Can you guess the best-selling class of drugs? It may be that a fifth of Americans suffer gastroesophageal reflux disease at least once a week, over 30% have hypertension, and over a third of U.S. adults have high LDL cholesterol, but the best-selling class of drugs isn’t proton-pump inhibitors for reflux, or angiotensin II receptor antagonists for blood pressure, or statins. It’s anti-psychotics.


The best-selling drug in America is Abilify, the prescribing information for which says it is only approved for:


  • Use as an add-on treatment to an antidepressant for adults with Major Depressive Disorder who have had an inadequate response to antidepressant therapy
  • Treatment of manic or mixed episodes associated with Bipolar I Disorder in adults and in pediatric patients 10 to 17 years of age
  • Treatment of Schizophrenia in adults and in adolescents 13 to 17 years of age
  • Treatment of irritability associated with Autistic Disorder in pediatric patients 6 to 17 years of age


It’s commonplace for people to refer to themselves or others as “depressed” or “bipolar,” but that’s a far cry from a diagnosis. The NIH has a handy page with the statistics on mental illness. At the most generous estimate, 5-8% of the adult population can be diagnosed with Major Depressive Disorder, and Abilify isn’t even indicated for them — it’s indicated only for those who haven’t responded to typical antidepressants, which is half or less. Bipolar Disorder affects 2.6% of the popular, but Bipolar I, the more severe version defined by a week or more of mania or mania so severe it requires hospitalization, is only a small fraction of that. Schizophrenia affects 1% of the population. Finally, depending on your definition, between 0.8% and 1.2% of children have autism.


Adding all of those up gets us to 5% or so of the population that could even qualify for Abilify, less than a quarter of the people with GERD, hypertension, or high cholesterol. So who is taking all of this Abilify, and why? As the Wall Street Journal reported last week, “Federal health officials have launched a probe into the use of antipsychotic drugs on children in the Medicaid system, amid concern that the medications are being prescribed too often to treat behavioral problems in the very young.” The quote Mark Duggan, a health-policy expert at the University of Pennsylvania’s Wharton School, saying that more than 70% of the cost of the five leading antipsychotics was paid for by Medicaid and other government programs.


While the public school system in many urban areas is in collapse — a problem we feel quite acutely here in Philadelphia — and there’s still no interest in putting tax dollars into early childhood education or after-school problems, and even the upper-middle-class can’t afford childcare so both parents can work, it seems Medicaid has $3.6 billion to spend on antipsychotic medications like Abilify, Zyprexa, Geodon, and Seroquel. (That’s just as of 2008 — the number is likely double or higher now given how rapidly prescriptions have grown.)


So what happened? Maybe it has something to do with thisContinue Reading Taxpayers Spend Billions Giving Children Antipsychotic Medications

I am a fan of the American court system. There is no natural law requiring people to resolve their differences by asking third parties to represent them and advocate on their behalf in front of impartial decision-makers. The folks in classical Athens and Rome thought it was a good idea, the Europeans rediscovered the practice in the Middle Ages, and the adversarial system of law has been consistently practiced by England, and then America, ever since.


Since the classical time, there have always been restrictions on lawyers intended to keep them honest. Most of those “restrictions” have amounted to nothing more than an oath sworn by lawyers to the government, but, on the whole, lawyers really do tend to be honest in their practice. In the bulk of my cases, particularly those “routine” cases involving reasonable insurance coverage (like automobile accidents and medical malpractice), neither I nor my client believe that the opposing counsel is intentionally lying during the course of the case.


Sure, opposing counsel and I may have strong differences of opinion about the underlying facts, and even in those routine cases the defendants are frequently, shall we say, less than forthright in their telling of the facts and their production of relevant evidence, but I generally recognize — and a most of my clients understand and accept — that the lawyer for the other side has a job to do. They are there to zealously advocate on behalf of their client. They didn’t witness the event with their own eyes; they know only what their client is telling them, and, apart from knowingly participating in perjury or some other fraud on the court, opposing counsel has a duty to zealously advocate on their clients’ behalf, rightly or wrongly.


That’s appropriate. As I wrote before about The Limits of Advocacy, “there’s nothing wrong with advocating on behalf of your client an argument you believe ‘probably could not succeed.’ There are two sides to every story, and at least two interpretations of every legal issue. The United States uses an adversarial legal system precisely so that these stories and interpretations can be fully developed, critiqued, and challenged.”  Zealous advocacy and loyalty are two fundamental tenants underlying our adversarial system of law. I expect nothing less of opposing counsel, and I deliver nothing less to my own clients.


The situation changes considerably when you start talking about complex litigation, particularly cases alleging fraud by a business (such as racketeering and False Claims Act cases, neither of which are insurable) and cases involving seven figures or more in potential damages. Those are the cases that bring in the big corporate defense firms with whole teams of lawyers that can rack up five-figure bills for the corporate client in the course of a typical workday. (I suppose it’s money well spent when you consider the guilty corporation’s alternative: owing up to their responsibility to pay for the serious damage they caused.)


