COVID-19 Will Lead to New False Claims Cases

Reuben Guttman Articles, Whistleblower Articles, Whistleblowers Blog

The COVID-19 virus is inspiring new private-public relationships that will lead to a new generation of whistleblower cases under the Federal False Claims Act.

Government is injecting billions of dollars into the private sector for medical devices and necessary healthcare equipment. The private sector is now supplying everything from tests to masks and ventilators. In the massive purchase of products and services there is not a corresponding gearing-up in oversight. Whistleblowers will be essential in documenting defective products, and false billing for services or products not supplied or rendered.

The fraud will not just be limited to medical products; state and federal governments are spending billions to build temporary medical facilities and there is no doubt that there will be fraud, waste and abuse in their construction.

To keep the economy from collapsing, the government has made grants and loans worth billions of dollars. Recipients of government funds must make truthful representations on their loan or grant applications and they must continue to meet the requirements of the loan or grant for an extended period of time. The conditions of receipt of government funds are as detailed as the requirement that a recipient remain neutral in a union organizing campaign; in other words, ripe for misuse.

The bottom line; COVID-19 has created a new role for whistleblowers.

False Claims Act: Offense and Defense

Reuben Guttman Articles, Whistleblower News

Description: Each year private citizen suits under the False Claims Act have returned billions of dollars to Federal and State treasuries. These suits leverage the government’s compliance enforcement resources and provide bounties to those individuals or entities – known as relators – who initiate them.

Who has standing to bring these suits? How are they investigated and put together? What are the pleading requirements and what role does the government play in overseeing this litigation. These issues along with relevant ethical concerns will be discussed from both the Relator and the Defendant perspective.

It is a program of particular interest to plaintiff counsel’s seeking to explore new litigation opportunities,  and defense counsel,  in-house and insurance counsel who work with clients who do direct or indirect business with the government and are subject to liability under the False Claims Act.  It is a program of particular interest to those in the healthcare, education, and defense arenas or for those involved with any client operating in whole or in part with government monies.

The False Claims Act, involving cases filed under seal on behalf of the government, presents unique challenges under the ethical rules. The program will explore these challenges with an eye toward the applicable ethical rules and considerations.

Reuben Guttman is a founding member of Guttman, Buschner & Brooks PLLC (GBB). His practice involves complex litigation and class actions. He has tried and/or litigated claims involving fraud, breach of fiduciary duty, environmental derelictions, antitrust, business interference and other common law torts or statutory violations.

The International Business Times called Mr. Guttman “one of the world’s most prominent whistleblower attorneys,” and he has been recognized as a Washingtonian Top Lawyer by Washingtonian Magazine. A February 19, 2015 profile of Mr Guttman by the Boston Globe’s STAT NEWS referred to him as the “Lawyer Pharma Loves to Hate.” Citing a $98 million recovery from Community Health Systems, Inc., Law 360 named Mr. Guttman a “Health Care MVP” and profiled him in a December 1, 2014 article. Author David Dayen, writing in his Book, Chain of Title (The New Press, 2016) cited Mr. Guttman’s work on behalf of robo-signing whistleblower, Lynn Szymoniak, noting “he had won some of the largest awards in the history of the False Claims Act; there was really nobody better for the case.” Writing in their book, The Corporate Whistleblower’s Survival Guide, (Berrett-Koehler Publishers, Inc., 2011), authors Tom Devine and Tarek F. Massarani wrote that “in settling qui tam litigation, [Mr. Guttman] has aggressively and successfully negotiated for corrective action against public health and safety consequences from prescription drug fraud.” In the book, When Good Companies Go Bad, (ABC CLIO, 2014), authors Donald Beachler and Thomas Shevory profiled Mr. Guttman’s off label marketing case against Abbott labs, involving the drug Depakote, which resulted in a $1.6 billion recovery in 2012 for state and federal governments. The Spring, 2013 Cover Story for the Emory Lawyer, profiled Mr. Guttman as one of Emory Law School’s leading players in the area of complex litigation noting that “even before filing a case, Guttman’s team engages in intensive investigation, retains experts and prepares as if a trial is imminent.”

