by Author | Jun 2, 2015 | False Claims Act
A recent SUPREME COURT FALSE CLAIMS ACT DECISION was handed down on May 26, 2014. Ending a trend of anti-relator rulings, this time, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, the Court handed out a split decision. It favored defendants by ruling that the Wartime Suspension of Limitations Act (WSLA) does not apply to civil actions under the False Claims Act. But, it gave relators new hope by holding that the so-called “first to file” bar, 31 U.S.C. § 3730(b)(5), applies only when there is a case that is “pending” at the time a related case is filed. If the prior case is dismissed for whatever reason, the first to file bar is not applicable to a second filed case.
What are the implications of this Supreme Court False Claims Act Decision? With respect to time bar limitations, one has to continue to be vigilant about pursuing meritorious FCA cases as soon as possible and certainly within 6 years under the FCA’s statute of limitations period, 31 U.S.C. § 3731(b). As for the new interpretation of the first to file bar, relators and their counsel should be more willing to consider filling cases even when there is reason to believe that a similar case has already been filed because it might have been dismissed. Relators and counsel may also want to review former cases that were dismissed on first to file grounds to make sure the correct standard was applied. Even if the first to file bar does not preclude a second filed action, however, there may still be a number of procedural hurdles that a second in time relator will face. These include the public disclosure bar, the statute of limitations and principles of res judicata. An already complicated issue just became more so.
by Author | Apr 3, 2015 | Customs Fraud
Customs Fraud Cases present unique challenges to developing and presenting viable False Claims Act Qui Tam Cases.
“What types of Customs Fraud Cases are suitable for qui tam actions?” The three most common are
(1) falsifying country of origin certificates and labels or mismarking goods (either to evade/minimize import taxes, duties, tariffs and anti-dumping penalties or circumvent US import quotas), often done in conjunction with “transshipping” the goods first to a country that can import them into the United States on more favorable terms,
(2) falsely claiming that goods coming into the United States will not formally enter the commerce of the United States but instead will be transshipped in-bond to another country (for example, Mexico), and
(3) under-reporting the declared “total entry value” of imported goods on entry documents, such as the Entry Summary (CPB Form 7501) and Inward Manifest (CBP Form 7533), and presenting false commercial invoices in support of such false statements. “What types of goods are being imported unlawfully into the United States?” Common categories include clothing, apparel and textiles (often from China), fasteners, produce and seafood, grey market prescription drugs and cigarettes, and other consumer products. “Who are potential targets of Customs Fraud?” These would include: manufacturers, licensed customs brokers, shippers, warehouse operators, wholesalers, retailers and other importers.
US Customs Fraud
“What are the greatest challenges to successful Customs Fraud cases?” There are two main ones. First, there has to be a valid legal theory of liability. It needs to be couched in terms of a “reverse false claim” under the False Claims Act. This means there must be a pre-existing obligation owed to the United States at the time the false claim is presented or the false statement is made. Second, if one is going to include US-based defendants (such as brokers, shippers and warehousers, and most importantly, large wholesalers, retailers and other importers), it is imperative to get solid evidence that the targets’ key employees knew about the unlawful Customs Fraud practices while they were occurring. Often it takes an insider –or access to an insider– to get this kind of evidence.
by Author | Apr 1, 2015 | False Claims Act
Because of a series of mishaps, two deserving whistleblowers recently became victims of an FCA Settlement Gone Wrong. In Dora Figueroa, et al. v. United States of America, two co-relators tried to get relief in a negligence lawsuit alleging that the Government had not properly protected its ability to recover an agreed upon settlement amount that was to be paid over time. The underlying FCA case involved healthcare fraud. There, the defendant ended up defaulting on its obligation to the Government and declaring bankruptcy. Turned out the Government did not properly record a real property deed securing the FCA obligation (it was in the wrong person’s name). After the FCA defendant defaulted on the settlement agreement obligation and declared bankruptcy the Government recovered only part of the agreed upon settlement amount. As a result, the co-relators did not receive their expected relator’s share. In response, they brought the negligence action against the US for not properly securing the FCA debt. On March 27, 2015, United States District Judge Philip S. Gutierrez, in the Central District of California, decided the lawsuit against the relators on summary judgment. The reason: the broad release language in the relator’s share agreement amounted to a waiver.
