On February 16, 2017, the Department of Justice (“DOJ”) intervened in a False Claims Act (“FCA”) lawsuit against UnitedHealth Group, Inc. (“UnitedHealth” or “the defendant”), which alleges, among other things, that UnitedHealth “engaged in a widespread scheme to knowingly submit, or cause to be submitted, false claims for payment to the United States by submitting false ‘risk adjustment’ information to the Centers for Medicare & Medicaid Services (‘CMS’) in order to improperly increase the amounts CMS pays them or their clients.” United States ex rel. Poehling v. UnitedHealth Grp., C.D. Cal., No. 11-cv-0258-A, unsealed 2/16/17.
On September 30, 2016, the Sixth Circuit remanded a False Claims Act (“FCA”) lawsuit against Brookdale Senior Living Solutions (the “defendant” or “Brookdale”), which alleges, among other things, that physician signatures on home care certifications and care plans were late and that Brookdale paid physicians to provide certifications for patients that did not require home care. Specifically, the Sixth Circuit reversed and remanded the district court’s dismissal of United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., Case No. 15-6377, holding that the relator “sufficiently plead the submission of particular claims to the government because she provided a detailed description of the alleged fraudulent scheme, and included her own personal knowledge of the review of Medicare claims for submission.”
The U.S. District Court for the District of Massachusetts recently dismissed a False Claims Act (“FCA”) lawsuit against Wal-Mart, Kmart, and Rite Aid pharmacies (collectively, “the defendants”), alleging, among other things, that the companies dispensed expired prescription drugs that were reimbursed by Medicare and Medicaid. In short, the court granted, in part, defendants’ motion to dismiss in U.S. ex. rel. Verrinder v. Wal-Mart Corp., Case No. 13-11147-PBS [here], holding that the relator’s allegations were not sufficiently connected to specific false claims for payment.
Pennsylvania’s student loan agency—the Pennsylvania Higher Education Assistance Agency (PHEAA)—filed a petition for certiorari on February 16, seeking U.S. Supreme Court’s review of whether the Agency has government immunity from the False Claims Act (FCA). In short, the PHEAA petition argues that Pennsylvania law “uniformly and unambiguously” treats the Agency as “an arm” of the state government, and that “[s]ince its creation in 1963, the [PHEAA] has occupied an inherently sovereign role as a ‘government’ instrumentality of the Commonwealth of Pennsylvania.” Therefore, according to the PHEAA, the Fourth Circuit erred in finding that the Agency was not immune from the relator’s FCA allegations in U.S. ex. rel. Oberg v. Pennsylvania Higher Education, Case No. 15-1093.
Posted by Kristin Graham Koehler and Kaitlyn Findley
On February 26, 2015, New York Attorney General, Eric Schneiderman, announced that he would propose state legislation to “protect and reward employees who report information about illegal activity in the banking, insurance, and financial services industries.” Attorney General Schneiderman’s proposed bill—The Financial Fraud Whistleblower Act—would both incentivize whistleblowers to report suspected securities and other financial frauds and protect them for doing so. In particular, the bill would provide compensation to individuals whose tips lead to more than $1 million in sanctions and would guarantee the confidentiality of whistleblowers’ information. Finally, the bill would provide whistleblowers with explicit legal protection from retaliation by current or prospective employers in response to their participation in New York’s whistleblower program.
This forthcoming legislation appears to be closely modeled after the provision in the Dodd-Frank Act that created the whistleblower program at the U.S. Securities and Exchange Commission (SEC). Similar to the SEC’s program, New York’s program would pay whistleblowers 10% to 30% of the penalties or settlement proceeds recouped by the government if their tips lead to sanctions worth more than $1 million. The Attorney General’s proposed legislation could create a competition between the SEC program and the anticipated New York whistleblower program because both programs would cover essentially the same industries in New York, and as such, would be competing for the same tips. As a result, if the New York whistleblower program is implemented, both SEC and New York likely will strive to make their programs more attractive to potential whistleblowers by increasing the reward amounts offered and expediting the payment of those amounts.
Despite these similarities, Attorney General Schneiderman indicated in his press release that the proposed legislation would go beyond SEC’s current regulations, stating that “this law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets.”
Posted by Kristin Graham Koehler and Kaitlyn Findley
On February 25, the Wall Street Journal (“WSJ”) reported that the SEC recently sent nonpublic letters to several companies asking them to disclose all confidentiality agreements, nondisclosure agreements, severance agreements, settlement agreements, any documents that “refer or relate to whistleblowing,” and a list of terminated employees since the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) went into effect.
SEC officials and “pro-whistleblower” stakeholders have expressed concern that clauses in these agreements undermine the efficacy of the agency’s whistleblower program by limiting employees’ ability to report a company’s potential wrongdoing or other securities-law violations to the SEC. For example, Congressional democrats recently have alleged that defense contractor KBR Inc. used such nondisclosure agreements to prohibit employees from reporting suspected violations to the government without first obtaining approval from KBR Inc.’s General Counsel — an allegation KBR denies. In addition, some agreements require employees to forego any share of settlement amounts obtained as the result of the employee’s tip, thereby eliminating the financial incentive to participate in the SEC whistleblower program.
The agency’s whistleblower program was created after passage of Dodd-Frank in 2010, which prohibits companies from interfering with employees’ reporting of potential securities-law violations to the SEC. Whistleblowers that participate in the program can recover 10% to 30% of the penalties collected if their information leads to an enforcement action with sanctions of more than $1 million. In 2014, the SEC received 3,620 tips regarding potential securities-law violations, which marks a 21% increase since 2012. Despite this steady increase in tips, SEC officials, including SEC Chairman Mary Jo White, remain concerned about companies’ treatment of internal whistleblowers and consider the issue a “high priority” action item for the agency.