[Ip-health] Whistle-Blower Suits Languish at Justice

[Riaz K Tayob]

Snip:
Among the largest false-claims cases to date are a $650 million
settlement earlier this year by drugmaker Merck in connection with an
alleged failure to repay Medicaid rebates; a $515 million deal with
Bristol-Myers Squibb to cover illegal drug pricing and marketing; and a
$98 million agreement with software maker Oracle over pricing.

    If their claims are successful, whistle-blowers can receive a hefty
slice of the settlements or verdicts, sometimes as much as 20 percent of
the award. A former Merck sales manager collected $68 million earlier
this year for his role in exposing an alleged drug-pricing scheme.

    Even bigger lawsuits containing potentially explosive allegations
are waiting in the wings. The vast majority, more than 500 cases,
involve the health-care and pharmaceutical industries and often involve
Medicare and Medicaid funds.
------------------------------------------

Whistle-Blower Suits Languish at Justice

Wednesday 02 July 2008
by: Carrie Johnson, The Washington Post

    More than 900 cases alleging that government contractors and
drugmakers have defrauded taxpayers out of billions of dollars are
languishing in a backlog that has built up over the past decade because
the Justice Department cannot keep pace with the surge in charges
brought by whistle-blowers, according to lawyers involved in the disputes.

    The issue is drawing renewed interest among lawmakers and nonprofit
groups because many of the cases involve the wars in Iraq and
Afghanistan, rising health-care payouts, and privatization of government
functions - all of which offer rich new opportunities to swindle taxpayers.

    Since 2001, 300 to 400 civil cases have been filed each year by
employees charging that their companies defrauded the government. But
under the cumbersome process that governs these cases, Justice
Department lawyers must review them under seal, and whistle-blowers
routinely wait 14 months or longer just to learn whether the department
will get involved. The government rejects about three-quarters of the
cases it receives, saying that the vast majority have little merit.

    Disputes can stay buried for years more while the government
investigates the allegations.

    "Even if no new cases are filed, it might take 10 years for the
Department of Justice to clear its desk. Cases in the backlog represent
a lot of money being left on the table," said Patrick Burns, a spokesman
for Taxpayers Against Fraud, which advocates for Justice to receive more
funding to support cases by whistle-blowers and their attorneys.

    Supporters of federal intervention in the cases say the dividends
are substantial: In recent years, verdicts and settlements have returned
nearly $13 billion to the U.S. government.

    At issue in most of the cases is whether companies knowingly sold
defective products or overcharged federal agencies for items sold at
home or offered to U.S. troops overseas. Under the Civil War-era False
Claims Act, workers who file lawsuits alleging such schemes cannot
discuss them or even disclose their existence until Justice decides
whether to step in.

    By its own account, the 75-lawyer unit in Washington that reviews
the sensitive lawsuits is overloaded and understaffed. Only about 100
cases a year are investigated by the team, which works out of the
commercial litigation branch of Justice's civil division.

    Critics argue that the delays are at least partly the result of
foot-dragging by Justice and the federal agencies whose position it
represents, especially in the touchy area of suppliers that may have
overbilled the government for equipment, food and other items used by
troops in Iraq and Afghanistan.

    Justice lawyers have rejected about 19 cases involving contractor
fraud in Iraq and Afghanistan, registering five settlements that
resulted in $16 million, officials said. Government officials said this
week that they are considering whether to dive into 32 more
whistle-blower cases involving Iraq or the Middle East.

    "It's just flatly absurd for us to be five years into this war" with
so few public cases, said Alan Grayson, a whistle-blower lawyer in
Florida who has criticized the Justice effort and who is running for
Congress as a Democrat.

    In a statement, Justice spokesman Charles Miller said that career
lawyers and supervisors base their determinations on merit, not on
political sensitivities. "Our decisions to intervene or decline in cases
involving Iraq and the Middle East are entirely consistent with our
record in [whistle-blower] cases generally," he said.

    Help from Justice greatly enhances the chances that a complicated
fraud scheme can be unraveled, lawyers say. And department statistics
show that cases Justice turns away win paltry, if any, financial recoveries.

    Key lawmakers have called on Justice to make false-claims
investigations a priority.

