False Claims Act Investigations + Defense Practice

Transcription

1 False Claims Act Investigations + Defense Practice 2015 Morrison & Foerster LLP All Rights Reserved mofo.com

2 WHAT IS IT? First passed by President Lincoln during the Civil War to penalize military suppliers for defrauding the Union Army, the False Claims Act (FCA) is now the civil weapon of choice used by the Department of Justice (DOJ) to combat suspected fraud on the United States. As states continue to enact their own false claims statutes approximately 30 states now have statutes modeled after the federal FCA state attorneys general are also aggressively pursuing potential FCA violations and coordinating their efforts to extract treble damages and civil penalties from defendants. WHY IT MATTERS The most recent statistics published by the DOJ confirm that the number of FCA suits and the size of monetary recoveries under the FCA are on a meteoric rise. In 2014 alone, the DOJ recovered $5.7 billion in FCA settlements and judgments. This total exceeds the DOJ s previous annual record, set in 2012, by more than $700 million also marks the first year in recent history in which the majority of recoveries were from cases involving the financial services sector: the DOJ reports that it recovered more than $3.1 billion from financial services of institutions related to alleged housing and mortgage fraud. While recoveries related to alleged health care fraud remained substantial exceeding $2.3 billion 2014 is the first year since 1998 in which recoveries related to health care fraud have not made up the majority of the DOJ s total reported recovery. The number of qui tam cases (i.e., FCA suits initiated by whistleblowers) filed in 2014 remained high, at 713 a total that has only been exceeded by the number qui tam cases filed in 2013, which totaled 754. This continued trend is unsurprising, given that whistleblowers stand to obtain up to 30 percent of any monetary recovery, and given the sheer size of whistleblower awards in recent years, which total more than $2.2 billion since Recent statutory amendments have also expanded liability under the FCA and made it more difficult for defendants to get cases dismissed at the outset of the proceeding. When the Fraud Enforcement and Recovery Act was signed into law in May 2009, the range of parties potentially liable under the FCA was broadened, available defenses were narrowed, and the government s most successful tool for fighting alleged fraud was otherwise strengthened. The passage of the Affordable Care Act in 2010 provided additional incentives for whistleblowers to file suit and, for the first time, expressly permitted certain FCA suits in the health care industry to proceed based on predicate violations of the federal Anti-Kickback Statute. FCA Investigations + Defense 1

3 WHO WE ARE Led by a cross-office and cross-practice group of attorneys composed of former federal prosecutors and seasoned defense attorneys from our award-winning Government Enforcement, Government Contracts, and White-Collar Groups we have substantial experience handling FCA investigations and litigation, whether initiated by the government or by whistleblowers. We have advised a wide range of clients, from privately held companies to Fortune 50 global brands. Our clients are companies doing business in numerous industry sectors, including pharmaceuticals, medical devices, aerospace, biotechnology, defense, information technology, telecommunications, health care, consumer products and services, higher education, and transportation. We also routinely represent individual defendants when separate counsel becomes necessary. WHAT WE DO Our objective is to resolve FCA matters at an early stage of the proceeding, and in a cost-effective manner, by convincing the government to decline intervention in the underlying qui tam action or to forgo its investigation altogether. When litigation is necessary, we have a history of success at every stage of an FCA proceeding, including obtaining dismissals under FRCP 9(b) and the FCA s unique public disclosure and first-to-file bars, and winning on summary judgment, at trial, or on appeal. We also advise clients on the many legal issues and proceedings that often accompany FCA matters, including white-collar defense, suspension and debarment proceedings, civil and criminal subpoenas, employment and retaliation claims, and the shareholder derivative suits that are sometimes filed on the heels of an FCA settlement. In FCA matters arising in the health care and life sciences industries, we have negotiated nationwide FCA settlements with the National Association of Medicaid Fraud Control Units (NAMFCU) and successfully convinced the Office of Inspector General to the U.S. Department of Health and Human Services (HHS-OIG) to forgo the imposition of onerous Corporate Integrity Agreements. Clients also call upon us to assist them with due diligence in connection with mergers and acquisitions, and establishing or revamping their compliance programs. WHERE WE DO IT We have assisted clients with federal FCA investigations and qui tam actions arising in federal districts throughout the country, working closely with AUSAs from the U.S. Attorney s Office in each district and their colleagues at Main Justice in We also have experience handling matters arising under state false claims statutes, and have represented clients in connection with investigations and litigation concerning alleged violations of state false claims statutes in the following states: Arizona, California, Florida, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, New York, Oklahoma, South Carolina, Texas, Utah, Virginia, and Wisconsin. REPRESENTATIVE MATTERS In addition to a slew of nonpublic FCA-related investigations, the following is a representative sample of our FCA litigation work: We are representing a group purchasing organization in two related qui tam actions alleging violations of the federal FCA based on predicate violations of the Anti-Kickback Statute. FCA Investigations + Defense 2

