Whistleblowers awarded $53.75 million in SmithKline qui tam case

False Claims Act case

April 8, 1998 --The six plaintiffs who filed three False Claims Act lawsuits against SmithKline Beecham Clinical Laboratories Inc. will share a total of $53.75 million as a result of a federal judge's ruling today.

The amount is the largest awarded so far in a whistleblower (qui tam) case under the False Claims Act.

SmithKline paid $325 million in February 1997 to settle the three qui tam lawsuits that charged the company had defrauded Medicare and other government health insurance programs through its billing practices. (See "SmithKline pays $325 million to settle whistleblower lawsuits involving Medicare fraud.") Under the False Claims Act, those who file lawsuits against companies that defraud the government are entitled to 15 percent to 30 percent of whatever the government recovers as a result of their cases.

Phillips & Cohen represented three of the plaintiffs who had jointly filed one of the false claims lawsuits against SmithKline. Their clients previously had settled the amount of their award with the Justice Department.

But the other plaintiffs had challenged the Justice Department's decision to award them less then 15 percent of the government's recovery. The decision of the federal judge in Philadelphia was a victory for those plaintiffs.

"We are pleased that the judge recognized how important whistleblowers are in stopping fraud against the government," said John R. Phillips of Phillips & Cohen. "When Congress strengthened the False Claims Act in 1986, it wanted to ensure that people who know about fraud would have an incentive to take the professional and personal risks involved in reporting it."

The Department of Justice had tried to cut the whistleblowers' award to $10 million. It argued that the bulk of the money recovered in the case was due to the government's ongoing investigation of medical laboratory billing practices nationwide, known as "Labscam."

The court, however, found that the whistleblowers' contributions to the SmithKline case were substantial and that the amount recovered by the government was increased significantly because of the information and assistance provided by the plaintiffs during the investigation.

"I am left with the impression that the attorneys in charge of the Labscam investigation . . . seek to take far more credit for the overall success of the proceedings than is rightly due," said U.S. District Judge Donald W. Van Artsdale in his ruling April 8.

Van Artsdale set the whistleblowers' share at 17 percent of the settlement, after subtracting amounts set aside for states' reimbursements and other claims. In his ruling, he added $42.3 million to the award that the government already had paid the whistleblowers.

The first false claims case against SmithKline was filed in 1993 by Robert Merena, a senior billing-systems analyst with the company. He was one of the plaintiffs who challenged the amount that the Justice Department wanted to award the whistleblowers.

Phillips & Cohen represented two former employees of a competitor of SmithKline's. The two men, along with a third party, filed a false claims lawsuit against the company in 1995. In their lawsuit, they brought to the government's attention SmithKline's practice of adding unnecessary tests to complete blood counts, or CBCs, and billing Medicare separately for them even when physicians had not ordered those tests. Their lawsuit resulted in the government recovering $12 million of the total settlement.

For more information about the case, see the following news stories:

  • "U.S. judge bolsters reward," Donna Shaw, The Philadelphia Inquirer, 4/9/98.
  • "Whistleblowers win $42.3 million," Tom Lowry, USA Today, 4/10/98.
  • "U.S. district judge says whistleblowers to get $42.3 million," The Wall Street Journal, 4/10/98.