Following its loss in a California trial, J.M. Eagle, a large manufacturer of industrial pipe, is pushing back hard against its qui tam legal adversaries. [Daniel Fisher/Forbes, Plastics News] Earlier on the False Claims Act here and here.
The docket keeps expanding and Legal NewsLine is out with a story quoting me and others:
…“In recent years, you’ve seen some pushback from the business community, but given the record of congressional expansion, they’ll be doing pretty well if they can just keep Congress from expanding it further,” said Olson, who also founded and still runs the popular blog Overlawyered.com. …
The Department of Justice announced in December that it secured $3.8 billion in settlements and judgments from civil cases involving fraud against the government in 2013. According to the office, the amount represents the second largest annual recovery of its type in history and brings total recoveries under the False Claims Act to $17 billion since January 2009….
Olson explains that the business community’s growing discontent over the False Claims Act includes concerns over incentives for whistleblowers. In many cases, the whistleblower either participated in the misconduct, or knew about the misconduct but failed to inform their company.
He adds that in worse cases, whistleblowers intentionally ignored misconduct so damages would pile up and result in a “better bounty.”
“These are all incentives that are at odds with the wish that employees be ethical and loyal to their employers, and are also sometimes at odds with the object of minimizing fraud,” Olson said.
Much more, including more quotes from me, at the link; related Peter Hutt interview piece.
Much more rewarding to act as a government informant than to help the employer address the problem: “Allegations of wrongdoing within a company often surface in the compliance department, which often is involved in internal investigations and receives employee complaints. Like other employees, compliance staff can under various statutes submit information on potential wrongdoing for whistleblower awards or claim retaliation for raising concerns about alleged wrongdoing.” [WSJ via CompliancEX]
If you’re the federal government, one thing it’s good for is to turn a losing claim — losing because filed too late — into a possible winner. It works through something called the Wartime Suspension of Limitations Act (WSLA), enacted by Congress in 1942 as the U.S. entered World War Two, and I explain it in this guest column for Jurist.
The WSJ editors wonder to what extent the feds, who have been pursuing a campaign lately to bring the colleges to heel, are coordinating with the private False Claims Act bar. Meanwhile, Rogier at Nobody’s Business spots some ironies in the Justice Department’s suit against Education Management Corp.: “pushing low- to medium-value degrees is something that law schools — including some of the best in the country — do habitually, every day. All of higher education does, with no exceptions I’m aware of.”
Along with the Cato Institute’s Center for Constitutional Studies, I’ve filed an amicus brief (a first for me) urging the U.S. Court of Appeals for the Federal Circuit to recognize the constitutional flaws in the federal “false marking” statute, which empowers private parties to sue over inaccurate (in practice, mostly expired) patent markings on products and collect fines of a generally criminal/punitive as opposed to civil/compensatory nature. Here’s our argument in a nutshell, from the Cato website:
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I’m quoted in this report by Dunstan Prial of FoxBusiness.com and in this report by David Savage of the Los Angeles Times on the large-scale bounty incentives in the Dodd-Frank financial regulation bill, which bring us closer to an “informer model of law enforcement” that “encourages people to be disloyal to their friends and co-workers.” Earlier here and here. Other coverage of the whistleblowing provisions: Coyle/NLJ, Koehler/FCPA Professor, Baer/Prawfsblawg.
There are lots of them tucked into the bill, and they will probably come at a significant cost for companies in the economy’s financial sector, as I explain in a new post at Cato at Liberty (earlier; more on qui tam and whistleblower matters more generally).
It seems the Senate-passed financial reform bill includes whistleblower bounties and other legal goodies. [Whistleblower Law Blog] On tax informants, see our post of Wednesday.
Bonus: Amy Kolz at American Lawyer (“Serial whistle-blower Joseph Piacentile makes millions helping the government uncover fraud. That’s how the False Claims Act is supposed to work. Or is it?”). And David Walk at Drug and Device Law assails as “dumb,” credulous, and based upon a biased sample a New England Journal of Medicine feature on whistleblowing in the pharmaceutical industry:
The New England Journal of Medicine bills itself as “the world’s most influential medical journal,” and it unquestionably publishes groundbreaking articles about medicine. But all too often in recent years the NEJM has strayed from what it knows — medicine – into what it doesn’t – law and public policy, particularly tort policy. No longer content with editorials encouraging litigation against anyone but doctors, the NEJM now publishes public policy advocacy pieces dressed up as scientific studies, with the implicit suggestion that those studies should get the benefit of the NEJM’s good name in public policy debates.
It’s attractive enough to have lured private equity money:
Three years ago, the I.R.S. began offering bigger rewards — 15 percent to 30 percent of whatever money the government recovered — in a move that has turbocharged the agency’s whistle-blower program. …
Among the lawyers, hedge funds and investors who may provide the financing for class-action lawsuits and whistle-blower cases against government contractors, the reinvigorated I.R.S. program has attracted attention.
Things you’re missing if you aren’t checking out my other site:
In June we reported on a boomlet in freelance lawsuits accusing companies of marking their products with outdated patent numbers or with other violations of a federal statute that prohibits the use of false or misleading patent marks on products. On December 28 the Federal Circuit issued a decision that may greatly stimulate the activities of what are already being called “marking trolls”. It holds that courts have discretion to impose the law’s $500 penalty per mislabeled item sold, which means that total penalties might rise to gigantic levels; lawyers who bring the cases then split the proceeds with the federal government in qui tam fashion. Coverage: George Best and Jeffrey Simmons/Foley & Lardner, Robert Matthews, Jr., Patently-O, Rebecca Tushnet and more, Patent Prospector.
The Progressive Policy Institute (!) criticizes a provision almost snuck into the health-care bill that would have been a windfall for trial lawyers at the expense of the rest of us. Earlier and earlier on Overlawyered, which was the first to publicize the provision.