by Peter B. Prestley
This New False Claim Act Practical Guide is intended to be a useful and contemporary resource for the legal practitioner representing a qui tam client, as well as potential False Claim Act relators seeking to gain a practical sense of how such actions are prosecuted. The False Claim Act is a rather terse statute, the more confusing provisions of which have been elucidated in various ways over the decades, and amongst and between the Circuits. There are extensive treatises that will serve as excellent starting points for research, as well as other shorter texts and materials which are aimed at more general orientations and which contain much detail and practical wisdom. Many of these are referenced in the Table of Sources contained in a later section of this text.
In reviewing the literature in this field, however, one finds that much of the secondary material on the subject seems somewhat dated as far as describing what is going on currently in this area of practice, and what the trends are. The paradigm described over and over again is very much a quasi-criminal process model, heavily reliant upon implicit notions of indictment, prosecutorial discretion and plea bargaining, set against a backdrop of overcrowded criminal dockets and heavily strained investigative resources. Hence, the key question has traditionally been whether the qui tam client has a case that will catch the government’s eye, with the lawyer’s and client’s attention firmly fixed on the horizon represented by the intervention decision to be made by the government.
In this day and age, however, the attorney and his would be client frequently face a more complex set of considerations. First, it is not always clear whether or not the government will intervene, and if so, how long it will take for the intervention decision to be made. Often at the threshold of a False Claim Act case there are a host of other remedies available to the qui tam plaintiff, that, more or less, may or may not, prove to be incompatible with the immediate filing of the quit tam action under seal. In such cases a different paradigm may be called for, one which is much closer to a complex civil litigation model. A litigation plan, quantifying and coordinating the numerous and sometimes conflicting variables, into a strong and flexible battle plan for success, now often replaces or should replace the polite hawking of the case to the government lawyers. Such a plan should account for various scenarios and should at least adumbrate the various available responses and/or approaches in the event the case evolves one way or another. Because such cases not only require advance analysis and planning, but also monitoring as the contours of the litigation emerge, a case management plan needs to be developed as well, so that timely strategic and tactical decisions can be made as circumstances change and warrant.
Hence even those who have specialized in these cases traditionally may be increasingly called upon to utilize new approaches and skills. For instance, a firm which represents a client may need to be willing and able to actually get its hands dirty in the litigation process, to push a case towards intervention, to assist the government after intervention, or to actually bring the case home after a decision not to intervene has been reached by the government. It may also have to have the experience and staying power to prosecute and possibly coordinate other available avenues of redress, many of which are indigenous to the state of origin.
Law firms, in light of these and other realities, may increasingly need to partner with other law firms to bring burdensome or enormous cases to successful resolution. A dramatic recent instance of this phenomenon was prominently in evidence in the prosecution of the HCA case and its settlement in 2003. The settlement brought the total that HCA, the nation’s largest for-profit healthcare provider, would pay to settle Medicare fraud charges to more than $1.7 billion. A team of six law firms helped the government pursue the case. According to one source, “more than 40 private attorneys put in over 75,000 hours and spent close to $30 million in legal and accounting resources to bring the case to a successful end for the government. Millions of pages of HCA documents were stored in repositories at three sites around the country.” Hence the conventional thinking on how these cases necessarily evolve is being overtaken by the new realities described above.
I have come to these cases from a career mostly involved in various sorts of complex and civil litigation, and most recently over the past seven years in the practice of employment law devoted solely to representing individuals in employment and benefit related matters. I have also been privileged to serve in many posts in the American Bar Association, and have met and worked with many of the ‘movers and shakers” of the bar, both on the plaintiff and defense sides of the aisle. When I read about the settlement of the HCA case, I was reminded of the sorts of enterprises that culminated in the resolution of tens of thousands of cases in the mass tort and coverage areas in the eighties and nineties and after. Interestingly enough, the same type of sophisticated case selection, planning, investigation and litigation plan management practices which had evolved in those areas to somewhat of a science seems to be emerging in the False Claim Act arena as well, as these cases burgeon in a deteriorating business ethics environment. This growth may well continue as some ascribe the increase in fraud cases to steadily evolving macro conditions such as a business climate in which there is rampant global competition, managers are held to impossible earnings standards by an investment community which often demands dramatically increased profits literally on a quarter by quarter basis, and sadly where self-policing standards and the oversight of the accounting and disclosure establishments has been found to be wanting and even often complicit in wrongdoing.
