Via the WSJ Law Blog, Amy Kolz at The American Lawyer has a new article about the False Claims Act:

"[FCA cases] are a big gamble," says Piacentile’s counsel, former Boies, Schiller & Flexner partner David Stone of Stone & Magnanini, who cites cost-benefit analyses and good relationships with prosecutors as essential to his qui tam practice. "That’s why you have to know what you’re doing. Otherwise you can be in a case for ten years and not get anything."

But there is a darker perspective on Joseph Piacentile. Unlike most qui tam relators, he doesn’t blow the whistle as an employee or business partner of the companies he has sued. Instead he relies on secondhand information collected through his own investigations. (Piacentile declined to comment for this article.) Defense counsel call him a professional mudslinger; some qui tam lawyers and former government lawyers say that he’s a parasitic bully who files vague or questionable complaints and then pushes his way into settlements based on his qui tam savvy and his willingness to litigate. And Piacentile has a criminal history of his own–a 1991 conviction on fraud and tax charges–which some lawyers say can undercut his credibility as a plaintiff.

It’s an interesting argument, worth the read, not least to see how lame most objections to the False Claims Act are these days. Piacentile "pushes his way into settlements based on his qui tam savvy and his willingness to litigate?"

Do billion-dollar companies lack the "willingness" to defend themselves in litigation? Do they hire lawyers who are not "qui tam savvy?"

Do they roll over every time some doctor from New Jersey with a fraud conviction "pushes" them?

That’s what the corporate PR departments want you to believe, but even for Piacentile:

Out of 14 unsealed cases in which Piacentile has been a named relator, just four have successfully settled, seven have been dismissed (some without prejudice), and three are ongoing. In two of the three ongoing cases, those filed against Novartis and Sanofi-Aventis, the government has declined to intervene, a negative sign. And Piacentile’s share in at least two of the four successful settlements has been relatively small. Two of the three corelators in Medco earned a combined award that was seven times greater than Piacentile’s. Of the approximately $52 million in relators’ awards in the 2007 Bristol-Myers settlement, Piacentile earned $7.3 million.

"Relatively small" is indeed relative. Though $7.3 million is a good chunk of change in most contexts, that’s not necessarily the case in False Claims Act litigation, which typically require the relator prove systematic fraud by highly sophisticated entities that have covered their tracks thoroughly, often with the assistance of counsel. The cases frequently go on for years without trial, requiring thousands of attorney hours on plus extensive efforts by investigators, experts, and an army of support staff. It’s not uncommon for relators to provide the U.S. Attorney’s office several thousand pages of organized, indexed documents with explanatory memos at the very first meeting.

Qui tam cases are intense. They’re expensive. They’re prolonged.

Consequently, they’re rare. There’s ample incentive against filing them.

Maybe, in the big scheme of things, Piacentile is reaping more reward than some people think he should. It’s hard to even evaluate; we don’t know the details of the sealed cases. It bears mention here that, in all these cases, the U.S. Attorney’s office and the Court obviously didn’t have a problem with the awards that Piacentile received.

But let’s keep our eye on the ball here. The rewards received by relators are but a fraction of the size of the fraud perpetrated by the defendants. The awards are capped by statute at 25% of the overall resolution of the case, 30% if the government doesn’t intervene. Typically, courts (and lawyers) start around 15% and then adjust it up or down based on the facts of the case. See the Department of Justice’s Relator’s Share Guidelines (p. 17).

When we weigh the scales of equity, which is really worth of more complaint — that Piacentile has reaped a few million dollars for questionable investigation techniques, or that dozens of companies defraud the government of billions of dollars every year?

  • Happybidr

    Piacentile is a hero. The complaints about sound like pure jealousy. Those are complicated cases. You’re not going to end up with one penny unless your work helped make case.