Adam S. Hoffinger is co-chair of the firm’s White Collar Defense & Government Investigations Group. Adam focuses his practice on complex civil and white collar criminal matters, including securities, health care, False Claims Act (“qui tam”), the Foreign Corrupt Practices Act (FCPA), export sanctions, criminal tax, money laundering, antitrust and bankruptcy. He conducts internal investigations on behalf of corporate boards of directors, bankruptcy trustees and public authorities. He counsels corporations and individuals in compliance matters, government investigations, and Congressional and regulatory matters. He also represents corporations and individuals in high-stakes civil litigation. Adam has defended numerous high-ranking executives and general counsel from some of the world’s largest companies, as well as high-profile staff and members of the Senate, Congress, White House and various government agencies, faced with federal and state criminal investigations and indictments. Adam is a fellow of the American College of Trial Lawyers and has successfully tried cases throughout the country.

Adam has been recognized in Chambers USA as “an absolutely fearless criminal defense lawyer” as well as for his “immense talent as a trial lawyer” and “strong advocacy skills,” in The Legal 500 US as “an aggressive trial advocate,” and in Benchmark Litigation: The Definitive Guide to America’s Leading Litigation Firms and Attorneys as a “celebrated government investigations practitioner.” He has also been recognized in The Best Lawyers in America, Expert Guide to the World’s Leading White Collar Crime Lawyers, Who’s Who Legal: Business Crime Defence, Global Investigations Review, Washingtonian Magazine and Washington DC Super Lawyers. Adam was named “Government Investigations Attorney of the Year” for 2015 and “Life Sciences Star” from 2013 to 2019 in LMG Life Sciences. In addition, he was recognized in the National Law Journal’s “Hot Defense List” for his jury trial victory on behalf of a former pharmaceutical executive in a criminal case charging conspiracy and violations of the federal Anti-Kickback statute. From 1985 to 1990, Adam served as an Assistant U.S. Attorney for the Southern District of New York. He received the Director’s Award for Superior Performance from the U.S. Department of Justice (DOJ) in 1990. He is an adjunct professor at The George Washington University Law School and has been an instructor at Georgetown University Law Center’s National Institute of Trial Advocacy (NITA) since 1992. He also serves on the alumni board of the Fordham University School of Law.

Source: https://westlegaledcenter.com/program_guide/course_detail.jsf?courseId=100277513&sc_cid=CELESQ_ws

Sweeping Stimulus Law Is Golden Opportunity for Scam Artists

Reuben Guttman Articles, Whistleblower News

The sweeping $2 trillion economic stimulus package signed into law by President Donald Trump on March 27 will undoubtedly help millions of people in need, but it is also expected to attract its share of shady operators looking to make a fast buck.

. . .

The stimulus provides for oversight, but “there is no way that the inspector general or a board governing oversight of $500 billion will be able to monitor and detect every fraudulent representation made in furtherance of government payment,” said Reuben A. Guttman of Guttman, Buschner & Brooks PLLC, a firm that represents whistleblowers.

Democrats pushed for and secured independent oversight of $500 billion for distressed businesses, Bloomberg News reported.

False Claims Act whistleblowers will be needed to help the inspector general do the job, Guttman said.

“The government’s first instinct in an emergency is to put money out without putting guidelines into place to make sure it will be well spent,” he said. “Products like ventilators and masks will have integrity problems because of this rush.”

. . .

Source: https://news.bloomberglaw.com/federal-contracting/sweeping-stimulus-law-golden-opportunity-for-scam-artists

Mass Tort Deals: Must-Read Interviews for a Must-Read Book

Nancy Gertner Articles, Reuben Guttman Articles

In 1965, Ralph Nader published Unsafe at Any Speed, an exposé on automobile safety, and since its publication, consumer faith in product safety has never been the same.

The early efforts of Nader and his legion of young lawyers and researchers—who came to be known as Nader’s Raiders—spurred the growth of products liability litigation. Nader gave consumers and their counsel a reason to go to court: they challenged the safety of products from cars to cribs, and the courtroom provided the level playing field where even the little guy could be heard and get justice.

Now, 50 years later, a law professor at the University of Georgia is exposing impropriety in a system—known as multidistrict litigation, or MDL—that is designed to handle these types of cases.

