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qui tam


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section heading icon     qui tam

This page highlights some US qui tam whistleblowing cases.

It supplements the discussion of whistle-blowing and secrecy.

subsection heading icon    Alderson, HCA and Medicare fraud

US hospital financial officer Jim Alderson gained over US$20 million under the 1986 False Claims Act after the federal government recovered US$1.7 billion from HCA, formerly Columbia/HCA. Alderson became a whistleblower after he was fired from his accounting job over disquiet regarding the company keeping two sets of records for Medicare reimbursements.

subsection heading icon    Maxwell and Kerr-McGee

In 2005 Bobby Maxwell filed a qui tam federal court suit against Kerr-McGee Corporation. He had won public commendation from superiors as a leading Interior Department auditor, dealing with royalty payments for extraction of oil and gas from public land. Maxwell alleged that major producers had short-changed the government; his job was eliminated in a reorganisation a week after a federal judge in Denver unsealed his claims that royalty payments had been evaded.

In 2006 the Department's inspector general provided a scathing report to Congress, commenting that its royalty data is often inaccurate, officials are overreliant on statements by oil companies rather than actual records and that less than 10% of oil and gas leases are being reviewed. That report undermined claims by senior Interior officials that the department is aggressively pursuing underpayments and outright cheating by companies.

In April 2007 a federal judge in Denver overturned a jury's verdict in favor of Maxwell, ruling that he was not eligible to sue Kerr-McGee as a private citizen because he had gathered most of his evidence while on the job. The judge did not question the jury's verdict that Maxwell had uncovered cheating by Kerr-McGee but indicated that Maxwell failed a crucial technical requirement under the False Claims Act. Maxwell is expected to appeal, in a case likely to go to the Supreme Court.

subsection heading icon    Miller and Halbert

In 2007 three companies associated with US civil engineering czar Bill Harbert were found guilty by a jury of rigging bids for US-funded water and sewer system contracts in Egypt during the 1980s, being hit with a U$34.34 million in damages (tripled under the False Claims Act for an award of US$103 million).

The litigation was brought on the evidence of whistleblower Richard Miller, a former executive with a contractor that was involved in the bid rigging scheme. Miller stands to collect between 15% and 30% of the damages.

subsection heading icon    Marchese and Cell Therapeutics

In 2007 former pharmaceutical sales representative James Marchese was awarded US$1.6 million after blowing the whistle on a drug marketing fraud, despite efforts by the federal Justice Department to prevent him receiving the money.

Judge Pechman of the Federal District Court in Seattle criticised Marchese for not alerting federal authorities more quickly, noting that after he was passed over for a promotion he wrote an angry letter to his superiors at Cell Therapeutics, taking credit for the very actions that he later identified as causing harm to cancer patients. In 2002, after another falling-out with his superiors, he went to the Food & Drug Administration. In 2007 the company agreed to pay US$10.5 million to settle charges that it had defrauded Medicare in connection with sales of the Trisenox cancer drug.

Marchese argued that he should receive 25% of that settlement, maintaining that the government would not have had a case without him. Judge Pechman awarded him the minimum 15%,, noting that he "provided the government with evidence of fraudulent activity that the government would not otherwise have discovered".

subsection heading icon    Lisitza and Walgreen

In 2008 pharmacy chain Walgreen agreed to pay US$35 million to settle a federal whistleblower suit featuring claims that it grossly overcharged Medicaid for prescriptions. The setkement would be shared by the whistleblower, the federal government, 42 states and Puerto Rico. Pharmacist Bernard Lisitza, the whistleblower, was expected to receive around US$5 million.

Walgreen denied any wrongdoing, commenting that it reached the agreement merely "to avoid the expense and uncertainty of litigation and to resolve all of the government's claims". Omnicare agreed in 2006 to pay US$49.5 million; CVS Caremark agreed in 2008 to a US$36.7 million settlement.

subsection heading icon    scale

Some sense of federal and state government use of qui tam is provided by the following settlements -

  • US$840m settlement with HCA (2000) resolves eleven out of thirty consolidated qui tam suits alleging fraudulent cost reporting and improper kickbacks. HCA subsequently agreed to pay a further US$625m to settle additional qui tam suits alleging fraud regarding cost reports to Medicare, kickbacks to doctors and false claims arising from operation of the hospital chain's wound care centers.
  • US$182m settlement with Roche Biomedical Laboratories (1996) regarding allegedly unnecessary clinical tests sold to doctors and billed to Medicare and Medicaid
  • US$325m settlement with SmithKline Beecham (1997) regarding allegedly unnecessary clinical tests sold to doctors and billed to Medicare and Medicaid
  • US$559m settlement with TAP Pharmaceuticals (2001) regarding alleged conspiracy with doctors to bill Medicare for drug samples, kickbacks to providers and inflated pricing of prostrate cancer drug Lupron. TAP paid a further US$290m in criminal fines and a civil payment to fifty states of US$25m
  • US$170m from nursing home operator Beverly Enterprises (2000) regarding alleged false billings to Medicare
  • US$76m from General American Life Insurance (2001) regarding alleged improper approval of claims for federal Medicare funds
  • US$85m settlement with hospital management chain Quorum Health Group (2001) regarding allegations of non-reimbursable costs in annual cost reports and use of secret set of cost report reserves identifying improper claims in case scheme was discovered
  • US$385m civil settlement and US$110m criminal fines paid by Fresenius Medical Care regarding five qui tam lawsuits alleging wrongdoing by kidney dialysis subsidiary
  • US$54m settlement with Boeing (2000) to resolve allegations that it placed defective transmission gears in army helicopters
  • US$40m settlement by Salomon Smith Barney (2000) in bond-pricing dispute.

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version of May 2008
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