Those complex business, commercial and class action cases also tend to get bogged down in the court system with endless motions, oral arguments, status conferences, and settlement conferences, anything and everything except for, of course, an actual jury trial, the last thing that a guilty corporation wants to go through. Justice delay is justice denied.


At trial, lawyers tend to stay within the normal bounds of zealous advocacy because fabrications and falsehoods tend to be exposed rapidly and brutally before the jury.


The same does not apply to all of those motions, oral arguments, status conferences, and settlement conferences. There is little space or time to rebut every misrepresentation made by a lawyer in a motion or at an oral argument, and virtually no way to prove that your opponent has lied in the middle of the conference before the judge. The situations simply do not present that type of opportunity. In a status conference, for example, the judge will be familiar with the case, but they will of course not have every document and every deposition memorized, and will have no way to evaluate the mere words of one lawyer versus another.


It is in many ways a license to lie. The lawyer will never get caught for a “misunderstanding” or “having a different view” or “being stupid” at one of these non-testimonial court events. The client will rarely be held responsible for their lawyer’s lie, even if it was made right in front of the client, who listened silently and nodded in approval. (“Though silence is not necessarily an admission, it is not a denial, either.” — Cicero.) I cannot cross-examine the opposing party to ask them if they agree with what their lawyer just said, and refer them to documents establishing the opposite.


At these pre-trial events, the only thing stopping a lawyer from looking the judge in the eye and telling him or her an outright lie is that oath the lawyer made to the government years ago.


Unfortunately, some lawyers out there apparently do not take that oath seriously.


In the last few weeks I have had a few occasions where, in the midst of one of these conferences during a complex case, opposing counsel has told the judge an outright lie. I do not mean “lie” in that their client has one version of the facts and my client has another version. I mean “lie” in that the opposing lawyer has said something to the judge that cannot be supported by any document or testimony in the case, a “lie” that I assure you would never be told to a jury under oath, since it would be swiftly disproven.


After each of those instances I was asked by my client, “can their lawyer just lie like that?”


As much as I would like to maintain the good reputation of the legal profession with the standard litany about the duty to be a “zealous advocate,” there’s nothing about being a zealous advocate which requires someone to lie, and I knew that these were, in fact, lies, pure and simple, lies designed to frustrate the judicial process by misleading the judge and thereby prolonging the case and introducing frivolous diversions from the real facts of the case.


How does this happen? Lawyers are not any more pure of heart than the population as a whole, but surely it cannot be that a substantial portion of lawyers have made the conscious decision to tell outright lies to judges. “In spite of everything, I still believe that people really are good at heart,” said Anne Frank, but maybe her experience proves the contrary. Some scholars think morality is hard-wired into the human brain, and I tend to agree. Few people see themselves as bad actors.


There must be some other explanation.


Clancy Martin, a philosopher turned liar turned philosopher again, explains:


As I would tell my salespeople: If you want to be an expert deceiver, master the art of self-deception. People will believe you when they see that you yourself are deeply convinced. It sounds difficult to do, but in fact it’s easy—we are already experts at lying to ourselves. We believe just what we want to believe. And the customer will help in this process, because she or he wants the diamond—where else can I get such a good deal on such a high-quality stone?—to be of a certain size and quality. At the same time, he or she does not want to pay the price that the actual diamond, were it what you claimed it to be, would cost. The transaction is a collaboration of lies and self-deceptions.


Here’s a quick lesson in selling. You never know when it might come in handy. … Use the several kinds of lies Aristotle identified in Nicomachean Ethics: A good mixture of subtle flattery, understatement, humorous boastfulness, playful storytelling, and gentle irony will establish that “you’re one of us, and I’m one of you.” We are alike, we are friends, we can trust each other.


The problem is, once lying to your customer as a way of doing business becomes habitual, it reaches into other areas of your business, and then into your personal life.


“There is nothing so ridiculous that some philosopher has not said it,” said Cicero, but the lying philosopher (he’s known these days as “The Lie Guy”) is right.


Recall those duties of zealous advocacy and loyalty. Sure, there are competing duties duties of merit, candor and fairness, but meeting those duties does not pay the bills. Loyalty and zealous advocacy pay the bills, and if lawyers really invest themselves emotionally, financially, and philosophically in their clients’ clause, then of course some lawyers will not even see the line drawn in the sand, the liar line, when they cross it.


So that is my answer to the clients wondering where the legal system has gone wrong: no, the opposing lawyer cannot just lie like that, but they might not even realize they’re doing it — before they tried to deceive you, they deceived themselves.

If you suspect your employer has violated securities, tax, or government contract laws, you can contact our firm for a free, confidential, no-obligation consultation using this form.  

Corporate Counsel reported yesterday:

The new federal whistleblower law is proving a hot item for many plaintiff law firms. Attorneys say that tipsters with visions of becoming millionaires are flooding their offices with calls.

"In the last three weeks, I’ve had many, many more whistleblowing calls than I had in the last three years," said Rebecca Katz, a partner at Bernstein Liebhard in New York. Katz is a former senior counsel in the enforcement division of the Securities and Exchange Commission, where she served from 1990 to 1998.

