parking zone. Well, you say to yourself, “What’s the ticket going to cost? A ticket is going to cost $6 or $10. Is that cheaper than buying a space in a parking lot for $30?” So you say, “Well, it’s cheaper to pay the price to break the law.”

Companies calculate this all the time, they calculate what they think the penalty is going to be, and they calculate the possibility of even paying the penalty. The wonderful thing about the False Claims Act, is that the False Claims Act actually makes it harder to calculate the penalty. Why? Because first of all, the statute imposes, triple, three times the actual damages to the United States government or the state governments and second, the False Claims Act imposes up to a $20,000 civil penalty for every false claim that was filed. For example, if I submit a thousand bills and each bill is a false bill, the actual damages may only accrue to let’s say $100,000 but I could have easily $1 million or $2 million in civil penalties. So, the false claims act takes that calculus out of the mix.

The general rule is, and I say general rule, not the rule that you abide by, but my general observation about companies is of course in the first instance it’s greed. In the second instance, it’s integrated into their business model and nine times out of 10, we can look at a financial reports that is 10-Ks, 10-Qs, the things that are the documents that are filed by publicly traded companies where the Securities and Exchange Commission, and we can get a pretty good sense as to whether the company has a business model that is either over the line, crossing the line in terms of legal propriety or pretty close to the line in terms of legal propriety. We’ll literally see statements and financial reports, where the company says, we can’t guarantee that we’re in compliance with X, Y, and Z law.

We see it, for example, in the healthcare arena where the company may say, “Well, we think we’re in compliance with the Anti-Kickback Statute, but we can’t guarantee compliance with the Anti-Kickback Statute”. Well, somewhere along the line, the company’s calculated into their business model the notion that if in fact they’re caught violating the law, the penalty is going to be X and Y, and they can afford to pay, pay that penalty, no worries. Consumers who are consumers, employees, whistleblowers, people who are in the business of reporting fraud, either by happenstance or because they’re morally compelled to do so, they actually can take that calculus out of the mix.

What is the role of the whistleblower attorney?

Well, first of all, if you want to bring a suit under the federal False Claims after the state False Claims Act, the government requires that you’d be represented by an attorney. Why? Because in the first instance, you are bringing the suit in the name of the United States government or the state government and your claim will be styled as John Smith or USX Rel John Smith versus the Doe Corporation. Where the government is the real party in interest, the government requires that an attorney appear on its behalf, that’s the most important thing to know. The second is that these statutes, the federal and state False Claims Acts actually provide for a bounty. If you merely just call a government hotline, the first thing is that you’re not necessarily going to be entitled to any bounty. In order to qualify for a bounty or put yourself in line for a bounty, you actually have to file a case under the federal and state False Claims Acts.

There are other whistleblower statutes, the Securities and Exchange Commission has one, it’s an administrative statute, the Internal Revenue Service has as an administrative statute, the False Claims Act statutes are the only ones that allow for actual litigation to be filed in the state or federal court. The thing is, is that when you put one of these suits in play, you’re controlling the case, you’re controlling the investigation, whereas if you merely just call a hotline somebody can answer the hotline, take down the information. There’s no obligation for them to get back to you, they’re not going to report back to you, for example, in two months saying, “Your claims or your claims are invalid.”

Once you file a case in a state or a federal court under the False Claims Act, state or federal False Claims Act, the court is monitoring their case. There’s going to be a judge overseeing the case, the government has to report back to you, the government is required to do an investigation. Filing a suit under the false claims act compels the government to do an investigation, it does so because it’s overseen by a federal or a state court judge, you’re going to be in a position where you’re going to know exactly what the government’s found. It’s more satisfying, there’s more comfort and there’s certainly more control. The only way you can put yourself through this process is if you have a lawyer, that’s just what the law requires.

Does the False Claims Act harm companies for honest mistakes?

