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We had always been of the opinion that the correct saying is “you are what you eat”, however, a recent False Claims Act case seems to infer that a food supply company has changed that old saying to “you are what you bill”.

A federal trial has been set for 2015 against a frozen meal delivery company that is being accused of Medicaid fraud. The complaint alleges nearly $900,000 in improper bills to Medicaid.

The company, Homestyle Direct, is accused of delivering meals to deceased clients, lying to clients about Medicaid requirements and, in some cases, delivering only desserts to the homebound clients and billing Medicaid for a full meal. Medicaid does not reimburse for desserts that don’t meet nutritional requirements.

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The names are as American as apple pie — J.C. Penney’s, Belk’s, Nordstrom’s and Lord & Taylor. The clothes sold in these stores that were manufactured by Dana Kay and Danny & Nicole and its affiliate companies, however, were made overseas and imported to the U.S. under false pretenses. Now Dana Kay and affiliates have agreed to pay the federal government $10,000,000 to settle a False Claims Act case in which they are alleged to have fraudulently valued their imports in order to avoid millions of dollars in tariffs. This is the largest Customs Fraud case ever settled in New York.
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1. Shut up and get a good lawyer, fast. You can complain about the fraud internally, but we all know how that usually ends. Once you identify a fraud, immediately contact a lawyer to ask for guidance, including what documents and corroborating evidence that you can take with you. Do NOT ever take originals. You don’t want the real crooks to flex their muscle and convince authorities that your “theft” should negate their fraud. It’s also possible that as soon as you start thinking about the impropriety, people at the company know who you are. That means you could be escorted out of the building before you can grab your kids’ pictures off your desk.

2. Make sure you have a case. FCA, IRS and SEC cases are not based on rumor or hunches, but evidence. You have to prove fraud and the government is not paying awards for generalized tips, but for specific evidence. You are supposed to be doing the government’s work for it. Don’t assume that you will be able to prove your case by having your lawyer or the government subpoena documents from the defendant after the case is filed. Think about what you personally know right now. As the great philosopher Tommy Boy said, “I can get a good look at a T-bone by sticking my head up a bull’s ass, but I’d rather take a butcher’s word for it.” The government wants the butcher, but come prepared with meat in hand.

3. Welcome hard questions and difficult truths. Don’t blame a lawyer for questioning your case – convince them it has the necessary merit. If you have found a good lawyer and you can’t convince them, then maybe you don’t have a case. My first(successful) case involved a novel theory – fraud that was obvious to me but not something that the Department of Justice had pursued before. My attorneys dug deep into the facts of my case and did a lot of legal research before they felt comfortable it was viable. Initial skepticism can save years of wasted time if the facts and/or law don’t work in your favor.

4. Get an honest lawyer who’s had some success in the whistleblower arena. Before divulging any specific details to a prospective lawyer, make sure they run a conflict’s check first to ensure they don’t have an ulterior agenda. For example, they could already represent a client that has a similar case and could be trying to suck information out of you. If a lawyer purports to have recovered billions of dollars in whistleblower claims, ask them how much their relators’ shares have been. There are some great lawyers who represent whistleblowers, including some who are less well known but nonetheless very capable. Asking other whistleblowers who they recommend and then talking to the lawyers is always a good way to approach a potential attorney-client relationship. The key, however, is to find an attorney with good judgment quickly.

Also, don’t pay someone an hourly fee to represent you on a whistleblower case (unless they are only representing you in an employment case). The real whistleblower lawyers all work on a contingency fee basis — meaning you pay nothing unless you win. The only lawyers I ever heard of who charge an hourly rate are ones who don’t know what they are doing — or ones who think you don’t have a case but are happy to take your money.

5. Prepare for the long haul. Most defendants don’t settle easily, and they never fear press as much as you think they will. Many lawyers have told me that every whistleblower they talk to says “the company will settle this quickly to avoid the press.” They never do.
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Although the year has not ended, there have been a number of significant False Claims Act settlements. In fact, the nine largest settlements this year total over $700 million. What’s really shocking is the connection to the state of New Jersey in the largest of the settlements.