How could this have been prevented? Relator’s counsel could have taken an active role in ensuring that the deed was properly recorded before signing the relator’s share agreement and/or relator’s counsel could have included language in the release provision saying it did not cover a subsequent action premised on the Government’s negligence in recovering the full settlement amount.
See: Dora Figueroa, et al. v. United States of America, CV 14-2255 PSG (MRWx), United States District Court, Central District Of California.
by Author | Feb 2, 2015 | False Claims Act, Qui Tam
What happens when Whistleblowers Violate The Seal in qui tam cases? Recently, two relators in Georgia found out the hard way: they were lucky to get away with paying a penalty of only $1.61 million for their indiscretions.
Frustrated by the Government’s slow investigation of their allegations, the relators contacted Fox News and shared confidential information with the news organization. Once the defendant found out that the relators had broken the seal order of the court, it sought to get the relators dismissed completely from the case. (Such results are rare but not unheard of in False Claims Act cases.). That would have cost them the entire $43,161,500 they were slated to receive for pursuing a successful non-intervention case against Wells Fargo for allegedly defrauding the Veterans’ Administration by overcharging on closing costs for residential mortgages for veterans.
The lesson here is a simple one: do not discuss your case with anyone other than your attorney because loose lips can cost you $ millions.
For more on this case see: United States ex rel. Bibby v. Wells Fargo Bank, N.A., 2015 U.S. Dist. LEXIS 636 (N.D. Ga. Jan. 5, 2015)
by Author | Jan 26, 2015 | False Claims Act, Qui Tam
“Is there Whistleblower Protection from Retaliation?” is a question I am frequently asked as a Qui Tam Attorney.
Tim McInnis Esq.
The answer is “yes” provided you can meet some basic requirements. Here are ten important questions that will help you and your whistleblower lawyer know if you might have a viable whistleblower retaliation case against a current or former employer.
1. Did your current or former employer (or someone you did work for) do something harmful to you at your job? (Were you: fired, suspended, cut in pay, demoted, not promoted, transferred, ostracized or harassed?)
2. Did at least one of these things happen within the last three years?
3. Prior to the first harmful event had you done at least one of the following: (1) Ask questions or look for evidence about possible fraudulent or unlawful conduct that involved financial or business transactions with an agency or department of the U.S. Government? (2) Tell or report to your employer you thought they were committing fraud or doing something illegal? (3) Refuse to go along with something you thought was improper or illegal or tell others not to do so? (4) Contact government authorities? (5) Threaten or actually start a lawsuit alleging your employer had committed fraud or acted unlawfully?
4. Did your employer know or suspect that you had done any of the things listed above before they took the first adverse action against you?
5. Will you be able to rebut your employer’s likely explanation that what they did to you was for legitimate business reasons? (Saying you were part of a RIF or downsizing, or that you were sanctioned for misconduct, incompetency or not getting along with others.)
6. Do you have witnesses or documents (for example emails) or recordings to corroborate your allegations?
7. Are you sure you didn’t sign anything that might prevent you from suing your employer? (For example: an arbitration agreement, employment agreement, severance agreement, litigation/prior lawsuit release or union contract.)
8. Did you suffer financially and/or in some other way because of what your employer did to you? Have you kept records documenting any losses or expenses or medical issues? And, have you tried to mitigate your losses (such as diligently looking for a new job)?
9. Does your current or former employer still exist and have the resources to pay a judgment? (For example, they are not in bankruptcy or dissolved/out of business.)
10. Are you willing to go through a potentially long and stressful process to get legal redress?
Note: This is limited to whistleblower protection under the federal False Claims Act. There are state and city whistleblower protection laws, as well as ones for specific industries, like transportation, banking and finance, healthcare, energy and environmental protection. Each has its own requirements.