"Will the complaints come to anything?" Katz asked. "Some will. But the number is just unbelievable."

The new law, the Dodd-Frank Wall Street Reform and Consumer Protection Act (pdf), went into effect in July. It authorizes the SEC to reward those who expose fraud at public companies with from 10 to 30 percent of the amount it recovers over $1 million.

No law firms wanted to divulge specific numbers about callers. But Erika Kelton, partner at the plaintiffs’ powerhouse Phillips & Cohen in Washington, D.C., agreed that the outpouring is huge.

"We’re inundated with calls," Kelton said, adding that many of the tips "appear to be good cases" and not bogus reports.

Kelton was the lead attorney for a whistleblower suit against Pfizer Inc., which paid a record-setting $2.3 billion in mid-2009 to settle civil and criminal charges for using illegal sales tactics. Of that amount, $70 million went to Kelton’s whistleblowing client, a former Pfizer salesman.

The SEC has made corporate fraud whistleblowing surprisingly easy to do. In a few short clicks you can get the process going. The SEC’s website even helpfully divides out the types of reportable fraud under Dodd-Frank, with direct links to the specific complaints:

(In contrast, the IRS requires you mail in a form to be a whistleblower under their new program for tax fraud. And let’s not even mention the onerous requirements of the False Claims Act.)

If you’re a whistleblower out there, Googling around for information about the process, and you only take one piece of advice to heart, make it this one:

Call a lawyer as soon as you can — certainly before you file a complaint with the government, and preferrably before you file a formal complaint with your employer.

I am by no means a dispassionate observer. I make money representing whistleblowers. They don’t necessarily need my, or any attorney’s, help — they could, in theory, go it alone and pin their hopes on the SEC (or the IRS) taking the claim, pursuing the claim to the bitter end, ensuring the whistleblower gets their fair share, and then protecting the whistleblower from retaliation.

But hear me out for a minute.

The prospect of being a successful whistleblower carries with it an intoxicating allure for plaintiffs and lawyers alike – what could be better than getting paid millions of dollars to be a crusader for justice?

The reality, though, is a bit more complicated:

"Basically, [whistle-blowing] ruins your life," says Luigi Zingales, a professor at the University of Chicago Booth School of Business who has studied the issue of whistle-blowers. "What is worth your life getting ruined? It’s pretty expensive."

It’s not assured that whistleblowing will ruin your life — there are certain circumstances in which the retaliation won’t be much worse than normal business, like when a self-employed person reports fraud by a particularly aggressive competitor — but make no mistake: if you report fraud by someone else, even if it ends up going nowhere, there’s a good chance that someone else is going to be, shall we say, very upset with you.

That’s where a whistleblower lawyer – who is typically paid on a contingent fee, and so has no interest in pursuing losing cases – first comes in. As obvious to you as the case may be, the case could be riddled with problems, problems that would either be apparent to an attorney upon their initial review or would be revealed during the attorney’s investigation. We, like most contingent fee firms, reject more than 90% of the cases we review, and everyone – including the potential clients and the potential defendants – is better off for it.

Put another way, if a potentially life-altering surgery is worth a second opinion from another physician, isn’t a potentially life-altering lawsuit worth a first opinion from an attorney?

But what if your claim does have merit? Why share a substantial portion of it – often 40%, plus costs – with a private attorney? Aren’t the government lawyers are going to do most of the work?

Not quite. Government civil attorneys are, as a rule, understaffed and overworked. They also have a tendency to take only cases they are certain they can win, and years of a symbiotic relationship with the private bar has trained them to expect not just prepackaged evidence and theories, but also substantial assistance in the prosecution of the claim — a big factor in their decision to pursue cases, considering that whistleblower cases are, as I’ve written before, among the most intense and prolonged claims out there.

There’s nothing wrong or inappropriate with that; the government has to work with the resources they have, not the resources they wish they had, and the whole point of whistleblower statutes is to encourage people outside the government to help out with enforcement efforts.

At the same time, though, it puts unrepresented parties at a significant disadvantage. They don’t have the resources or experience to navigate the nascent stages of the investigation and to put the case together for the government. Moreover, even once the case gets going, the government lawyers represent only the government itself; their interest in the whistleblower extends only to prosecuting a successful case on the government’s behalf. They don’t have an interest in sharing the eventual recovery with the whistleblower, and they only have a limited interest in protecting the whistleblower from retaliation.

I try to stay far away from "if you or a loved one…" faux-blogging here, but the influx of callers following Dodd-Frank is likely only the tip of the iceberg. I’ve seen way too many potential whistleblowers make mistakes in those crucial early stages, such as by disclosing the fraud in the wrong way, thereby tripping over issues like the "public disclosure" bar of the False Claims Act or the "original source" requirements for whistleblower recovery.

So, "if you or a loved one" is considering being a whistleblower, you certainly don’t have to call me for a free consultation, but you really should call someone. The earlier in the process a whistleblower can obtain an attorney, the better.

