Whistleblower News, April 2011

1. April 2011
Inside this Edition:
Record Setting Whistleblower Recoveries in FY 2010
IRS Proposes Amendments to Its Informant Reward Program
Whistleblower Secrecy Remains Safe ... For Now
False Claims Act Includes Broad Protections Against Whistleblower Retaliation
Ohio and Washington Introduce Bills to Enact State False Claims Acts
Recent Whistleblower Events
Record Setting Whistleblower Recoveries in FY 2010
Fiscal Year 2010 was a record-setting year for recoveries under the False Claims Act
(FCA). The United States Department of Justice announced in November 2010 that it had
secured $3 billion in civil settlements and judgments in cases involving fraud against the United
States in FY 2010. This includes $2.5 billion in health care fraud recoveries-the largest in
history-and represents the second largest annual recovery of civil fraud claims. Moreover,
amounts recovered under the False Claims Act since January 2009 have eclipsed any previous
two-year period with $5.4 billion in taxpayer dollars returned to federal programs and the
Treasury. Recoveries since 1986, when Congress substantially strengthened the civil False
Claims Act, now total more than $27 billion. Some of the noteworthy whistleblower settlements

2. in FY 2010 included:
o Allergan: $225 Million (off-label marketing of drugs)
o Astra Zeneca LP: $302 Million (off-label marketing of drugs)
o Novartis Pharmaceutical: $237.5 Million (off-label marketing of drugs)
o GlaxoSmithKline, PLC: $600 Million (sale of adulterated drugs)
o EMC Corporation: $87.5 Million (Misrepresenting Commercial Prices)
o Hewlett-Packard Co.: $50 Million (Kickbacks; Influencer fees)
o Cisco Systems: $48 Million (Defective Pricing; Kickbacks)
For more information, please visit www.falseclaimsact.com
IRS Proposes Amendments to Its Informant Reward Program
In 2006, Congress passed the Tax Relief and Health Care Act, which created the IRS
Whistleblower office and made rewards to whistleblowers less discretionary than in the past.
Under Internal Revenue Code 7623(a), the IRS shall pay awards to people who provide
"specific and credible information" to the IRS if the information results in the collection of taxes,
penalties, interest or other amounts from a noncompliant taxpayer. The IRS wants specific
information about significant tax issues. "Significant" is defined by the IRS as taxes, penalties,
and interest owed in excess of $2 million. This is not the venue to report speculative concerns,
air personal disputes, drop a dime on a former spouse, or to report isolated events such as a
waiter failing to declare his tips as income.
There are two basic tracks currently in place for whistleblower complaints that are filed with
the IRS. On the first track, whistleblowers submit information concerning amounts in dispute
(back taxes, interest, and penalties) in excess of $2 million. In these cases, the IRS is looking
for non-compliant taxpayers with annual gross income of more than $200,000. If the IRS
successfully obtains a recovery from a non-compliant taxpayer, the IRS is required to pay the
whistleblower between 15 and 30% of the recovery. Whistleblowers on this track who are not
satisfied with the reward may appeal to the United States Tax Court located in Washington,
D.C.
The second track applies to cases involving less than $2 million in dispute. If the IRS
obtains a recovery in these cases, payment of a reward to the whistleblower is discretionary,
with a maximum of 15% of the recovery up to a maximum of $10 million. Whistleblowers on this
track cannot appeal to the United States Tax Court.
On January 18, 2011, the IRS published notice of proposed rulemaking that will redefine
how whistleblowers may be compensated by the government. The proposed amendments
allow for rewards to be paid to whistleblowers if the information they provide results in the denial
of a claim for a refund that the IRS would have otherwise paid or reduces an overpayment credit
balance. In other words, if the whistleblower's tip prevents the IRS from paying an improper
refund to the putative defendant, the amount of that refund will be included in the calculation of
the recovery by the government. This represents a significant change from the law as it
currently stands. It seeks to monetize prospective violations as opposed to recovering amounts
that previously were paid. Similarly, if the whistleblower provides the IRS with information that a
putative defendant tried to claim a fraudulent loss as an offset to tax liability, the resulting
amount of taxes owed will be included when calculating the whistleblower's reward.