Such circumstances obviate the need for such laws as the False Claim Act, even as the False Claim Act is politicized and various initiatives to water down the law are surfaced. At this point, however, the law shows great promise as a key tool to increasingly root out the “wink wink, nod nod” attitude towards stealing from the government fisc. Who amongst us has not marveled at the success of Elliott Spitzer and his people as they shine their prosecutorial light on one area of white collar marauding after another? The vision of armies of private citizen Spitzers creating a business environment so squeaky clean that it becomes a national competitive advantage was at work when Congress passed the 1986 amendments to the False Claim Act, and should send chills down the backs of those who have been tempted by lax oversight to make stealing from the government a substitute for clean and effective business practices. As practice under the Act becomes more activist, and less passively dependent on stretched prosecutorial resources simply too distracted to do all of the work necessary, the early promise of the Act should increasingly be realized. It really is apparent that to date the surface has only been scratched. Moreover, there is a climate afoot which is simply tired of what can only be described in the wake of the ENRON and similar scandals as corporate distain for the laws of the land. It is interesting to note that there is a bill that has passed the U.S. Senate under which whistleblowers could report tax frauds that cost the government $20,000.00 or more to a newly established IRS Whistleblower office. The bill, modeled after the qui tam provisions of the False Claim Act, would apply to individuals and corporations having incomes over $200,000.00, and would allow whistleblowers to receive 10 to 30 per cent of the recovered taxes and penalties. Also, at last count at least 14 states have enacted state false claims acts aimed at preventing stealing from state coffers. In Connecticut, my home state, seeing our most recent former governor paraded off to federal prison in the wake of contract frauds, and with members of his staff indicted for running a criminal enterprise from the governor’s office, plus efforts to enact a new state False Claim Act, presents both a symbolic and practical break with a past in which corruption has been easily and blatantly tolerated.
In addition to placing these cases in their contemporary context, this text will attempt to address some of the more troublesome aspects of these false claim act prosecutions, which will be viewed and considered, as indicated above, against what is intended to be a broader backdrop than usually treated in this area. It will begin with a practical discussion of the legal context in which the qui tam case is brought. Not only is there the shadow of a criminal prosecution hanging over these types of cases, but there are also considerations that are sui generis to the qui tam area, and also a plethora of often complimentary and or contradictory legal avenues of address available to the qui tam relator, separate and aside from the basic False Claim Act statute. Also, the often awkward and equivocal position occupied by many qui tam relators will also be described, with advice offered as to some of the basic issues and considerations that face the typical qui tam relator and the attorney advising him or her.
This discussion is to be followed by an overview of the principal mechanisms of the statute, with particular emphasis on how qui tam cases differ from other more conventional forms of civil litigation. As the reader will appreciate, qui tam cases are brought in conjunction with the U.S. Attorney’s office, and require specialized handling from a litigation perspective. Highlighted in particular are the qui tam retainer agreement, the various decisions which must be made and the tasks which need to be performed at the onset of the litigation, False Claim Act provisions relating to the relator’s share, issues unique to settling such cases, and the provisions of the act pertaining to attorney’s fees.
The text will then turn to a description of the various kinds of misfeasance that provide the essential predicates to bringing successful qui tam cases. This discussion will be broken down by industry sector, with particular emphasis on health care fraud, defense contractor fraud, and drug company fraud, that together constitute the lion’s share of the qui tam cases which have been brought to date. Often the qui tam relator may only be aware of the tip of the iceberg where contractor fraud is concerned, and the attorney representing the qui tam relator should be familiar with the most frequent forms of contractor theft so that they can be fully identified, documented and described in the complaint and disclosure statement, the documents which the statute anticipates will inform the government of the factual basis for the claim they are being invited to prosecute.
Once a case is filed, the often long and laborious process of shepherding or actually litigating the case to a successful conclusion begins. This aspect often involves the education of the client about the nature of the enterprise as it evolves and establishing and maintaining a good working relationship with the office of the U. S. Attorney.
Last, there is a discussion of fascinating subject of ‘endplay’ in qui tam cases. There are a variety of ways that these cases are resolved. The thesis is advanced here is that with careful intake, wise strategic planning, and good anticipation of the direction of the direction the case will or may take, the chances for success in meritorious cases can be extremely favorable. Particular emphasis is placed upon the situation where the government has not chosen to intervene, and the attorney and the qui tam plaintiff prosecute the case.
At the end of the volume will be included an extensive annotation of the statute itself, prepared in order to provide the reader with a ready judicial gloss and up to date reference source for all of the key issues of statutory interpretation that have arisen under the False Claim Act statute.