Over at the Delaware Corporate and Commercial Litigation Blog, Francis Pileggi highlights one of the many quirks of practice in Delaware:

Professor Bainbridge discusses an article here from The Wall Street Journal that quotes a Delaware Superior Court judge in connection with a dress code for those who appear in his court. Most Delaware lawyers know that it is at least an unwritten rule that a “white dress shirt” is expected of lawyers who appear in a Delaware court.

Delaware, it must be said, has among the most formal and quaint procedures I’ve ever seen. Even though, as Pileggi previously pointed out, Delaware law recognizes no formal distinction between “local counsel” and “forwarding counsel,” it is still generally the practice in Delaware for local counsel to sign all discovery and letters for the court. Only a few months ago, opposing local counsel called me out for signing discovery requests with my name, rather than local counsel’s; in response, I shot back a copy of that opinion, and never heard another word from opposing counsel (thanks Francis!).

But I save the retorts for opposing counsel — far be it from me to tell the judge it’s odd and unnecessary for local counsel, as is the custom, to personally introduce me before each and every oral argument, even after I’ve been granted pro hac vice status and thus have entered the case, with the same responsibilities and duties as the local counsel.

When in Delaware, do as the Delawareans do.

But let’s switch gears for a moment.

I tend to agree with Mark Bennett that “experienced” isn’t “better” when “experienced” doesn’t mean “wiser,” just “older”:

When looking for a less-expensive lawyer, you can go one of two ways: either to a lawyer of the same vintage who for some reason charges lower fees, or to a younger lawyer. I always recommend that you look for the latter—a lawyer who is in the situation I was in, say, ten years ago: with four years of criminal-defense experience behind me, but without children, big mortgages, or a steady stream of clients; competent, experienced, and well-trained (ten years ago, I was coming off a string of acquittals and five weeks at the Trial Lawyers College) but working on developing the business side of my practice. Highly determined and energetic, and with lots of time to dedicate to the few cases on my docket.

The alternative would be an older lawyer who might be charging lower fees because he doesn’t have confidence in his abilities (and so doesn’t think he’s worth more), because he has a high-volume practice or because, despite the time he has had to build a reputation, others don’t think he’s worth more. This should not inspire confidence in the potential client.

That said, there are dozens of unwritten rules applicable to the practice of law, only a few into which other lawyers will clue you. There is, for example, no rule governing how a potential qui tam relator must preview a potential false claims act case to the U.S. Attorney’s office — there’s just a way of doing it, a way you only learn by doing it.

Which reminds me of one of my posts from last fall, Why It’s Hard For BigLaw Associates To Start Rainmaking, where I wrote:

Experience drives word of mouth, drives referrals, builds ability, builds confidence, and enables your practice to grow.

So how do associates get “it?”

Get clients in the door. You can’t compete on experience, so compete on price, on selectivity, on service, on anything you can.

Maybe that means cutting rates. Maybe that means billing fewer hours. Maybe that means taking difficult, frustrating, unprofitable cases. Maybe that means jumping into other fields and wasting dozens of unbillable hours just making sure you’ve got the basics right. Maybe that means spending some time, off the clock, figuring out how potential clients in your field find lawyers, and figuring out how to make their name the first that a potential client hears.

That is to say, associates need to use the methods other entrepreneurs use to build business.

Yet, few of those methods are available to associates at BigLaw firms, because the business model — which generates most of its profits by creating unnecessary work for recent law graduates — is designed for the short-term compensation of the partners, not the long-term career of the associates. Experienced rainmakers can squeeze every last penny of profit out of a case by having you spend all weekend reviewing documents. You don’t even have a case at all.

It’s hard to go a day without reading something about “work/life balance.” But what about work/career balance? “Working your way up the ladder” is often cited as a way for associates to succeed, but let’s be honest: these days, few people are putting out ladders for you to climb.

So scrap the ladder metaphor, start thinking about the bootstrap instead, and go learn all the white dress shirt rules out there.

The False Claim Act envisions a broad definition under 31 U.S.C. § 3729(b) for when a defendant “knowingly” makes a false or fraudulent claim to the federal government:

(b) Knowing and Knowingly Defined.— For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information—

(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information,

and no proof of specific intent to defraud is required.

The burden of persuasion for proving it is, like under most federal statutes, only preponderance of evidence:

Unlike a large number, and perhaps the majority, of the States, Congress has chosen the preponderance standard when it has created substantive causes of action for fraud. See, e. g., 31 U. S. C. § 3731(c) (False Claims Act); 12 U. S. C. § 1833a(e) (1988 ed., Supp. I) (civil penalties for fraud involving financial institutions); 42 CFR § 1003.114(a) (1989) (Medicare and Medicaid fraud under 42 U. S. C. § 1320a-7a); Herman & MacLean v. Huddleston, 459 U. S., at 388-390 (civil enforcement of the antifraud provisions of the securities laws); Steadman v. SEC, 450 U. S. 91, 96 (1981) (administrative proceedings concerning violation of antifraud provisions of the securities laws); SEC v. C. M. Joiner Leasing Corp., 320 U. S. 344, 355 (1943) (§ 17(a) of the Securities Act of 1933); First National Monetary Corp. v. Weinberger, 819 F. 2d 1334, 1341-1342 (CA6 1987) (civil fraud provisions of the Commodity Exchange Act). Cf. Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 491 (1985) (suggesting that the preponderance standard applies to civil actions under the Racketeer Influenced and Corrupt Organizations Act).

