1. Why False Claims Matter
Andrew Sparks
Assistant United States Attorney
Eastern District of Kentucky

2. Any views expressed herein are those of the speaker, and are not to be deemed official positions of the Department of Justice.

3. The False Claims Act 31 U.S.C. § 3729-33
The False Claims Act is the primary civil weapon for combating fraud against the United States
The Act is intended to reach all fraudulent attempts to cause the federal Government to pay money
The Act allows the Government to recover the loss of the fraud and impose monetary penalties

4. History of the FCA
Enacted in 1863 as a result of fraud during the Civil War
Originally known as “Lincoln’s Law” or the “Informer’s Act”
Adopted following a series of Congressional Hearings into fraud at the War Department

5. The Union Defrauded
“For sugar it [the government] often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the refuse of shops and foreign armories.”
29 Harper’s Monthly Magazine 228 (1864)

6. Amendments The Act was amended in 1943 1986 2009
The 2009 amendments expand the scope of the False Claims Act and make it easier to pursue cases

7. False Claims Act Key Features
Redresses fraud involving federally funded programs
Allows for treble damages
Additional penalties for each false claim or statement
Joint and several liability for defendants

8. False Claim Act Recoveries
Between the 1986 and 2009 over $23 billion recovered
Over $16 billion in HHS cases
$3.9 billion in DOD cases
$3 billion in other cases

9. What is a false claim?
A claim is any request or demand for money that is
Presented to an officer, employee, or agent of the United States, or

10. is made to a contractor, grantee, or other recipient, if the money is spent on the Government’s behalf or advances a Government program or interest if:
The Government provides any of the funding or
The Government reimburses the recipient of the claim

11. The Presentation Requirement
The new amendment imposes liability on any person who “knowingly presents or causes to be presented a false claim for payment” to
An officer, employee, or agent of the United States
A recipient of federal funds, if the requested funds were to be used on the Government’s behalf or to advance a Government program

12. “Knowingly”

13. “Knowingly” The terms "knowing" and "knowingly"--
(A) means that a person, with respect to information--
(i) has actual knowledge of the information;
(ii) acts in deliberate, ignorance of the truth or falsity of the information; or
(iii) acts in reckless disregard of the truth or falsity of the information; and
(B) require no proof of specific intent to defraud

14. Factors Relevant to “Knowledge”
Is the standard clear?
The defendant’s own words
The defendant’s conduct
Has there been previous education by government?
Has the defendant been warned by knowledgeable people (such as staff)
Has the defendant attended training sessions?
not using x-rays
Check aim and retest
Line 7 of deposition
Staff: Leona Helmsley: “only the little people pay taxes”

15. Other Factors Relevant to “Knowledge”
Comparison to Peers
Magnitude of alleged fraud
“Compliance” Plans
Holmes chart

16. Claim Grant documents Loan applications Direct request for payment
Invoices
Progress payments
Health care claims

17. Some Examples of Claims
A doctor bills Medicare for medical services not rendered
A doctor bills Medicaid for medical services not rendered
A defense contractor provides substandard weapons to the military
A defense contractor provides substandard weapons to the national guard if federal dollars were used
A road contractor defrauds the government on a federal highway project
A road contractor defrauds the government on a state highway project that receives federal funds

18. Additional False Claims
Shortchanging the US on the amount of money or property to be delivered to the government
Knowingly buying property from an officer of the Government who cannot legally sell the property
Knowingly concealing or avoiding an obligation to pay the Government
“Reverse False Claim”

19. Reverse False Claims Reverse False Claim examples:
A doctor is paid twice for the same service. When she realizes the Government’s error, she decides to keep the money.
A contractor mistakenly bills the Government for a more expensive product than was delivered. Upon discovery, the contractor keeps the overpayment.