The guts of the False Claims Act contain language like this, knowingly presents or causes to be presented a false or fraudulent claim for payment or approval, knowingly makes, uses or caused to be made or used a false record or statement material to a false or fraudulent claim. The question is what does the term knowing, or knowingly mean? The False Claims Act actually contains a definition of these words, and this is what it says, the terms knowing and knowingly mean that a person with respect to information has actual knowledge of the information, acts in deliberate ignorance of the truth or falsity of the information or acts in reckless disregard of the truth or falsity of the information and requires no proof of specific intent to defraud.

What does that mean? It means that you cannot bury your head in the sand if you’re doing business with United States government, Justice Holmes once said in an old case, that you’ve got to turn square corners. You have an obligation to know the law, you have an obligation to know whether your product meets specifications, you have an obligation to know whether your services meet specifications and you have an obligation to know whether what you’re doing is in compliance with the law. You can’t simply claim ignorance. It is possible that you could have done everything in your orbit of control to prevent a False Claims Act from being filed and thus not be in violation of the False Claims Act, but it is also possible that you could act recklessly, act without disregard, act grossly negligently, and that will substitute for intent. It is a standard that is not hard for a federal civil prosecutor or a state civil prosecutor or an attorney prosecuting these cases to meet.

What’s it take to investigate and prove these complex cases involving fraud, misconduct and abuse?

Well, in the first instance when a client comes to us, they’ll have a sense that what’s going on, let’s say in the workplace, is improper. We’re going to determine whether the impropriety involves some money that was paid out by the federal or state governments or whether there were statements made to the federal state governments or state governments that were false, whether there was money that was paid out that shouldn’t have been paid out, so we’re going to look at that basic information. We are going to look at if it’s a public company, we’re going to look at what’s motivating the impropriety, what representations were made to Wall Street, what demands Wall Street was making on the company, what was the market pressure at the time, was the illegality…

For example, marketing illegality in the pharmaceutical industry is often driven by market pressure. We’re going to look at the bonus structure of employees, we’re going to look at whether the CEO or the chairman or the directors are making money off these allegedly illegal activities. We’re going to go on YouTube, we’re going to look at everything that’s available about the individual actors on YouTube. We’re going to look at their videos, we’re going to look at Facebook, we’re going to look at LinkedIn, we’re going to gather as much information as we can to see if we can get more context in terms of what our client is saying. Then our clients may have, for example, documents that are within his or her custody or control, we’re not going to ask that our clients take documents from the workplace. We don’t want the client to take documents from the workplace.

But if the client has in documents that were handed to hear him or her, we’re going to look at those documents as long as they’re not attorney client privilege, we don’t want to see anything that’s attorney client privilege, so it will take us some time to put this case together. We’re going to put together a complaint, meaning a cause of action that’s going to be filed at the the court and we’re going to put together a disclosure statement. Disclosure statement, as I said, is the document that’s the roadmap for the investigation. We’re going to keep in mind that agency investigators are going to be looking at the case, FBI agents are going to be looking at the case, attorney general staffers and attorneys are going to be looking at the case. There’s going to be a myriad of individuals who are going to be all of a sudden swarming, in theory, because of the allegations we’ve made and we want them to be looking at this roadmap.

If the case goes more than a year or two years, there may be people who leave the investigation or people who come on to the investigation and we want to make sure that there’s a document that they can always turn to, that they can get a quick synopsis of what the case is about, the central allegations, the witnesses, the key documents. The government is going to take a look at this when they get the complaint, when they get the disclosure statement and the first thing the law enforcement people are going to do is they’re going to say, “What agency is involved?” If it’s a healthcare situation, they may go to the Health & Human Services Agency or maybe the subdivision of that, the Center for Medicare Services, and they’re going to share with them the complaint.

They’re going to say, “What’s the spend here? How much money was spent on these products or services as to these allegations? If in fact these allegations are true, do you, the agency think that there was a wrong committed?” They’re going to get the agency’s view of the case and obviously we’re going to have a sense of where the agency is going to be in terms of the law because we’re not going to bring a case unless we understand that the law has been violated. Obviously the agency, if they believe the law is violated or we’ve alleged violation of the law, they’re going to be concerned. Then, the government is going to launch their investigation after they consult with the agency and the agency looks at what they have internally.