Grogan v. Garner, 498 U.S. 279, 288-289 (1991).

But even though a whistleblower need not show specific intent to defraud, there nonetheless are limits on the claims. The Fourth Circuit recently decided US ex rel. Owens v. First Kuwaiti General Trading, affirming the District Court’s grant of summary judgment:

Relator John Owens brought this qui tam suit under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729, et seq., against First Kuwaiti construction firm, his former employer. He alleged that the firm billed falsely for deficient work in connection with construction of the U.S. embassy in Baghdad and that it retaliated against him for actions taken in furtherance of his FCA contentions. The district court granted summary judgment to defendant.

The essence of Relator’s claim is that defendant failed to live up to its contractual obligations. He produced no evidence either of knowing misrepresentations on defendant’s part or of having been mistreated for any actions taken on behalf of his FCA claims. We therefore affirm the district court’s judgment. Congress crafted the FCA to deal with fraud, not ordinary contractual disputes. The FCA plays an important role in safeguarding the integrity of federal contracting, administering strong medicine in situations where strong remedies are needed. Allowing it to be used in run-of-the-mill contract disagreements and employee grievances would burden, not help, the contracting process, thereby driving up costs for the government and, by extension, the American public.

I’m a sucker for Circuit Court opinions that state the law in plain English and cite to other Circuits, which is why I’m posting this one:

The FCA provides that suit may be brought against anyone who “knowingly presents” to the government “a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1). It similarly allows suit against anyone who “knowingly makes ․ a false record or statement material to a false or fraudulent claim.” Id. at § 3729(a)(1)(B). In adopting the FCA, “the objective of Congress was broadly to protect the funds and property of the government.” Rainwater v. United States, 356 U.S. 590, 592 (1958).

The FCA’s scienter requirement does not demand “specific intent to defraud” and can be satisfied by proving only “reckless disregard of the truth or falsity of the information.” Id. § 3729(b). Congress, however, has made plain “ ‘its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence.’ “ United States ex rel. Hochman v. Nackman, 145 F.3d 1069, 1073 (9th Cir.1998) (quoting S.Rep. No. 99-345, at 7 (1986)). This is because “[t]he FCA is a fraud prevention statute.” United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1019 (7th Cir.1999); see also Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 2130 (2008). It does not allow a qui tam relator to “shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the False Claims Act.” United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 373 (4th Cir.2008).

The case itself is good example of when faulty government contracting work is not quite bad enough to warrant liability. The defendant there apparently messed up some of the building work, but no worse than other contracts with similar claims did, and — more importantly — no worse than envisioned by the contract itself. The whistleblower thus couldn’t muster, at least in the Circuit Court’s eyes, enough evidence to show the defendant even “recklessly disregard” the falsity of the claims it submitted.

At Business Week, it seems Oracle isn’t living up to its namesake:

Oracle Corp., the world’s second- biggest software maker, faces a lawsuit brought by a whistleblower and the U.S. Justice Department claiming it overcharged the government by tens of millions of dollars.

As the Complaint summarizes,

This lawsuit is based on a scheme by Defendant Oracle Corporation ("Oracle") to defraud the United States by failing to disclose deep discounts Oracle offered to commercial customers when Oracle sold software products to federal government agencies through a General Services Administration Multiple Award Schedule. Oracle’s failure to disclose the discounts it offered to its most favored customers resulted in overcharges to the federal Government totaling tens of millions of dollars.

Failing to give the government most-favored-customer deals in a GSA contract puts you on the fast track to a qui tam suit, since the GSA damages (and the per-claim penalty) add up rapidly with each new fraudulent order placed by the government.

It seems Oracle is quite experienced in the specific fraud at issue here:

In October 2006, Oracle paid $98.5 million to settle a False Claims Act lawsuit over GSA Multiple Award Schedule pricing disclosures at PeopleSoft Inc., a software maker. Oracle bought PeopleSoft in January 2005 for $10.3 billion.

The complaint, filed in 2003 by whistleblower James Hicks, was joined in 2006 by the Justice Department.

PeopleSoft Case

PeopleSoft was accused of understating the discounts it provided to commercial customers, including one that got up to 74 percent off the listed price.

“Because PeopleSoft did not give GSA accurate pricing information, it negotiated higher prices for its products and services than it would have obtained if GSA had known the truth,” Rod Rosenstein, the U.S. Attorney in Maryland, said in a statement at the time. 

How ironic.

One fact worth pointing out: the present case was originally filed more than three years ago yet only recently unsealed and served upon Oracle. Per the False Claims Act, once the Complaint was filed, it then sat silently, under seal, while the U.S. Attorney’s office for the Eastern District of Virginia investigated whether or not they would intervene in support of the case. (They did.)