In her 2019 book Mass Tort Deals: Backroom Bargaining in Multidistrict Litigation, Professor Elizabeth Chamblee Burch blows the whistle on MDL. She writes about a virtually unregulated system driven by deals between a limited group of plaintiff and defense lawyers involving tens of thousands of plaintiffs. Burch’s work is not just based on empirical data; she writes about victims of car accidents, misbranded drugs, and defective medical devices whose cases—purportedly consolidated only for pretrial proceedings—are resolved by court-appointed lead counsel through global settlements that give defendants finality and plaintiffs little choice but to accept the offer. Burch also raises concerns about a system that promotes, indeed at times coerces, settlements over the transparent litigation that has historically driven regulation and made products safer.

If one were to think her concerns involve only a small fraction of federal court litigation, think again. Burch writes that “from 2002 to 2017, MDL jumped from 16 to 37% of the federal court’s pending case load,” with 95 percent of those cases in the products liability arena.

The system that Burch writes about had its origins in the early 1960s, when the federal courts were flooded with nearly 2,000 lawsuits stemming from a nationwide conspiracy to fix the prices of equipment used in the transmission of electricity. With guidance from Chief Justice Earl Warren, who created a Coordinating Committee of Multidistrict Litigation, a process was created to drive efficiencies in the litigation of these cases. The work of Warren and the committee’s chair, Alfred P. Murrah—then Chief Judge of the Tenth Circuit—paved the way for the passage of the MDL statute, 28 U.S.C. § 1407, in 1968. That statute provides for the coordination for pretrial purposes of civil actions involving “one or more common questions of fact.” Cases filed anywhere in the federal court system can be transferred to a single district for pretrial purposes. The MDL statute is short and—in contrast to Federal Rule of Civil Procedure 23, which addresses class actions—provides no standards for the appointment of counsel, class representatives, or for the approval of settlements.

With Supreme Court rulings on class actions in the late 1990s making class certification more difficult for plaintiffs, mass tort actions—rolled up into the MDL system—became the go-to method for handling matters that in yesteryear might have been addressed through the more regulated class-action system. The big plaintiff firms could still litigate massive actions and the defense lawyers could still engineer settlements giving their clients global peace.

Yet, the MDL statute addresses only pretrial matters—not settlement; not global peace; not provisions for opting out; not the appointment of counsel, the compensation of counsel, or the confidentiality of and use of materials discovered in litigation. It is here that Burch does a masterful job of exposing the “Mass Tort Deals” that have evolved from an unregulated system.

To get a better sense of the problem, I posed questions to Professor Burch and Judge Nancy Gertner, who retired from the federal bench in 2011 and now teaches at Harvard Law. My interviews are below.

Judge Gertner, do we have a real problem with the MDL process and how do you view that problem from having been on the bench?

The problem is the classic one: rules and transparency. There were no clear rules with respect to who is assigned an MDL. There is no blind draw, no concrete set of procedures. After I complained about the asbestos MDL shortly after I got on the bench—late 1990s—I was never assigned a case again. My complaint was that the MDL judge, Judge [Charles] Weiner of Philadelphia, was simply dismissing the cases “subject to their being reopened by motion.” The dismissals were contrived, done for the purpose of showing that the cases were moving. I finally got an MDL when Judge Robert Keeton died and my court assigned me to one that had been assigned to him. In the last year I was on the bench, I drew a civil rights case that was headed for the MDL court. My case was the first filed, a second was in Chicago, a third in San Francisco. All of us were up to date, willing to take on the case. It was assigned to neither of us; it went to a judge in Memphis who was on the committee.

If the MDL process were “merely” procedural, it would be one thing. But the decisions made by the MDL judge profoundly affected the substantive outcomes of these cases. Under the circumstances, the failure to have a transparent judicial assignment process is critical to the fairness of the proceeding.

Professor Burch, your book raises ethical issues regarding the MDL process. Why has there not been more of an outcry?

All of the primary stakeholders—plaintiffs’ lawyers, corporate defendants, defense attorneys, and yes, judges—benefit from settlements. And it’s in aggregate settlements where ethical issues arise most prominently. To give corporate defendants the closure they demand, some “settlements” (deals between defendants and plaintiffs’ attorneys) require plaintiffs’ lawyers to recommend the settlement uniformly to all their clients and then some take the extraordinary step of requiring lawyers to withdraw from representing clients who refuse to settle. That doesn’t leave much room for genuine consent.