3. These proposed changes, if adopted, will open the whistleblower program up to a whole
new population of citizens with credible information. Claims for rewards that would have
previously been denied may now be granted. For more information on the IRS Whistleblower
Program, visit http://www.falseclaimsact.com/irs_whistleblowers_law_overview.php
Whistleblower Secrecy Remains Safe ... For Now
In a split 2-1 decision on March 28, 2011, the 4th Circuit U.S. Court of Appeals upheld the
automatic 60 day sealing provision of the False Claims Act. The suit, brought by the American
Civil Liberties Union, the Government Accountability Project and OMB Watch, alleges the
secrecy unlawfully blocks the public's access to judicial proceedings and violates the
whistleblower's right to freedom of speech by forbidding them to discuss the misconduct. They
also argue it violates the separation of powers doctrine by not allowing judges to decide on case
by case basis whether the matter should be sealed. The ACLU alleged specifically that the
sealing of Qui Tam lawsuits was hiding Iraq war costs as well as the possibility of war
profiteering. Judge James Dever, III states in the majority decision that the sealing provision
protects the integrity of ongoing fraud investigations. In response to the plaintiffs' claim that
sealing Qui Tam complaints violates the separation of powers doctrine, Dever wrote that the
complaints are subject to judicial review after 60 days and ultimately, all cases will be unsealed
for public review. Additionally, the majority opinion states that whistleblowers are not forbidden
from discussing the underlying misconduct that caused them to bring the complaint, rather they
are only prohibited from discussing the existence of the complaint. They also ruled the plaintiffs
had no standing to make the argument, since they could not produce a whistleblower who
wanted to talk about the fraud and abuse but was prohibited from doing so. In a dissenting
opinion, Judge Roger Gregory stated transparency was key to the fight against fraud and
abuse. Additionally, he stated the seal provision should be decided by judges on a case by case
basis, allowing for more public review. Additionally, he stated whistleblowers should be more
free to discuss their allegations of abuse and fraud in public, thereby reducing the risk that the
government will under-enforce the FCA for "political reasons.
False Claims Act Includes Broad Protections Against
Whistleblower Retaliation
Recent amendments to the federal False Claims Act strengthened the broad protections
against retaliation of qui tam whistleblowers. 31 U.S.C. Section 3730(h) was amended in 2009
and 2010 to expand the protections for those who try to stop false claims for payment to the
federal government. No longer is the protection limited to retaliation against employees by their
employers for lawful acts done in furtherance of a false claims act lawsuit. The FCA now
protects against retaliation against employees, contractors, and agents by anyone for lawful
acts in furtherance of efforts to stop 1 or more violations of the FCA. These amendments add
important new protections for whistleblowers because they: (1) expand those protected by the
law; (2) remove the employer as the only potential defendant (and potentially add supervisors
and others); and (3) expand the protection to acts in furtherance of efforts to stop 1 or more
violations - as opposed to acts done in furtherance of an FCA lawsuit. For more information
about qui tam lawsuits, visit www.falselcaimsact.com

4. Ohio and Washington Introduce Bills to Enact State False Claims
Acts
Bills recently introduced in Ohio and Washington would enact State False Claims Acts to
encourage whistleblowers (known as qui tam "relators") to step forward and file a lawsuit
against those who submit false claims for payment to the state government. The Ohio False
Claims Act (Senate Bill 143) would, similar to the federal FCA, cover all State spending; while
the Washington False Claims Act (Senate Bill 5458) would cover claims to the Washington
State Medicaid Program. Currently, 28 States have enacted State False Claims Acts, most of
which are modeled on the federal False Claims Act (which has been used to recover more than
$27 Billion since 1986). For copies of all 28 State False Claims Acts visit
http://www.falseclaimsact.com/sfca_overview.php
RECENT WHISTLEBLOWER EVENTS
On June 27, 2011, Marc Raspanti will speak at the American Health Lawyers'
Association Annual Meeting in Boston, Massachusetts, on the topic of "Everything You
Need to Know About Handling a Whistleblower"
On June 8, 2011, Michael Morse will speak at the Pennsylvania Institute of Certified
Public Accountants' Health Care Conference on the topic of "Health Care Fraud and the
False Claims Act"
On April 14, 2011, Marc Raspanti spoke at the American Bar Association 2011 Spring
Meeting- Joint Criminal Justice / Litigation Section CLE Program, on the topic of "A New
Day has Dawned: Federal and State False Claims Acts at the Forefront of Litigation"
On April 9, 2011, Michael Morse spoke at the Health Care Compliance Association's
Compliance Institute in Orlando, Florida on the topic of "False Claims Act
Developments"
On April 5, 2011, Marc Raspanti spoke at the Offshore Alert Conference in Miami,
Florida of the topic of "Avoiding the Mistakes of the UBS/Birkenfeld Case: Protecting
Whistleblowers from Criminal and Civil Liability"
For more information about whistleblower lawsuits, visit:
www.falseclaimsact.com or www.fraudwhistleblowersblog.com

5. Federal and State Qui Tam Litigation
Pietragallo Gordon Alfano Bosick & Raspanti, LLP has one of the most successful,
skilled and respected practices in the United States representing qui tam whistleblowers under
federal and state false claims acts and the IRS Whistleblower Program. For nearly 20 years our
attorneys have fought on behalf of qui tam whistleblowers across the United States, in many of
the most complex and sophisticated cases in the history of the federal False Claims Act. Our
attorneys have served as lead counsel for whistleblowers that have resulted in more than $1
Billion in recoveries for Federal and State taxpayers.
Michael A. Morse, Esquire Marc S. Raspanti, Esquire
Phone: (215) 988-1427 Phone: (215) 988-1433
Fax: (215) 981-0082 Fax: (215) 981-0082
E-Mail: E-Mail:
MAM@PIETRAGALLO.com MSR@PIETRAGALLO.com
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