That’s not to criticize the fine folks at the USAO there — these cases are massive and require an extraordinary amount of complicated work. The USAO is also quite rightly very selective in deciding whether or not to intervene in a case. Further, the most effective part of a qui tam investigation is typically the initial part done in secret prior to the unsealing of the suit.

Putting all of that together means one thing: a lot of time, money and effort spent on the investigation before the lawsuit itself really gets going. It’s hard to tell in these cases how much of the investigation was done by the USAO, and how much was done by the relator’s lawyer, but I’ll tell you this: if you dump an unprepared case on the USAO’s lap or don’t pull your weight in the initial investigation, they’ll show you the door.

Something to keep in mind next time you read another attempt to deny whistleblowers their due under the False Claims Act.

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?

The New Colossus:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep, ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

But what of the tired and poor of our own shores?

WASHINGTON — With a client list that reads like a roster of Fortune 500 firms, a little-known company with an odd name, the Talx Corporation, has come to dominate a thriving industry: helping employers process — and fight — unemployment claims.

Talx, which emerged from obscurity over the last eight years, says it handles more than 30 percent of the nation’s requests for jobless benefits. Pledging to save employers money in part by contesting claims, Talx helps them decide which applications to resist and how to mount effective appeals.

The work has made Talx a boom business in a bust economy, but critics say the company has undermined a crucial safety net. Officials in a number of states have called Talx a chronic source of error and delay. Advocates for the unemployed say the company seeks to keep jobless workers from collecting benefits.

“Talx often files appeals regardless of merits,” said Jonathan P. Baird, a lawyer at New Hampshire Legal Assistance. “It’s sort of a war of attrition. If you appeal a certain percentage of cases, there are going to be those workers who give up.”

Like Gerald Grenier:

Advocates for the unemployed cite cases like that of Gerald Grenier, 47, who spent four years as a night janitor at a New Hampshire Wal-Mart and was fired for pocketing several dollars in coins from a vending machine. Mr. Grenier, who is mentally disabled, told Wal-Mart he forgot to turn in the change. Talx, representing Wal-Mart, accused him of misconduct and fought his unemployment claim.

After Mr. Grenier waited three months for a hearing, Wal-Mart did not appear. A Talx agent joined by phone, then seemingly hung up as Mr. Grenier testified. The hearing officer redialed and left an unanswered message on the agent’s voice mail. The officer called Mr. Grenier “completely credible” and granted him benefits.

Talx appealed, claiming that the officer had denied the agent’s request to let Wal-Mart testify by phone. (A recording of the hearing contains no such request.) Mr. Grenier won the appeal, but by then he had lost his apartment and moved in with his sister.

Mentally-disabled, but still working the night shift to pay his way, just so some morally-disabled companies can fire him and deny him his due.

I can’t take these cases. No private lawyer can. The potential client has no way to even pay the costs, much less an attorney’s fee.

In a perfect world, the government would intervene to stop major corporations from trampling on the rights of the powerless. 

Sometimes they do, but it depends on the people who represent the government:

[Ohio Attorney General Richard] Cordray is instead focused on using his authority to protect consumers from predatory lending and fraud. He has organized numerous legal challenges of banks and lenders, recently held a summit dedicated to combating consumer fraud that included 300 Ohio consumer advocates, and has been working with other state AGs and the Obama administration to "report trends in fraud and illegal conduct to Treasury to help develop a coordinated and effective national response" and argue in favor of effective financial reform.

A dozen other state AGs are too busy filing lawsuits against health care reform — suits that virtually no one believes will succeed — to care about a couple hundred thousand unemployed citizens being held down in poverty by a former employer too cheap to pay its dues and a frivolous-objection-filing machine.

Even AGs who do care don’t have the resources to prosecute every company that systematically cheats its employees, former employees, and consumers. There’s simply too much cheating out there.

Same goes for public interest / legal aid firms. They do great work, but even the ones in major cities labor under "shoestring budgets" and the beneficence of big firms with whom they partner, big firms which represent those same companies

Who, then, could take up the banner?

Not law school clinics, not anymore:

ANNAPOLIS, Md. — Law school students nationwide are facing growing attacks in the courts and legislatures as legal clinics at the schools increasingly take on powerful interests that few other nonprofit groups have the resources to challenge.


Law clinics at other universities — from New Jersey to Michigan to Louisiana — are facing similar challenges. And legal experts say the attacks jeopardize the work of the clinics, which not only train students with hands-on courtroom experience at more than 200 law schools but also have taken on more cases against companies and government agencies in recent years.

“We’re seeing a very strong pushback from deep-pocket interests, and that pushback is creating a chilling effect on many clinics,” said Robert R. Kuehn, a law professor at Washington University in St. Louis, citing a recent survey he conducted that found that more than a third of faculty members at legal clinics expressed fears about university or state reaction to their casework and that a sixth said they had turned down unpopular clients because of these concerns.

A bill is pending in Louisiana that would "forbid law students at clinics that receive any public money from suing government agencies, companies or individuals for damages unless exempted by the Legislature." The bill is "a response to a suit brought by the Tulane Law School clinic on behalf of an environmental group against federal and state environmental regulators, seeking greater enforcement of air quality standards in the Baton Rouge area."