There may be more than one agency involved, for example, in a drug case, a drug is being sold illegally, that is marketed illegally. It could be a drug that’s purchased by 50 state Medicaid agencies, it could be a drug that’s purchased by the Veterans Administration, it could be a drug that’s reimbursed by Tricare, which is the military insurance entity, it could be a drug that’s paid for by any of the state health and welfare funds… There’s a myriad of entities that actually may be involved, they’re going to weigh in and going to chime in on what their perspective of the lawsuit is. There’s this inward investigation that the government’s going to do, and that’s just checking with their own people and own agencies.

The second thing the government’s going do is they’re going to look at your documents, what documents you’ve given them, and they may obviously do that before they talk to the agencies or contemporaneous with it. The third thing the government’s going to do is they’re going to issue either civil investigative demands, agency subpoenas, or they’re going to issue grand jury subpoenas depending on whether a criminal activity is implicated. Those subpoenas are going to, are going to require the production of documents and the government’s going to review all those documents. Once they review all those documents, they’ll begin to send agents out into the field and the way they’ll do an investigation, something I’ve written about, is they’ll start from the outside in.

They’ll look at former employees or vendors, then they’ll look at current employees, and they’ll go up the food chain and begin to focus on some of the management employees. Then ultimately they’ll go to the top of the food chain and the directors and CEO of the company and they may along the lines subpoena information from their laptops and so forth. The government could do hundreds of these interviews and this may take a period of two years or so, three years. Then once they collect all the information, and there’ll be doing this along the way with sharing the information with the agencies, they may get back to you as counsel for the relator saying, “This is what we’ve found. Can you give us some more insight on this issue or that issue, or what does your client have to say about this issue or that issue?”

Sometimes as the government collects the information or the documents, they’re going to put them on a database and they’re going to allow you as the counsel for the whistleblower to review the database and actually help the government with document review and point out which documents you think are important. Ultimately this is going to result in some kind of conclusion that the Justice Department or the state attorney generals are going to make and it’s going to, in most cases, be a binary decision making process, “Are we going to intervene in the case, are we not going to intervene in the case?” If they intervene in the case, they become part of the case and they may decide to litigate it or they may decide to settle it.

Nine times out of 10, they’ll talk to the defendant, they’ll do what’s called a partial unsealing the last of the court to partially unseal the complaint, and the government won’t ask for that without the permission of the relator and the partial unsealing of the complaint, will allow the defendant to actually for the first time see the complaint. Sometimes the defendant will see it with the relator’s name and sometimes the defendant won’t see it with relator’s name, and sometimes they’ll see the entirety of the complaint, sometimes certain portions will be redacted, that is blacked out.

That will allow for at least a discussion about settlement and of course prior to this decision on intervention, the government at the point it’s making a decision probably is going to call the defendant in and say, “This is what we found, what’s your position on it?” And they’re going to hear the defendant’s position. This entire process allows the government to engage in a lot of free discovery, free meaning, not that it doesn’t cost the government anything, but the government is not fighting off discovery from the defendant at this time, it’s just getting information. It’s getting information, it can bounce the information off the defendant, it can get to defendant’s position, and it’s in a pretty darn good a position to ascertain whether this case is a good case and one that it should jump into, pursue or settle.

If it intervenes, that’s the direction it takes. It pursues it or it’s settles it, it becomes the lead with relator’s counsel. If it doesn’t, it says to the relator’s counsel, “You’re free to go pursue the case on your own.” Sometimes that happens and sometimes the relator will determine that the government’s investigation has determined that there really is no merit to the case. Generally if you investigate the case enough up front, you’ll get a sense that the case is good enough to litigate even absent government intervention.

What would you say to a whistleblower who is concerned over facing off against these BIG corporations with, what feels like, unlimited resources?

