Wednesday, July 2, 2008

Qui Tam Delays

Doj The Washington Post has a story on serious delays in the Justice Department's review of qui tam actions--many of which are filed by whistle-blowing employees.  Apparently, two major factors are a lack of resources and an uptick in claims related to Iraq contracts, although some are alleging intentional foot-dragging by the DOJ:

More than 900 cases alleging that government contractors and drugmakers have defrauded taxpayers out of billions of dollars are languishing in a backlog that has built up over the past decade because the Justice Deparment cannot keep pace with the surge in charges brought by whistle-blowers, according to lawyers involved in the disputes.  The issue is drawing renewed interest among lawmakers and nonprofit groups because many of the cases involve the wars in Iraq and Afghanistan, rising health-care payouts, and privatization of government functions -- all of which offer rich new opportunities to swindle taxpayers.

Since 2001, 300 to 400 civil cases have been filed each year by employees charging that their companies defrauded the government. But under the cumbersome process that governs these cases, Justice Department lawyers must review them under seal, and whistle-blowers routinely wait 14 months or longer just to learn whether the department will get involved. The government rejects about three-quarters of the cases it receives, saying that the vast majority have little merit. Disputes can stay buried for years more while the government investigates the allegations. . . .

At issue in most of the cases is whether companies knowingly sold defective products or overcharged federal agencies for items sold at home or offered to U.S. troops overseas. Under the Civil War-era False Claims Act, workers who file lawsuits alleging such schemes cannot discuss them or even disclose their existence until Justice decides whether to step in.

By its own account, the 75-lawyer unit in Washington that reviews the sensitive lawsuits is overloaded and understaffed. Only about 100 cases a year are investigated by the team, which works out of the commercial litigation branch of Justice's civil division. . . .

Among the largest false-claims cases to date are a $650 million settlement earlier this year by drugmaker Merck in connection with an alleged failure to repay Medicaid rebates; a $515 million deal with Bristol-Myers Squibb to cover illegal drug pricing and marketing; and a $98 million agreement with software maker Oracle over pricing. . . .

Even bigger lawsuits containing potentially explosive allegations are waiting in the wings. The vast majority, more than 500 cases, involve the health-care and pharmaceutical industries and often involve Medicare and Medicaid funds. Only a few hints of the Iraq and Afghanistan disputes have erupted publicly. One is a suit filed by two former employees of Custer Battles, a defense contracting company in Fairfax. The workers accused the company of inflating expenses on a contract it won to replace the Iraqi currency. After a three-week trial in 2006, a jury found in favor of the plaintiffs and awarded them $10 million. But U.S. District Judge T.S. Ellis III later tossed out the case, ruling that the money at issue, controlled in the early years of the Iraq conflict by the Coalition Provisional Authority belonged to the Iraqi government, not U.S. taxpayers. Justice declined the whistle-blowers' request to intervene before the case went to trial, plaintiffs' lawyers said. The government eventually weighed in with a court brief on behalf of the whistle-blowers when the case was appealed.

The story describes several others cases and is well worth reading in full.  With the recent Supreme Court qui tam decision, this relatively hidden area of the law may be getting some of the attention that it deserves.

-JH

http://lawprofessors.typepad.com/laborprof_blog/2008/07/qui-tam-delays.html

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