Those who are most impacted by ethical violations are the plaintiffs, many of whom are severely injured and have neither the time nor the resources to make a stink. In a world of repeat players, they are the one-shotters, the ones who need and deserve the most protection because their voices are so rarely heard. But therein lay the crux of the principal–agent problem: if it’s in the lawyer’s best interest to flout the rules and get the deal done, there will be no outcry, only silence.

Judge Gertner, from your vantage point, why has there not been more of an outcry about the problem?

The question is who is likely to complain and to whom? Judges are not complaining; the assignments are a plum for the Court, entitling the judge to attend a yearly conference in Palm Beach. And the skewed assignment process is usually not apparent. (It was in my case.) The lawyers are not complaining. Candidly, many of the lawyers in MDL case are competing for lead counsel; the last thing they want to do is rock the boat.

Professor Burch, many of the MDLs involve drugs or medical devices. Are the issues you raise in your book ultimately impacting healthcare standards?

The mass-torts plaintiffs’ bar is a last resort, a failsafe of sorts, for when medical drugs or devices come on the market that do more harm than good. So, yes, there is a feedback loop from the courts to healthcare and vice versa.

The FDA regulates everything from tainted spinach to cosmetics to pet food. It can’t and won’t catch everything. There will be drugs and devices on the market that shouldn’t be. We would hope that litigation opens a window into the processes that allowed that to happen so that drug and device companies would avoid those kinds of mistakes in the future. But, if the past is any indicator, the profit motive is a very strong one to overcome.

Judge Gertner, what is the process for fixing the problems?

The authorizing legislation and rules should be redone. There ought to be rules with respect to the assignment of judges—a random draw, a set of principles. And the rules along with judicial training need to make clear that some cases should not be settled; the premium in the MDL is not—as it was supposed to be—providing a mechanism for shared discovery, with a trial to follow in the jurisdictions from which the cases came. The premium is on resolving the case.

Professor Burch, who needs to read your book, and what needs to be done to begin to fix the problems you identify?

I hope the book will appeal broadly to policymakers, judges, lawyers, and plaintiffs alike. It’s empirically based, but not stodgy. I aimed to make it accessible to a diverse group—from insiders who operate in this world daily to those who are injured and experiencing the judicial system firsthand.

As for a fix, there is no single, silver bullet. But there are many things that can improve it and judges can implement the changes and reforms I suggest without waiting for rule changes or legislation. I devote an entire chapter to proposals, but I’ve boiled the key principles down to the following:

  • Appoint lead plaintiffs’ lawyers based on the same principles of adequate representation that we see in class actions. In doing so, judges should invite applications and think about building the best team by seeking cognitive diversity—people with a diverse set of tools and skills, who approach problems differently.
  • Value dissent among lawyers and create outlets for it. As plaintiffs’ aims and preferences differ, dissenters can challenge the status quo and inject undisclosed information into the discussion. Dissenters can thereby act as a failsafe (but not a substitute) for adequate representation on key motions.
  • Tie plaintiffs’ attorneys’ common-benefit fees (the fees they are paid for their work on behalf of the group as a whole rather than their individual clients) to plaintiffs’ actual outcome rather than to the “sticker price” of the settlement fund. Begin by subtracting litigation costs and administrative fees from the gross settlement amount so that lawyers don’t profit from added expense. Then tailor awards to groups of lawyers based on quantum meruit. If there’s a group of non-lead lawyers who do little but advertise and freeride on leaders’ efforts, then taxing them with a higher percentage common-benefit fee might be appropriate. Conversely, if lawyers develop and try state court cases on their own, judges should reduce common-benefit fees for those lawyers to incentivize them to develop cases on the merits.
  • Empower plaintiffs to weigh in on their settlement awards. Awarding fees on a quantum meruit basis gives judges the authority to hear about the benefits of any deal from those who are most affected. Many plaintiffs want an opportunity to be heard, even if it’s just a chance to submit a letter to the judge. Some feel victimized not only by the corporate defendant but by the litigation process itself. If plaintiffs are receiving less than 50% of a settlement award, that should be a huge red flag for the judge.
  • Remand cases episodically. When leaders decide which cases they’re going to develop and which ones they aren’t, the ones that won’t benefit from multidistrict litigation centralization shouldn’t be waylaid by the MDL process. Likewise, if discovery reveals that a block of cases is no longer benefitting from centralization or if there is a global settlement that clients don’t want to accept, judges shouldn’t be hesitant to remand those cases to the federal courts from which they came. This gives plaintiffs the ability to credibly threaten trial and the corporate defendant the opportunity to demand case-specific proof.