I’ve had so many clients who have come to me at the end of the day after a case is settled and said, “I can’t believe we did it, I can’t believe we’ve taken on this multibillion-dollar enterprise and made them change the way that they do business, made them pay the United States government hundreds of millions of dollars,” in one case, way over $1 billion, actually in a couple of cases way over a billion dollars. My answer to them is, “This is what the litigation process is about. In the United States, an individual who is in the right can walk into a federal or state court and he can take on the most well healed defendant, corporate or otherwise and change the way America does business.”

There’s no better way to do that, at least from the consumer vantage point than through the False Claims Act. You get to step into a court and you’re litigating on behalf of the United States of America and various states. Where a company is in the wrong, it doesn’t make a difference whether it’s publicly traded, it doesn’t make a difference whether it’s got a market cap of $10 billion, if they’re in the wrong, you could be an individual who has a net worth of $2,000 or less and still change the way that entity does business. And, make money for yourself, compensate yourself for the risks that you’ve taken, get the reward and obviously return lost dollars to the United States of America.

To an insider with knowledge of fraud and considering blowing the whistle — what do they need to know?

The choice to become a whistleblower is an iterative process and it should be an iterative process, You should give due consideration to it. You want to be in a relationship with an attorney who cares about you and you want to be in a relationship with an attorney whom you like, and you want to be in a relationship with an attorney who has litigated cases, tried cases, understands what this case is going to look like in front of a judge, how it’s going to be perceived by the government, the difficulties in putting the case together, the difficulties in putting the evidence together. It’s not a flip decision and it shouldn’t be. Decisions that aren’t flip in there made a with due consideration, maybe even some doubt, those are the best kinds of decisions because they result in really good relationships with an attorney and they result in cases that are brought for all the right reasons.

Cases can be drawn out and they’re going to be days that are going to be good days or where you’re going to see what you perceive as some glimmer of hope and some days where it’s going to look a bit darker. At the end of the day, hopefully you’re going to say to yourself that this is one of the things that you’re going to be most proud of at the end of your life.

How common is fraud against government programs?

The government operates through the private sector, you can’t imagine how many vendors the United States government does business with. Think about your public school, walk into the cafeteria, there’s a food service vendor, they’re a contractor that’s putting food in your kids’ mouths.

Walk outside. The public school grass has being cut, maybe it’s being cut by a contractor, go into a public hospital, there may be contractors who do the cleaning, there may be contractors who provide X-ray services. Certainly there are contractors who were building the hospital and certainly there are contractors who are selling the drugs and the equipment, the medical devices to the hospital. Think about the United States military, we fly F-16s, F-15s, F-35s, all of these planes, the greatest technology known to the United States military are the products of the private sector. We rely on the private sector to be truthful, we rely on the private sector to make products that are safe, but you know what, the private sector’s the private sector.

They have obligations to Wall Street, they have obligations to hedge funds and investors, people who all owe nothing about whether an F-35 jet engine works or doesn’t work. They just care about the bottom line, the stock price and sometimes greed and money drive impropriety. Nine times out of 10, that impropriety, when it involves a company that does business with the United States government implicates lost tax payer dollars and taxpayers, individual people are being put in physical jeopardy.

How do attorneys protect the whistleblowers who come forward to expose wrongdoing?

The best protection that you have is actually filing a suit in cooperating with the United States government or state attorney general because once you’re cooperating with government entity, it makes it more difficult for an employer to either terminate you or alter your terms and conditions of employment. If you’re blowing the whistle internally, there’s no outside regulator involved.

Obviously there’s nothing that can preclude anybody from doing something wrong, but there are deterrence mechanisms and there are certainly retaliation avenues. The deterrence mechanisms are, A, cooperating with a federal or state agency, involving those agencies in the grievance, number one. Number two, you should know that there are multiple mechanisms or avenues that one can take, an attorney can take if an employee has been retaliated because they’re bringing a wrongdoing to the attention of a regulator or even the employer. There are common law remedies, there are statutory remedies and the federal and state false claims act have very, very stringent have anti-retaliation provisions.