20. Who is the “Government”?
Federal agencies
Entities dealing with federal money
Claims made to government contractors
Includes subcontractors
Government insured loans

21. What are Government claims?
Claims made to states or grantees receiving federal money
DOT funding to states
Medicaid
Stimulus money
Grants to local governments
Amtrak

22. Who is subject to suit? Individuals Corporations
Municipal corporations
Not the Federal Government
Not state entities

23. Scienter
The FCA does not require proof of any specific intent to defraud.
Rather, bases liability on acting “knowingly”:
- has actual knowledge of the information
- acts in deliberate ignorance of the truth or falsity of the information; or
- acts in reckless disregard of the truth or falsity of the information

24. Falsity Express By omission Implicit
Regarding the quality of goods provided
Regarding the process used to produce them
Regarding the contract formation
Regarding compliance with laws and regulations

25. Damages No actual damages required – can seek only penalties
Treble damages
Penalties
$5,000 - $10,000 per false claim
Increased to $5,500-$11,000

26. Calculation of Damages
Many different ways to calculate
Can range from difference between what the Government paid and what the product or service was actually worth
Could be a complete return of the payment

27. Statute of Limitations
Six years from the date of payment of the claims, or
Three years from the date of discovery by an official with authority to take action
But never more than 10 years after the submission of the claim

28. Do I have a false claim?
Key: look for federal money. If there is fraud and federal money is involved, directly or indirectly, you likely have a false claim.

29. Who do I tell? Your local US Attorney’s office
Ask for the Affirmative Civil Enforcement attorney

30. Whistleblower Provisions (“Qui tam”)
“A person may bring a civil action for a violation of section 3729 for the person and for the United States Government.”
Procedure: File complaint under seal; disclose all material evidence to government; government investigates, decides whether to intervene
Relator’s Share (15-25% if government intervenes; 25-30% if government does not)

31. Whistleblower Provisions
Limitations on Who Can Be a “Relator” -- “original source”
PPACA
Modifies definition of “original source”
Eliminates “based upon”
Removes jurisdictional bar

32. United States of America, ex rel. Robert A. Liter vs. Pfizer, Inc.
Eastern District of Kentucky

33. Last month, Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. agreed to pay $2.3 billion to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products. This is the largest health care fraud settlement in the history of the Department of Justice, the largest criminal fine of any kind imposed in the U.S., and the largest ever civil fraud settlement against a pharmaceutical company.
Tony West
Assistant Attorney General

34. Off-Label Marketing
Under the provisions of the Food, Drug and Cosmetic Act, a company must specify the intended uses of a product in its new drug application to the FDA.  Once approved, the drug may not be marketed or promoted for any use not specified in the application and approved by the FDA. 

35. National Case 10 Relators 3 Districts
7 Cases in the District of Massachussetts
1 Case in the Eastern District of Pennsylvania
1 Case in the Eastern District of Kentucky

36. Drugs Involved in the Scheme
Bextra
Geodon
Zyvox
Lyrica

37. Breakdown of Civil Settlement
$1 Billion Collectively to Medicaid Participating States
$502,524,316 for Bextra
$301,462,065 for Geoden
$97,945,019 for Zyvox
$48,223,886 for Lyrica
$49,844,714 for Kickbacks

38. Criminal Penalties $1.3 Billion
$1.195 Billion Criminal Fine
$105 Million Forfeited

39. Lyrica (Pregablin) Approved To Treat
Pain from damaged nerves that happens with diabetes
Pain from damaged nerves that follows healing of shingles
Partial seizures, when taken with other medications to treat seizures
Fibromyalgia

40. Among other uses, sales staff were instructed to promote Lyrica to treat the following:
Bipolar Disorder
Anxiety Disorder
Multiple Sclerosis
Migraine Headache

41. Statements Made by Sales Reps
Best medication for pain and inflamation
Best option for neuropathic pain patients
Less costly and more effective than Gabapentin
Twice the efficacy with safety and tolerability than Neurontin
Better than any agent for diabetic and post therpetic neuralgia

42. Calculating the Damages
Two types of damages: 1. Off-label promotion 2. Switching prescriptions to Lyrica

43. The Cost of Doing Business?
Pfizer – 2004 – Neurontin Payment: $430 million $190 million civil $240 million criminal

44. Pfizer (Pharmacia & Upjohn)
2007 – gentropin
Payment: $19.68 million

45. Pfizer – 2002
Liquitor
Payment: $49 million

46. Bristol-Meyers Squib – 2007
Abilfy
Payment: $515 million

47. Purdue-Pharma – 2007
Oxycontin
Payment: $634 million

48. Schering-Plough – 2006
Temodar and Intron A
Payment: $435 million

49. Cephalon – 2008
Actiq, Gibitril, and Provigil
Payment: $425 million

50. Why False Claims Matter
Andrew Sparks
Assistant United States Attorney
Eastern District of Kentucky