    "Whistle-blowers are the key to the secrets locked in closets
throughout the federal bureaucracy and government contractors," said
Sen. Charles E. Grassley (R-Iowa). "These patriotic Americans stick
their necks out, against all odds, to help the federal government pursue
fraud and save taxpayers tens of billions of dollars that would
otherwise be lost."

    Last month, Deputy Assistant Attorney General Michael F. Hertz told
Congress that "the number and increased complexity of the fraud schemes
presented to the department, combined with the volume of cases now under
review, certainly present challenges."

    Among the largest false-claims cases to date are a $650 million
settlement earlier this year by drugmaker Merck in connection with an
alleged failure to repay Medicaid rebates; a $515 million deal with
Bristol-Myers Squibb to cover illegal drug pricing and marketing; and a
$98 million agreement with software maker Oracle over pricing.

    If their claims are successful, whistle-blowers can receive a hefty
slice of the settlements or verdicts, sometimes as much as 20 percent of
the award. A former Merck sales manager collected $68 million earlier
this year for his role in exposing an alleged drug-pricing scheme.

    Even bigger lawsuits containing potentially explosive allegations
are waiting in the wings. The vast majority, more than 500 cases,
involve the health-care and pharmaceutical industries and often involve
Medicare and Medicaid funds.

    Only a few hints of the Iraq and Afghanistan disputes have erupted
publicly. One is a suit filed by two former employees of Custer Battles,
a defense contracting company in Fairfax. The workers accused the
company of inflating expenses on a contract it won to replace the Iraqi
currency. After a three-week trial in 2006, a jury found in favor of the
plaintiffs and awarded them $10 million. But U.S. District Judge T.S.
Ellis III later tossed out the case, ruling that the money at issue,
controlled in the early years of the Iraq conflict by the Coalition
Provisional Authority, belonged to the Iraqi government, not U.S. taxpayers.

    Justice declined the whistle-blowers' request to intervene before
the case went to trial, plaintiffs' lawyers said. The government
eventually weighed in with a court brief on behalf of the
whistle-blowers when the case was appealed.

    Frederick M. Morgan Jr., a Cincinnati lawyer who represents
whistle-blowers, said that the numbers of lawyers willing to take on
cases involving defense contractors has dwindled, in part because of
Justice's slow decisions.

    One of Morgan's lawsuits, against contractors hired by the Navy to
build nuclear submarines and an Ohio company that manufactured submarine
valves, took five years to resolve.

    Another case, involving the manufacture of the F-22 fighter, was
filed in early 1999. It was late 2006 before Justice decided not to
intervene. The case is now in active litigation.

    "The impact of a 7 1/2 -year delay in the litigation of a case is
difficult to quantify but impossible to discount," Morgan said.

    Whistle-blower lawyers say other factors can contribute to long
delays, including the difficulty in investigating claims in war-torn
areas and complications that arise when military officials contend that
technology or other products at issue in the lawsuits are classified. In
addition, Justice lawyers who handle civil cases often cannot proceed
until authorities decide whether a case merits criminal prosecution, the
lawyers said.

    Even when older cases are pushed into the open, the passage of time
can present courtroom challenges.

    Last year, a D.C. jury awarded whistle-blower Richard Miller more
than $30 million, a figure that now-Chief Judge Royce C. Lamberth
tripled to $90 million. But in the dozen years since the suit was filed,
witnesses' memories of events had dimmed and the U.S. Agency for
International Development had tossed its investigative files.

    The judge blasted civil division lawyers for "doing virtually
nothing" to follow up for four years after Miller brought forward
allegations in 1995 about bid rigging on construction contracts in
Egypt. The delays meant "loss of evidence, fading memories,
disappearance of documents," he wrote.

    Justice spokesman Miller said that the civil case was stalled for
years because criminal proceedings in the matter took priority. He added
that the whistle-blower did not object to the government's repeated
entreaties for more time.

    Last week, Lamberth denied defense motions for a new trial. But the
verdict is likely to be appealed, according to lawyers who participated.

    "I have a feeling we're some way away from resolution," said Charles
S. Leeper, a lawyer for B.L. Harbert International, the main
construction company involved in the case.

http://www.truthout.org/article/whistle-blower-suits-languish-justice