How important are whistleblowers in fighting fraud?

Whistleblowers do a lot in terms of bringing corporate fraudsters to justice. As many lawyers as the United States Department of Justice have and as many resources they have and as many state attorney generals as exist, really there are so many corporations and so many wrongdoers that insiders are the key to enforcing compliance in this century. In fact, two centuries ago when it was recognized by the United States Congress, when the False Claims Act was first initiated, the role of whistleblowers would be paramount. In the first instance, whistleblowers play an important role, in the second instance, with the help of the whistleblowers and the counsel that they bring to the table, companies are brought to justice, and they’re brought to justice in at least three possible ways.

First of all, the scheme that’s revealed by the whistleblowers becomes transparent and people know what to look for in terms of other wrongdoers who seek to emulate impropriety. The second is that there is going to be a penalty in terms of the assessment of actual damages, it’s multiplied times three, and there’s going to be civil penalties that may be imposed. That number, whatever that number is, that dollar figure sends a message that wrongdoing is punished. The third, is that in some rare situation there are what are known as parallel proceedings where the United States government Civil Division or the attorney generals of the states and their Civil Divisions, have parallel proceedings with their criminal divisions and the criminal division gets to work.

It looks at the facts that have been presented by the whistleblower and says, “You know what, we think that there’s criminal liability to be imposed on companies and potentially individuals.” Back towards the end of the Obama administration when Sally Yates was the Deputy Attorney General of the United States, she issued what was known as the famous Yates Memorandum, I think it was September 15th, 2015. What she said is that whenever there’s a civil settlement with a corporation, that the Justice Department should look at individual liability as well, particularly because individuals are the captains of the corporation, corporations can only act through the wrongful conduct or conduct of the individuals as the case may be.

The trend is not only to look to impose liability on the corporation, but liability on individuals. Obviously not line employees who are unwitting participants in schemes at times, but those who actually captained the scheme and orchestrated the scheme, the government’s looking to impose liability. So yes, compliance in the United States is a complicated process, it’s an ongoing process, it’s an iterative process. It’s process that’s repetitive and reminds people that not only do we have substantive laws and regulations, but we have processes to enforce the laws and regulations and we have penalties that we impose as reminders that these regulations deserve compliance.

What would you say to an insider who is scared to come forward?

We’ve had cases where there have been whistleblowers who have had exposure in the sense that they’ve participated in the scheme. Sometimes they were unwitting participants, many times the best whistleblowers are unwitting participants and they reach a point where they wake up one day and they say, “Oh my God, this isn’t right.” Then we have had, in rare circumstances or cases, whistleblowers who actually were part of orchestrating the scheme and they actually may have some exposure, under the False Claims Act, either as capable of bringing a claim. There are some complexities where the individual has more exposure and you have to analyze those on a case by case basis.

Is there a statute of limitations for coming forward to report false claims act violations?

The False Claims Act has a minimum six year statute of limitations, at least at the federal level and mostly at the state level, that’s what the statute of limitations is. Depending on the circumstances, the statute of limitations can be as lengthy as 10 years. That sounds like a lot of time, but it does take some time for an individual whistleblower to be cognizant of what’s going on in the workplace, put the pieces together and really understand that there is wrongdoing that needs to be reported, time lapses when that’s going on. Obviously it’s important for the whistleblower at the earliest possible point in time to a consult with an attorney and figure out if there’s something wrong in the workplace, what needs to be done, what if any actions the individual whistleblower should take, and what if any actions should be taken by the attorney on the whistleblower’s behalf.

What’s it take to prove and win in such complex cases?