That’s right: we passed these laws, but we don’t want anyone out there actually enforcing them.

Just like the unemployment compensation: it’s on the books, but heaven forbid you get any of it.

The government can fix these problems in a blink. Leave the clinics alone. Provide more funding to public interest law firms. Make unemployment compensation objections subject to qui tam laws with treble damages for violations, a per-violation fine, and an award of attorney’s fees.

If we’re not going to have enough attorneys general to enforce the laws on the books, then we need to make a market for private ones.

As The Recorder reported,

Four states and dozens of California cities and water districts have joined a qui tam lawsuit, unveiled this week, seeking millions of dollars in damages against a company for allegedly supplying customers with substandard PVC pipe.

The suit, brought against J-M Manufacturing Co. and its former parent company, Formosa Plastics Corp., alleges that J-M sold PVC pipe that had tensile strength below industry standards, and that the company deceived customers by choosing stronger samples for independent certification of its product. The suit also contends that under the company president, Walter Wang, it "implemented a series of ‘cost-cutting’ measures that undermined the quality of J-M’s PVC pipe products," including filling supervisory positions with less experienced managers.

In one corner, we have the Defendants:

"At JM Eagle, we stand 100 percent behind the quality of our products," said spokesman Marcus Galindo. "Any claim that Mr. Wang or anyone at JM Eagle sacrificed the quality of our product for profit is ludicrous. We’re a company that cares about more than just the bottom line."

According to the complaint, Hendrix was fired a week after he wrote a memo informing management that the tensile strength of the PVC pipe was below the standard required by independent certification agency Underwriters Laboratories Inc.

Galindo discounted that claim, saying outside agencies make unannounced visits to the company’s plants to perform regular audits of its products.

Further, Galindo noted, over the three years that the federal government investigated the claim, it "never stopped purchasing pipe from us. They have decided not to move forward and intervene in this case."

In the other corner, we have Phillips & Cohen LLP’s press release:

Nevada, Virginia, Delaware, Tennessee, San Diego, Sacramento, San Jose, the Los Angeles Department of Water and Power and 39 other California municipalities and water districts have joined a whistleblower lawsuit seeking millions of dollars in damages from JM Eagle and its former parent company, Formosa Plastics Corp. (USA), for supplying their water and sewer systems with pipes that JM knew were substandard. …

"The decisions by so many states, cities and water districts to join this case show just how serious these allegations are," said Mary A. Inman, a San Francisco attorney with Phillips & Cohen LLP, which represents the whistleblower, the Commonwealth of Virginia, the State of Tennessee and 25 California cities and water districts. "With government entities struggling to meet their budgets, it’s particularly important for them to recover their losses from any fraud."

As a result of the investigation into the quality of PVC pipe that JM Eagle has provided, the Nevada Department of Public Works, the cities of San Diego and Sparks, Nevada, as well as at least three water districts in Nevada and California (Truckee Meadows Water Authority, North Marin Water District and Alameda County Water District) have removed JM products from their approved-products lists for purchases.

In a case of this size, a government’s decision to intervene or not is more political than legal. I don’t mean that in a pejorative sense: when a government brings a multi-million-dollar lawsuit against one of its major suppliers, there’s a lot more at stake than a settlement or judgment.

It’s thus hard to read the tea leaves on the differing federal and state decisions. I’m sure the plaintiff’s lawyers are quick to remind that the federal government usually does not intervene, and that the non-intervention is likely a product of limited resources and the federal government’s belief that the state intervention (and the experience of the plaintiff’s counsel) will ensure the claims are prosecuted in a diligent and thorough manner.

On the flip side, I’m similarly sure the defendants’ lawyers consider the state interventions nothing more than cash-strapped states looking for "jackpot justice" from a profitable business.

An interesting one to watch, not least because the plaintiff’s claims are predicated entirely upon violation of third-party standards and codes (e.g., Underwriters Laboratories, American Water Works Association, American Society for Testing and Materials, and FM Approvals) that are incorporated into the government contracts.

Another interesting statutory construction case arising from allegations scientists at Cornell University Medical College and Thomas Jefferson University "misrepresented the findings of their DNA research when they applied for National Institute of Health research grants and did not correct the misrepresentations on subsequent progress reports and renewal applications." Problem is, the grants in question were filed back in the 1990s.

As Judge Savage recounts,

The [False Claims Act] prohibits ‘any person from making false or fraudulent claims for payment to the United States.’ Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 411, 125 S. Ct. 2444, 162 L. Ed. 2d 390 (2005); 31 U.S.C. § 3729(a). Any person found liable for violating the FCA is subject to a civil penalty of $ 5,000 to $ 10,000 per violation and treble damages. 31 U.S.C.A. § 3729(a) (West Supp. 2008); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 181 (3d Cir. 2001).