And now my take. Our rule of law is a work in progress. That’s what makes is special. It is a system that welcomes critique and improvement. For NITA lawyers and jurists who champion the rule of law, the Burch book is a must-read. It is a catalyst for an open dialogue and undoubtedly procedural changes in the way many of these mass tort cases are adjudicated.

Reuben Guttman is a founding partner of Guttman, Buschner & Brooks, PLLC, in Washington, D.C. Read more of his On the Rule of Law columns here.

Corporate Crime Reporter: Reuben Guttman on the Failure of Corporate Compliance

Reuben Guttman Articles, Whistleblower Articles

Corporate Crime Reporter, Volume 34, Number 3, Monday, January 20, 2020

REUBEN GUTTMAN ON THE FAILURE OF CORPORATE COMPLIANCE

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says.

“WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model,” Guttman told Corporate Crime Reporter in an interview last week.

“Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it,” Guttman said. “I have litigated against Abbott Labs. The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. It resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.”

“What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I s_aw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill.”

“Compliance programs in part are being used to assuage people and not make them second guess because they believe someone else is taking care of it.”

“When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal.”

“But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.”

“And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?”

“Our niche as a law finn is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice.”

“Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance? Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015. It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance.”

“I come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful. If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act.”

“In many respects you have compliance programs that are analogous to company dominated unions. Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do
with it.”

“Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation. For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.”

If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose? “I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.”

“I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?”

“The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not. At the least, you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.”

“Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?”

A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharnrnceutical industry – “Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing.

These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say – we have to take the 73 7 M AXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.”

“In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.”

Is there any evidence that the government corporate criminal enforcement program is deterring wrongdoing? “Based on the wrongdoing I’ve seen, no.”

“Each of the big phannaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.”

“The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact. What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.”

INTERVIEW WITH REUBEN GUTTMAN, GUTTMAN, BUSCHNER & BROOKS, WASHINGTON, D.C.

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says. We interviewed Guttman on January 13, 2020.

CCR: You graduated from Emory Law School in 1985. What have you been doing since?

GUTTMAN: I have been doing litigation against large corporations. Between 1985 and 1990, I was counsel to the Service Employees International Union.

I was the chief outside counsel to the Oil Chemical and Atomic Workers Union (OCA W). l represented OCA W in the nuclear weapons sector. I brought significant cases against the Department of Energy and environmental and safety and health issues.

I have had a corporate fraud practice under the False Claims Act and other statutes. I have been involved in cases against the major pharmaceutical companies – Pfizer, GlaxoSmithKline, Wyeth, Celgene, Abbott Labs. And collectively these cases have resulted in recoveries totaling $6 billion.

I have done lots of litigation under the Fair Labor Standards Act against the meatpacking industry involving meatpackers in the midwest.

Primarily my expertise is corporate fraud and mismanagement. I bring securities class actions based on breaches of fiduciary duties. I have litigated the issue of whether the Hershey Corporation had to make disclosures about records regarding its use of child labor in the Ivory Coast and Ghana.

I have had a pretty broad practice over 35 years. I have reinforced that through teaching at various law schools – including Rutgers and Emory.

I’m writing a book on pre-trial litigation which will be published by Walters Kluwer hopefully in the fall. My co-author is Jason Lore at Rutgers.

I do a regular blog for the National Institute of Trial Advocacy called The Rule of Law blog. I was on the board of directors of the American Constitution Society for six years – I’m now on the advisory board. It’s been 35 years of an eclectic practice.

CCR: What is the primary practice of your law firm?

GUTTMAN: It is complex litigation involving corporations.

CCR: Is your practice exclusively plaintiffs’ side?

GUTTMAN: Yes.

CCR: What percentage of your practice is False Claims Act?

GUTTMAN: Seventy percent.

CCR: Other than False Claims Act, what kind of cases do you bring?