False Claims Act litigation is complex, high impact litigation. What do I mean by that? What I mean by that is it involves putting together schemes, big schemes which are really complex puzzles. You have to know the federal rules of evidence or the local state rules of evidence. You have to understand that these schemes are not put together necessarily with direct evidence, they’re put together with circumstantial evidence, and if you’re really someone who knows and understands the rules of evidence, who knows that the federal rules of evidence, Rule 401 doesn’t distinguish between direct and circumstantial evidence. What you’re looking for is lots of little nuggets that you can piece together and you’re sitting there and methodically putting these nuggets together, and you’re creating a narrative that explains the behavior of a wrongdoer, and you’re looking at the motivations, you’re going back.

You’re doing the economic analysis in the sense that you’re looking at the financial reports, what’s filed with the Securities and Exchange Commission, what otherwise me maybe available online, what’s motivating this entity or entities to engage in what they’re doing. These are complex cases, they’re not run of the mill slip and fall cases with one or two witnesses. They’re document intensive cases, their documents are electronically stored so there’s going to be some retrieval issues, there’s going to be electronic discovery issues, they’re cases that are driven by experts who are the glue that put the case together in the sense that they explain to the court the judge or the jury the context of the case, or they may help enabling the court to understand the regulatory scheme or the damages.

They’re cases that are going to take the patience of a lawyer who understands how to try a case, understands ultimately what that argument is going to look like when all the evidence, all the evidence is in and he or she stands in front of the jury and makes that closing case for the whistleblower.

What do you see on the horizon as the future of false claims used to defraud Government?

Greed is centuries old, if you read the Bible, new or the Old Testament, there is no dearth of stories where greed is prevalent, wrong doing is prevalent. We regulate to proscribe wrongdoing, we regulate to create mechanisms to enforce compliance with substantive laws to address wrongdoing. Anywhere there is money, there’s going to be wrongdoing, there’s going to be schemes that circumvent legitimate means to get to the money.

The other night I was looking at the Department of Education’s website and just looking at all of the contracts that are being let to the private sector. From things as small as photography to as complicated as data analysis or the implementation of school lunch programs, there is no shortage of situations where there’s going to be fraudsters looking at how to cheat the government out of the money. Moving from the Department of Education to the Department of Defense, anybody who’s seen the … it’s actually a black comedy, War Dogs, and how two individuals in their 20s conspired to cheat the Department of Defense out of millions and millions of dollars.

You watch that movie you’ll see in some ways how easy it is to cheat the United States government and think not only about the United States government and all its agencies, Defense Department, Education Department, Environmental Protection Agency, office of the Treasury, General Services Administration. You go through the streets in Washington where we have our office and you’ll see just building after building government agencies, the Department of Labor and every one of these agencies has a budget and they let contracts with the private sector. So, wherever there’s government money, there’s going to be fraud.

What if you’re involved in the misconduct? Why should your reach out with what you know?

If you’re involved in the healthcare industry, you may be working for a large pharmaceutical company or a large hospital or nursing home chain, you’re working for an employer that at least has the indication, the appearance of propriety.

You say to yourself, “I see some things going on in the workplace that I’m just not comfortable with, but they must be okay because it’s a big company. They have a corporate compliance department, they have lawyers, they have experts, they’re traded on the New York Stock Exchange, they issue press releases, they give me nice handbags that I can carry my awareness with, they have all the indicia propriety.” You know what, your instincts to be something that you should be concerned about, size, the fact that they look big, the fact that they look professional, the fact that they look good doesn’t mean that they’re not violating the law. When you get that concern, think about it and it’s important that you call a lawyer, if for no other reason to get peace of mind.

Bounce what’s going on off the lawyer to determine whether your concerns are valid and if they’re not valid, okay, you have peace of mind. And if they are valid, then what are the next steps? Do you leave the workplace, do you continue to work, do you raise issues internally, do you take action by filing a claim under the federal False Claims Act or other possible statutes that exist? These are decisions that you really, really need expert help with and in selecting a lawyer, you really need to talk to somebody who has worked under the False Claims Act, represented whistleblowers, done employment law and most importantly knows how to put cases together for trial. Somebody who litigated cases, taken depositions, done motions practice, argued before a jury and is not afraid to go that kind of distance.

