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The Long Reach of Whistleblower Laws

Statutes like the False Claims Act and state whistleblower laws cover a wide range of fraudulent behavior

The Long Reach of Whistleblower Laws

// San Francisco, CA, USA // KellerGroverWB // Jeffrey Keller

To most people, whistleblowing may seem like something out of the movies -- a lone crusader speaking out against fraud and corruption. But in fact, the activities that lead to whistleblower lawsuits are far more common than one might imagine, and whistleblowers can come from all walks of life, from all professions and backgrounds. Cases brought under the federal False Claims Act -- the gold standard of whistleblower laws -- have led to the recovery of more than $30 billion for the government since the statute was substantially amended in 1986. For enabling these recoveries, whistleblowers typically receive a share of the amount that is ultimately paid back by those who have improperly profited from fraudulent or other wrongful acts in their government contracts.

“The False Claims Act has been an invaluable tool in encouraging individuals to speak up about wrongful behavior, and so successful that it has been emulated in dozens of states,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer. “But most individuals are not aware of these statutes or the types of improper activity that can trigger them. They may be questioning actions by their employer, they may even feel like they are being punished for bringing it to a supervisor’s attention -- perhaps by being transferred or demoted -- but they haven't necessarily connected that what they are seeing wrong in the workplace rises to the level of a fraud on the government or that there are laws that protect them for trying to raise these issues and lawyers who can guide them through the process.”

Two areas where the government makes huge expenditures are on defense and for healthcare. Because there are so many government contracts in this area, it’s not surprising to see fraud and abuse as well.

Here is a small sampling of some of the kinds of improper behavior that can trigger whistleblower laws like the False Claims Act:

-- Defense contractor fraud. Fraud by defense contractors -- often in the form of overcharges for services and products -- were the original impetus for the passage of the False Claims Act during the Civil War. Even today, similar whistleblower cases have been seen related to military contracts in the U.S. and abroad.

Pharmaceutical Fraud

-- Improper marketing of prescription drugs. This can take the form of marketing a drug for off-label uses (that is, for a condition other than those approved by the Federal Drug Administration), promoting unsubstantiated claims, or even paying kickbacks to doctors and pharmacists for prescribing or recommending the drug.

-- “Nominal” drug pricing. This practice involves a pharmaceutical company giving a hospital a huge discount on medication -- greater than 90 percent -- so that it will use it for treatment. Typically the discount is provided for a long-term drug, such as medication used to treat arthritis, with the hope that the patient will continue to use the same drug after leaving hospital, when it will cost its normal, and far higher, price.

-- Manufacturing fraud. Cases in which companies have not been truthful about product contamination and other manufacturing defects have also fallen under whistleblower statutes.

Healthcare Fraud

-- Medical care bill padding or upcoding. In some successful False Claims Act whistleblower cases, recoveries have been obtained from hospitals and other health care providers who have improperly inflated bills or “upcoded” medical services -- Billing for more expensive treatment and care than was actually required, in order to obtain higher reimbursements from Medicare and Medicaid.

-- Medical laboratory fraud. Also falling under the whistleblower statutes are laboratory tests that were never requested or performed (but billed to Medicare and Medicaid programs nonetheless), or were performed but weren’t medical necessary (scheduled by doctors who had received kickbacks a lab).

-- Mortgage insurance fraud. Actions such as eliminating quality controls (resulting in loans that were known, or should have been known, to have a high probability of default) and encouraging personnel to cut corners and conceal defects have also fallen under the False Claims Act. Many such ‘defective’ loans resulted in defaults that were then covered by the federal government, expensive outlays that could have been prevented.

“The government is the single largest contractor in this country. It buys everything from drugs and computers to office supplies and guided missile systems. If your employer contracts to sell anything to the government, it is subject to the whistleblower laws,” says Keller, whose firm has offices in San Francisco and Los Angeles. “It is important for employees to know that behavior they see around them -- behavior they may already be troubled about and even speaking up about -- is covered by powerful laws that not only protect them, but in the end, protect all of us.”



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