To answer the above question, the largest three whistleblower cases this year all have connections to New Jersey and, further, four out of the top five settlements had a connection to New Jersey as well.

The largest settlement this year involved Ranbaxy, Inc., based in Princeton New Jersey. The settlement was $500 million. The second largest settlement involved New Jersey based C.R. Bard. The Bard settlement exceeded $48 million. Coming in “third place” was Par Pharmaceuticals based in Woodcliff Lake, New Jersey. Par settled for $45 million.

In following the settlements, by size, a plastic surgeon from Florida came in fourth place settling for $26.1 million.

In fifth place was CH2M Hill, with offices in Parsippany and Paterson, New Jersey. Hill settled for $18.5 million.

The False Claims Act provides for a payment to the individual that provides the first information to the United States government involving fraud. Although there are specific requirements, the person reporting the information to the government must have unique information that the government did not previously possess. In all of the above cases, the individual or individuals that reported the information to the federal government received rewards in excess of 15% of the amount recovered by the United States government. Needless to say, these rewards represent a strong incentive to report the fraud beyond the obvious motive of “doing the right thing”.
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Everyone knows that Walt Disney left this earth many years ago. However, his legacy lives on in, among other things, the amusement parks in California, Florida and France. As part of the development of and continued operation of these amusement parks, the ire of local environmentalists is often raised. Now what might this have to do with sanctions against a whistleblower in the Federal Courts?

In a recent decision, a California court found a whistleblower’s lawsuit to be frivolous. The court has invited the Walt Disney Company to submit a bill for the time spent by the law firm on the defense of the matter. This case will undoubtedly be cited as the reason why whistleblowers should not come forward and report activity that they believe to be fraudulent. However, many of the facts particular to this case will not be mentioned.

The Federal False Claims Act, and similarly many state False Claims Acts, is subject to the Federal Court rule prohibiting frivolous claims. It is fairly rare for an action for a frivolous suit to be successful. The sanctions for bringing a frivolous claim require a showing that the action was “baseless” and that a reasonable inquiry would have confirmed the frivolous nature of the action. It is often the case that potential whistleblowers are afraid to move forward in making their claim or bringing their information to the attention of the government because of the fear of being sued.

The facts in the Walt Disney case were unique and even a layperson would probably agree that the action by the whistleblowers was baseless and frivolous. The whistleblower, an environmental group, sued Walt Disney for the “future” damages to the waterways surrounding Disneyland. Additionally, this was the 10th lawsuit based on essentially the same facts filed by this same group. Other courts, when considering the earlier actions by this group, had dismissed many of them with prejudice.
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On July 26, 2013, the Department of Justice announced the settlement with Dubuis Health System. Dubuis operates long-term acute care hospitals in a number of states located in the Southern East and South Western United States. The health system does not operate any facilities in the state of New Jersey.

A former Administrator at Southern Crescent (part of the health system) alleged that the health system kept patients hospitalized beyond what should have been considered “medically necessary”. The health system did this for two reasons; the system would receive a higher rate of Medicare reimbursement and, the health system could maintain its classification as a long-term acute care facility.

It was alleged that the fraud occurred between 2003 and 2009. It is not known whether or not there were allegations before or after these dates of fraud.

The health system agreed to pay $8 million to resolve the allegations. The whistleblower will receive a little more than $2.1 million of the recovery by the United States government.

Healthcare fraud, including long-term acute care facilities, nursing homes, and hospice has been a hot topic over the last number of years. The False Claims Act, a federal statute, has provided a vehicle for the federal government to become aware of the fraud. Very often, the fraud is not known to the federal government and is brought to the attention of the Department of Justice by an individual. The individual can be an employee, a competitor, or, in some cases, a patient. The individual that brings the fraud to the attention of the federal government is called a “relator”. The False Claims Act provides for the relator to receive an award based upon the success of the case. The False Claims Act is very particular and has significant requirements including the need for the information to not have been public and the relator must be the first person to bring the information to the attention of the federal government. For this reason, relators often seek the services of a whistleblower lawyer with experience in the area. The False Claims Act provides for an award of between 15% and 30% of the amount recovered by the federal government.