To Summarize: What’s Your Parting Message?

When you see situations where government money is being wasted or where there has been fraud and abuse with regard to government money, billing for services not rendered, billing for products that don’t work, billing for products, drugs, devices that aren’t necessary, there’s an opportunity for you to participate in an important provision of our democracy.

Listen to the complete interview here.

What is a kickback?

Federal law makes it a felony to provide remuneration to someone to order or recommend a product or service paid for with federal health care dollars. It also makes it a felony to receive money for the purpose of recommending or ordering a product that is paid for with federal health care dollars. The law is known as the antikickback statute and it places drug companies, device manufacturers, doctors and even nurses within the orbit of liability.

Payments that do not appear on their face to be bribes may indeed be problematic. Consulting agreements, promotional speakers events, and even grants can violate  the law. Promotional speakers events are highly likely to violate the law.

The Importance of Whistleblowers

Whistleblowers are of vital importance to regulators, helping them put the pieces of the jigsaw together, says Reuben Guttman.

Back in 2013, HSBC whistleblower, Herve Falciani, told the German publication Der Spiegel: “Banks such as HSBC have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering.” Conclosury statements like this are levied all the time by public interest groups, legislators, opinion writers and pundits.  When they are made, they are often a matter of speculation or at most, an argument of inferences from loose facts. Of course, Herve Falciani is different. When he left HSBC in 2008, he reportedly took data from 130,000 customers. He took the facts to allow authorities to make solid claims of tax evasion; claims that can only be effectively levied with inside information.

In a global economy with complex transactions, communications occurring in multiple languages and transactions and communications made with the jargon of the industry, it is extraordinarily complicated for outside regulators to investigate and gather the facts to prove complex fraud cases.  To some degree, it is analogous to a large ship attempting to navigate a harbor without a local captain available to explain where the rocks are or where the water is shallow. Or, perhaps it is like a blind person walking into a room for the first time without having any sense of where the furniture is located.

Of course regulators have the ability to access documents through a subpoena or civil and investigative demands, and they might even have the ability to ask questions under oath.  But which documents do the regulators ask for?  And when the questions are asked, how should the questions be worded so that regulators target the facts with the precision of a laser guided missile?   Imagine an investigator questioning an HSBC official: Question:“Have you aided and abetted foreign citizens in ways that allow them to avoid paying taxes?”  Answer: “No, that is not our mission … we are a bank.”

The problem is that most sophisticated lawbreakers understand the concept of a smoking gun.  Never create a document that summarizes the wrongdoing for regulators.  Never create a document that lays out the facts leading regulators to pinpoint the wrongdoing. And of course, in a large corporation, never create documents, rules, policies or plans that will cause the average employee to question the propriety of a corporation’s efforts. We live in an age where complex wrongdoing is orchestrated through communications and programmes which, if analysed independently, would seem harmless.

Yet, it is the whistleblower – the person inside the box – who can explain how patterns of innocent conduct, when linked together, amount to wrongful schemes involving fraud, money laundering, racketeering and tax evasion.  Whistleblowers like Falciani are so critically important to regulators and without their help, regulators face a daunting task of fully understanding the schemes and pinpointing and gathering the evidence to convince a trier effect that wrongful conduct has occurred.  Hence, “the importance of the whistleblower.”


A whistleblower is an individual who discloses information about wrongdoing. Often, the whistleblower does so even though the wrongdoing that s/he witnesses is considered the norm or accepted behavior for that particular environment. Because the wrongdoing is — unfortunately—considered accepted behavior, the decision to blow the whistle is a difficult one. Those in the whistleblower’s immediate environment often try to convince the whistleblower that what s/he believes is unethical, or indeed illegal, is acceptable and legal. Whistleblowers question themselves and seek information to either validate their own conclusions or to question their conclusions. This website was in part developed as a tool for whistleblowers to help them through this dilemma.