GUTTMAN: We have a large class action under ERISA against the mortgage servicers. It’s a novel theory. The court has sustained our complaint. I’m sitting in South Carolina now.

We are settling a civil rights class action against the South Carolina prison system. The settlement will require the treatment of thousands of prisoners for Hepatitis C. It has partially settled already. It requires the state to test prisoners.

We are involved in derivative litigation in Delaware.

CCR: You are primarily a False Claims Act firm.

GUTTMAN: We actually litigate non-intervene cases. For Celgene, we settled on the eve of trial. We took tons of depositions. We are trial lawyers. We are not lawyers who put the case in play hoping the government will settle.

Right now we are suing Massachusetts General Hospital in a non intervene case. We are litigating against a urologist in New York City in a nonintervene case. We settled the intervene portion of it for $12.3 million in November.

We are always in discovery, we are always taking depositions.

CCR: Are you saying that the majority of your False Claims Act cases are non-intervene cases?

GUTTMAN: A decent percentage of them. We litigate more False Claims Act cases than anybody else in the country. That’s just my perspective.

CCR: How many False Claims Act cases do you have going at any one time?

GUTTMAN: We get anywhere between 500 and 1,000 knocks on the door a year. We will cull that down to four, five or six False Claims Act cases that we take a year.

We vet these cases so heavily that by the time they get to the government, the government is looking at a case that is strong on the merits.

CCR: You have a strong filter. Do you know pretty much know within the first couple of minutes of talking with a whistleblower whether or not it’s going to be a case for your or not?

GUTTMAN: We can tell from the first twenty or thirty minutes. Let me give you an anecdote. A number of years ago I had a case against Abbott Labs.

The case settled for $1.6 billion. 1 asked the government lawyer a little while after the case settled – when did you realize it was a good case? And the government lawyer said – about 30 minutes into the client interview. We can pretty much tell up front whether it has some heft, whether it’s a case that we are going to dig into and investigate. There are ways to eliminate cases quickly.

CCR: How many cases are you carrying at any one time?

GUTTMAN: Dozens.

CCR: How many cases do you settle a year?

GUTTMAN: In the last five years, we have been resolving four or five cases a year.

CCR: We posted a story on Twitter from the Wall Street Journal about an interview with a Justice Department official, Matt Miner. He was talking about how internal compliance programs can help prevent corporate crimes. You went onto our Twitter feed and wrote – “Internal compliance programs do nothing to address pervasive wrongdoing central to a company’s business model, as in Enron, Tyco and WorldCom. This I know from 30 years plus of litigation against corporate wrongdoers.”

I read that to Duke Law Professor Sam Buell. He told us this – “This guy is saying – I’ve seen companies spend lots of money on compliance and it didn’t make a difference because they were thoroughly corrupt and everyone in the company didn’t care about compliance. But other people will say- I’ve seen companies with good compliance who generally stayed away from enforcement actions. Or I’ve seen companies with bad compliance but they got better; and their problems with the government decreased. Everyone is talking anecdotes. Companies are enormously complex. They are the most complicated things we have in our society. They become extremely difficult to study empirically.”

GUTTMAN: I was at Milberg Weiss and Grant & Eisenhofer. At Milberg, we were part of the Enron litigation. Milberg was also part of the Worldcom litigation.

When I was at Grant & Eisenhofer, they were part of the Tyco litigation. WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model.

Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it. I have litigated against Abbott Labs.

The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. lt resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.

What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I saw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill. Compliance programs in part are being used to 14 CORPORATE CRIME REPORTER MONDAY JANUARY 20, 2020 assuage people and not make them second guess because they believe someone else is taking care of it.

When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal. But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.

And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?

Our niche as a law firm is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice. Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance?

Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015.

It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance. 1 come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful.

If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act. In many respects you have compliance programs that are analogous to company dominated unions.

Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do with it.

Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation.

For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.

We are now suing Massachusetts General Hospital for overlapping surgeries. The allegations are that they completely overlapped.

CCR: What do you mean by overlapped?

GUTTMAN: In the orthopedic area, you book patients whose~urgeries overlap. The surgeon is running from one surgery to another. We just settled such a case against another hospital in New York City. It’s a Medicare fraud case.

CCR: If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose?

GUTTMAN: I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.

I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?

The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not.

At the least you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.

Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?

CCR: A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharmaceutical industry –

GUTTMAN: Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing. These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say- we have to take the 737 MAXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.

In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.

CCR: Is there any evidence that the government corporate criminal enforcement program is detening wrongdoing?

GUTTMAN: Based on the wrongdoing I’ve seen, no.

Each of the big pharmaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.

The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact.

What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.

CCR: Of your practice, what part of the False Claims Act cases are FCPA or Medicare fraud or other?

GUTTMAN: There is overlap. You could have a situation where a company is unlawfully marketing a drug. And they are not making that disclosure to the public. In a large pharmaceutical fraud case, you are going to have a securities component. We have been involved in a number ofFCPA cases.

CCR: Has the plaintiffs bar moved over the years from primarily class actions to primarily False Claims Act cases now?

GUTTMAN: It’s a complicated question. Elizabeth Burch is a professor of law at the University of Georgia. She has just published a book titled Mass Torts. It would be worth interviewing her on this.

In 1965, Ralph Nader published Unsafe at Any Speed. Before that book, people thought – if you got into a car accident, it was your fault. Nader made people think – it could be a defect in the automobile. He was the impetus for plaintiffs’ class
actions.

In 1968, Congress passed the multi-district litigation (MDL) statute. The courts needed to figure out how to address the 3,000 price fixing cases in the electrical transmission industry. There was an informal mechanism to do that. And that was codified in 1968.

With the rise of the class actions, the defense bar organized and made it harder to certify a class action. I’m actually arguing a class action certification case tomorrow, so it’s on my mind.

By the 1990s, you had two Supreme Court asbestos cases. And with those cases, the Supreme Court made it more difficult to certify class actions. Because cases were not being certified, you had all of these mass tort cases being brought as individual cases. Lawyers on both sides sought to use the MDL process.

It’s not that people are moving into false claims as much as people are moving into these MDL mass tort cases.

Of course, some product liability attorneys want to get into the false claims area. But the reality is that the false claims bar, to some degree, is the impetus for a lot of these cases. We bring the big pharma false claims cases and other cases follow.

Another thing that has been happening is that the courts have been cracking down on access to the courts. The pleading standards have been toughened.

When I got out of law school, there was something called notice pleading. As long as you put the other side on notice about what the case was about, that was enough.

In 2007 or 2008, the Supreme Court came down with a couple of cases requiring the pleading of facts. You can’t just plead conclusions. If you plead conclusions, the court will strip out the conclusion. And then the court will apply a plausibility standard.

And a judge will look at a case and say – is this case plausible? In a false claims case, you have to plead fraud with particularity or specificity. These cases are front loaded in the sense that you have to do the investigation up front. You have to prove a case that the government thinks is a good case – not a case you think is a good case. All of those are filters that whittle down access.

CCR: There is a public debate over the role of the trial lawyer in society. A case can be made that big business has defeated the trial lawyers in the court of public opinion. Why did that happen?

GUTTMAN: I don’t think they have won the debate. Everything we have in this country that makes us safer is the result of transparency in the court system – the trial lawyers.

The trial lawyers brought us Brown v. Board of Education. The trial lawyers brought us Loving v. Virginia – the right to marry who you want to marry without regard to race.

The trial lawyers brought us safer automobiles, seat belts. They exposed the dangers of lead paint. The trial lawyers brought us safer food. We can live safer healthier lives because of trial lawyers.

CCR: You are making the argument. But regular people don’t like trial lawyers.

GUTTMAN: I haven’t done polling. I’m going to court tomorrow morning. I try cases. I have a comfort level because I know I’m saving people’s lives tomorrow morning when I am going to get Hepatitis treatment for thousands of pnsoners.

The state of South Carolina prison system is going to be testing 20,000 people and treating them. I know I’m having an impact.

I have brought cases that have saved people from drugs that are harmful to them. Maybe trial lawyers are not getting the message out. I teach and have a broader public policy perspective.

I try to take cases that have a broader impact. I want to leave the world a better place. I went to law school so that I could do things that make the world a better place.

Contact: Reuben Guttman, Guttman, Buschner & Brooks, Embassy Row District, 1509 22nd Street NW, Washington, D.C. 20037. Phone: 202.800.3001. Email: rguttman@gbblegal.com

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