An action under the FCA may be commenced in one of two ways. The attorney general may sue on behalf of the United States government; or, a private individual, known as a relator, can bring a qui tam action. 31 U.S.C.A. § 3730(a), (b)(1); Graham County, 545 U.S. at 411-12 (citing Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 769-72, 120 S. Ct. 1858, 146 L. Ed. 2d 836 (2000)). Because the relator brings the action on behalf of the government, he must give the government notice of the action. The government has sixty days from the filing of a qui tam complaint to elect to intervene in the action, and, for good cause shown, can petition the court to permit it to intervene at a later date. Graham County, 545 U.S. at 412; § 3730(b)(2) and (c)(3).

A civil action under the FCA must be brought within six years of the violation or within three years of the date when the government learned or should have learned the facts material to the violation, whichever is later. Id. §§ (b)(1), (2). In no event may an action be brought after ten years of a violation. Id. Specifically, the FCA statute of limitations provides:

(b) A civil action under [the False Claims Act] may not be brought –

(1) more than 6 years after the date on which the violation of [the False Claims Act] is committed, or

(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,

whichever occurs last.

31 U.S.C.A. § 3731(b) (2003).

The critical difference between § (b)(1) and (b)(2) is that under § (b)(1), the statute of limitations begins to run when the violation occurs, whereas under § (b)(2), it begins to run when the appropriate person learned or should have learned facts putting him on notice that a violation occurred. A conflict arises from the interplay between the unusual procedure allowing a private party to bring a qui tam action on behalf of the government and the language of the tolling provision, which appears to relate only to the government. It is this conflict that raises the issues confronting us in this case."

United States ex rel. Bauchwitz, No. 04-2892, 2009 U.S. Dist. LEXIS 111919, at *23–25 (E.D. Pa. Dec. 1, 2009).

There’s no obvious right answer:

The circuits and district courts that have considered the issue are split as to whether § 3731(b)(2) applies to private relators in actions where the government has not intervened. The Courts of Appeals for the Fourth, Fifth and Tenth Circuits have held that the tolling provision does not apply to qui tam actions where the government has not intervened. United States ex rel. Sanders v. N. Am. Bus Indus., 546 F.3d 288 (4th Cir. 2008), cert. denied, 129 S. Ct. 2793, 174 L. Ed. 2d 291 (2009); United States ex rel. Erskine v. Baker, 213 F.3d 638, 2000 WL 554644 (5th Cir. 2000) (unpublished table opinion); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 725 (10th Cir. 2006). In contrast, the Ninth Circuit, as well as district courts in Massachusetts, Georgia and Illinois, apply § 3731(b)(2) to private actions even where the government has not intervened. United States ex rel. Hyatt v. Northrup Corp., 91 F.3d 1211, 1214, 1217 (9th Cir. 1996); United States ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, ___ F. Supp. 2d ___, 2009 U.S. Dist. LEXIS 92945, 2009 WL 3171798 (D. Mass. 2009); United States ex rel. Lewis v. Walker, No. 3:06-CV-16, 2007 U.S. Dist. LEXIS 68208, 2007 WL 2713018 (M.D. Ga. Sept. 14, 2007); United States ex rel. Bidani v. Lewis, No. 97 C 6502, 1999 U.S. Dist. LEXIS 3530, 1999 WL163053 (N.D. Ill. Mar. 12, 1999). The Third Circuit has not decided the issue.

Id. at *51–52.

Although the Third Circuit’s precedent leans towards allowing relators in non-intervention cases to rely on statutory provisions arguably meant only for use by the government when it intervenes, the Supreme Court says otherwise:

The Third Circuit’s view of the relator’s status vis-a-vis the government is no longer viable in light of the Supreme Court’s recent holding in United States ex rel. Eisenstein v. City of New York, 129 S. Ct. 2230, 173 L. Ed. 2d 1255 (2009). There, the Supreme Court held that the relator in a non-intervened FCA case cannot invoke the sixty-day deadline applicable to the United States as a party for filing a notice of appeal under Fed. R. App. P. 4(a)(1)(B). Resolving the circuit split, the Supreme Court determined that the government’s retaining an interest in an FCA case in which it has not intervened does not make it a ‘party.’ 129 S. Ct. at 2233. It concluded that this interest does not convert the government’s status as a real party in interest to that of a ‘party’ in the litigation in which it has declined to intervene. Id. at 2235. Consequently, the relator cannot be deemed to have the same status as the government.

Because the Third Circuit’s rationale regarding the relator’s status in Rodriguez has been rejected, it cannot support a holding that would permit a relator to take advantage of a tolling provision applicable only to the government. 54 It has been replaced by the reasoning of the Supreme Court in Eisenstein. Therefore, following that reasoning, we conclude that the three-year tolling period in § 3731(b)(2) does not apply in cases where the government does not intervene.

Id. at *55–56.

Summary judgment granted, case dismissed. It’s not good material for appeal or certiorari, either, as the Eastern District of Pennsylvania also held "Even if the tolling provision applies, as [plaintiff] argues it does, the result would be the same. Because [relator] possessed knowledge of the facts underpinning his allegations regarding all three areas of the defendants’ fraudulent statements by 1999 and their probable connection to grants, the claims that are barred by the six-year limitations period would also be barred by the three-year tolling period."