4 We won a dismissal in the District of Massachusetts for a major pharmaceutical company in a federal FCA case alleging misrepresentations that caused states to pay, and the federal government to reimburse, claims for products that were not covered under the Medicaid program. We are representing a national credit-rating agency in a suit filed by the California attorney general under the California FCA, seeking to recover investment losses allegedly sustained by California s two public pension funds CalPERS and CalSTRS during the financial crisis. This unprecedented lawsuit marks the first time that any governmental entity has sought to recover investment losses under a false claims statute. We represented McKesson Corporation in a federal qui tam action alleging that McKesson defrauded the Medicaid program by conspiring with, or otherwise causing, a drug price publishing company to artificially inflate the average wholesale price (AWP) of more than 400 brand-name pharmaceuticals. After negotiating a settlement with the DOJ and NAMFCU, we litigated over a dozen state FCA suits filed by opt-out states in federal and state courts across the country. We are representing a major accounting firm in a qui tam action alleging that our client conspired with, or otherwise caused, its audit client to falsely claim billions of dollars in federal student loan money from the U.S. Department of Education. We first secured a dismissal with prejudice of the whistleblowers claims under the federal FCA s public disclosure bar, and then obtained a $500,000 attorneys fee and sanctions award against the whistleblowers counsel. This case is now on appeal to the Ninth Circuit. After completing six days of a 15-day jury trial, we obtained a very favorable settlement in a federal FCA case brought by two whistleblowers against our client and its principal shareholder, alleging fraud related to the sale of the Headwaters Forest to the United States government. We represented a large dental health maintenance organization (HMO) in connection with a qui tam action filed under the federal FCA and the California FCA, alleging that our client performed unnecessary medical procedures in an attempt to recoup unwarranted reimbursements from Medicare and the California Medicaid program. After providing comprehensive presentations to the government with limited document productions and no sworn testimony from any witnesses the DOJ and the California attorney general declined to intervene in the underlying qui tam action, and the whistleblower s claims were dismissed. We represented an Ivy League university in a qui tam action brought by a former medical school professor who claimed that the university and its affiliated hospital improperly billed Medicare for radiology services. A federal court in Connecticut dismissed the FCA claims with prejudice pursuant to the public disclosure bar. We represented a Fortune 10 company in a unique California FCA case, predicated on alleged pharmaceutical pricing fraud, filed by the city attorney of San Francisco on behalf of the State of California s Medicaid program. After we moved for summary judgment challenging the city attorney s standing to assert a claim on behalf of California, the city attorney voluntarily dismissed its claim on behalf of the State. We represented a Fortune 50 company in connection with an investigation by the DOJ under the federal FCA regarding alleged overcharges for shipping services. After convincing the DOJ to decline intervention, the court granted our motion to dismiss the relator s claims. This case is now on appeal to the Ninth Circuit. We represented a major steel producer in a qui tam action and parallel criminal investigation, along with related indemnification claims, in the Middle District of Louisiana. The government and the relator initially sought $750 million in damages and penalties, but we settled the entire matter for $15 million, most of which was ultimately recovered for the client from indemnitors, with no criminal charges filed. FCA Investigations + Defense 3

5 We represented a prominent New York investment bank in a California FCA suit filed by the State of California and the California Office of Statewide Health Planning and Development (OSHPD). This complex case centered on allegations that representatives of the investment bank made fraudulent statements and omissions that induced OSHPD to insure bonds that secured financing for the acquisition of several Los Angeles hospitals at an excessive purchase price. The claimants sought more than $130 million in damages. After more than four years of litigation, the matter was settled on terms favorable to our client. We represented a national drug wholesaler in a qui tam suit alleging violations of the federal FCA based on predicate violations of the Anti-Kickback Statute. After we moved to dismiss the case, the whistleblower voluntarily dismissed our client as a defendant without filing an opposing motion. We successfully defended two predecessor corporate entities of multinational telecommunications companies in a federal FCA qui tam action filed in the U.S. District Court for the District of Columbia. The claimant sought more than $50 million in damages and named approximately 50 defendants. Our clients were dismissed from the action as a result of a successful motion to dismiss. We represented an HMO in litigation under the California FCA arising from a business license tax dispute commenced by the City of Modesto. After conducting an audit, the City determined that the HMO owed additional taxes and penalties exceeding $1 million and brought an action seeking an additional $6 million in damages under the Municipal Code and the California FCA. We got all of the claims dismissed. We have represented numerous individual defendants in qui tam cases. For example, we obtained dismissals for several individual defendants in the Columbia/HCA MDL proceeding. We also represented numerous employees of a major aerospace company, first in connection with a grand jury investigation, and then in connection with subsequent civil litigation against the company in the Southern District of Ohio. FOR MORE INFORMATION ABOUT MORRISON & FOERSTER S FCA INVESTIGATIONS + DEFENSE PRACTICE, PLEASE CONTACT: Demme Doufekias (202) DDoufekias@mofo.com Steven M. Kaufmann D.C.: (202) Denver: (303) SKaufmann@mofo.com James M. Koukios (202) jkoukios@mofo.com J. Alexander Lawrence New York (212) ALawrence@mofo.com Dan Marmalefsky Los Angeles (213) DMarmalefsky@mofo.com Don Rushing San Diego (858) DRushing@mofo.com Stacey M. Sprenkel San Francisco (415) SSprenkel@mofo.com Rick Vacura Northern Virginia (703) RVacura@mofo.com Bradley D. Wine Northern Virginia (703) BWine@mofo.com FCA Investigations + Defense 4