WASHINGTON, DC, Jan. 31, 2012 - A whistleblower law passed 25 years ago to little fanfare has helped the government recover more than $30 billion and become the government's most successful weapon in the fight against Medicare fraud, defense contractor fraud and other types of fraud against the government.
The Department of Justice is commemorating the 25th anniversary of the amended False Claims Act by hosting an event today that will feature some of the key players in the law's passage and its success, including U.S. Rep. Howard Berman (D-CA), the House sponsor of the 1986 law; Sen. Patrick Leahy (D-VT), chairman of the U.S. Senate Judiciary Committee; and attorney John R. Phillips, a founding partner of Phillips & Cohen LLP, the nation's most successful law firm representing whistleblowers.
"The False Claims Act is a unique statute that has become the go-to law to stop corporations and others from cheating Medicare and other government programs," said attorney Phillips, who worked closely with Congress to secure passage of the amended False Claims Act in 1986. "As the success of the law shows, taxpayers benefit from the public-private partnership between the government and whistleblowers and their lawyers in the fight against fraud."
Phillips filed the first qui tam lawsuit under the amended False Claims Act on April 29, 1987, six months after the law was enacted. The lawsuit, against a doctor and a medical practice for Medicare fraud, settled for $585,000. Since that time, Phillips & Cohen's cases have recovered more than $7 billion in civil settlements and related criminal fines for government, including a record-setting case against pharmaceutical giant Pfizer involving the illegal marketing of the painkiller Bextra. That case settled for $1.8 billion, including the largest criminal fine ever levied.
The amended False Claims Act empowers whistleblowers in several ways, such as allowing whistleblowers to file civil cases (known as "qui tam" lawsuits) against companies and individuals who are defrauding the government and recover damages on the government's behalf. The law sets whistleblower rewards of 15 percent to 25 percent of the amount recovered if the government joins the case and a limit of 30 percent if whistleblowers pursue cases on their own.
Keeping the law alive has been challenging, said Erika A. Kelton, a Washington, DC, attorney with Phillips & Cohen.
"Corporations have tried many different ways to kill the law, including lobbying Congress and challenging it in court, with two battles that went all the way to the Supreme Court," attorney Kelton noted. "But thanks to staunch support for the law in Congress - particularly Sens. Chuck Grassley and Leahy and Congressman Berman - and the work of government attorneys and whistleblower lawyers, the False Claims Act has remained essentially intact."
The False Claims Act has served as a model for whistleblower programs at the Internal Revenue Service, the Securities Exchange Commission and the Commodity Futures Trading Commission and for more than two dozen states.
"At a time when Congress is bitterly divided along party lines, it's important to note that the False Claims Act passed as a result of a bipartisan effort headed by Republican Sen. Chuck Grassley and Democratic Congressman Howard Berman, and was signed into law by Ronald Reagan, a San Francisco attorney with Phillips & Cohen. "Stopping fraud shouldn't be a partisan issue."