Although this healthcare system did not maintain facilities in the state of New Jersey, if New Jersey had paid any of the bills which were improper, there would have been a recovery for the state of New Jersey as well. This is due to the fact that the state of New Jersey passed a False Claims Act in 2008. The New Jersey False Claims Act, very similar to the Federal False Claims Act, provides for a vehicle to report fraud against the state of New Jersey or state authorities.
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New Jersey, like many other states, maintains a provision for paying over money or property to the State if it remains unclaimed for a period of time. Although the time can differ based upon the type of property, the limitation period can be as short as one year or as long as 20 years.

The technical term is “escheat”. This basically means that the property would revert to the State, in this case the State of New Jersey.

When you first take a look at the unclaimed property statute you would assume that it is effectively a “grab” by the State of New Jersey of unclaimed property. In fact, the statute was originally intended to, and continues to attempt to, protect the true owners of the property. After the property is turned over to the State, the State lists the property publicly to determine the true owner. If the property remains with the holder, not the State, there does not appear to be a strong incentive for the holder to find the actual owner and return the property.

You may be familiar with the unclaimed property provisions if you look online or at the lengthy advertisements in the newspaper listing all sorts of property by name and address. Who amongst us has not looked for our own name in the listing hoping to find money that is owed to us!

The question then becomes, what might this have to do with the False Claims Act?

A number of years ago, a Credit Union was alleged to have violated a statute similar to New Jersey’s. The Credit Union had hundreds of thousands of dollars in mortgage accounts that had not been properly handled. The individual that provided the information to the State was awarded nearly $150,000.00.

The Unclaimed Property Act covers things like actual money, casino chips, rental deposits, uncashed checks, utility deposits, and annuity or life insurance policy proceeds. If the company or business that you work for has not provided information to the State of New Jersey regarding property they are holding, you may have information that can be pursued under New Jersey’s False Claims Act.
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Just before year-end, GE healthcare agreed to pay $30 million to the United States Department of Justice. The case was filed by a salesman in Michigan. James Wagel alleged that a company owned by GE healthcare marketed a diagnostic drug used in cardiology testing improperly. The drug involved in the case is named Myoview.

The case is very interesting in that GE healthcare acquired Nycomed Amersham. Nycomed, a New Jersey company, allegedly told doctors how to “stretch” the drug. The drug enables doctors to see blood flow in a patient’s heart and helps the doctor detect coronary heart disease. Some doctors were using less than the total amount of the solution during the diagnostic procedure. By using less than the total amount of the solution, the doctors were able to “stretch” the number of procedures completed with the same amount of solution. The doctors then charge Medicare for the procedure.

Unfortunately, the diluted product sometimes resulted in false positives during cardiology testing and exposed the patient to additional and unnecessary testing.

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It seems that some companies never learn when it comes to false claims against the United States government. Omnicare is in the business of providing prescription drugs to elderly patients, and, has a particular pedigree in supplying nursing homes. Omnicare operates in at least 16 states, and, has 2 locations in New Jersey.

In 2010 Omnicare paid nearly $100 million to settle a whistleblower and kickback lawsuit. According to a recently filed lawsuit in The Federal Court, Omnicare has developed a new way to overcharge the United States and individual state governments.

A whistleblower, Peter Ordeanu, alleges that while working for the company or its predecessors, he learned that Omnicare regularly inflated the amount of money billed for dispensing drugs. The fraud involved Omnicare changing the National Drug Code number (“NDC” number) on the drug dispensed to the patient. By changing the NDC number the actual name or type of the drug dispensed was masked. The whistleblower claims that by changing the label, the US and state governments were overcharged by millions of dollars.

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