Articles Posted in Whistleblower/Qui Tam

A lot of people lost money in the recent economic downturn. Stocks plummeted, 401K accounts shrank overnight, and for most people, there was nothing that could have been done to prevent it. In some instances, though, an investor’s loss was a direct result of negligence or fraud on the part of the company that was supposed to be protecting their money.

According to the Securities and Exchange Commission (S.E.C.) that is exactly what allegedly happened to investors who trusted their money to MassMutual Financial Group, an insurance company based in Springfield, Massachusetts. Bill Lloyd worked for MassMutual for 22 years and allegedly had a reputation for being a straight arrow. Unlike the stereotypical agent who is interested only in making money for himself, Lloyd truly cared about his customers. As a result, when he encountered a situation in which his customers were allegedly getting ripped off, Lloyd could not let it slide.

In 2007, when money was gushing into variable annuities, MassMutual added two income guarantees: Guaranteed Income Benefit Plus 6 and Guaranteed Income Benefit Plus 5. The idea behind these products was that they would guarantee that the annuity income stream would grow to a predetermined cap regardless of how the investment itself performed.

When the investors retired, they could take six percent (or five percent, depending on which product they bought) of the cap for as long as they wanted or until it ran out of money, and still be able to annuitize it at some point. In theory, the money would never run out, and that is how agents like Lloyd were allegedly told to sell the product to customers. Before long, investors had put $2.5 billion into these products.

In 2008 it allegedly became evident that the products did not work they way customers had been told they would work. As a result of the market’s fall, it was according to Lloyd all but certain that thousands of customers were going to run through their income stream within seven or eight years of withdrawing the money. Continue reading ›

In 2010, the Securities and Exchange Commission (SEC) enacted a law which encourages people in the know to “blow the whistle” on people or companies who are stealing from or cheating the government. The SEC rewards successful “whistleblowers” with up to 30% of sanctions collected by the agency.

Recently, an attorney has asked the agency to intervene in a legal battle between the attorney and his former employer. David Danon worked for Vanguard from 2008 to 2013, and according to Vanguard, sent company records to his home email address while he was employed by the company and “at the end of his employment”.

In May 2013, one month before leaving Vanguard, Danon filed an SEC whistleblower lawsuit against his employer and another lawsuit in New York state court. Danon alleges that Vanguard has been operating an illegal tax shelter for almost 40 years. According to the complaint, the company has avoided paying $1 billion in U.S. federal income taxes and at least $20 million in New York state taxes. The company allegedly accomplished this by providing services to the mutual funds it runs at prices that allow it to avoid federal and state income taxes.

Vanguard insists that the case is without merit and has said that it intends to defend itself in the courts. The company sent a letter to Danon after the filing of the lawsuit, saying that, “Vanguard intends to take all necessary and appropriate steps to protect its interests “. It also stated that Vanguard “reserves all of its rights to seek legal redress” if Danon fails to return the company’s documents immediately. Continue reading ›


Johnson & Johnson and its subsidiaries have agreed on Monday to pay over $2.2 billion to resolve criminal and civil allegations of promoting prescription drugs for uses not approved as safe and effective by the Food and Drug Administration – which was first brought to light by a Chicago-area whistle-blower.

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A wise philanthropist is a cautious philanthropist. Many people already know to check a few reputable websites before deciding whether or not to donate money to a particular organization. However, some charities are better than others at making sure that the majority of the funds they receive truly benefit the people and causes they are meant to help. If a charity fails to properly appropriate funds from the government, the repercussions can be particularly expensive.

A common cause for charity is cancer treatment and research. A recent whistleblower lawsuit has revealed that even the government must be mindful of who it donates money to. The lawsuit which involves allegations of misappropriation of funds for cancer research has been settled for $2.93 million. The defendant was Northwestern University and the funds provided by the government were allegedly misused by Dr. Charles Bennett. Bennett, worked for Northwestern University as a principal researcher in studies that sought to better understand rare diseases and to develop systems to better identify when cancer drugs have bad side effects. He reaped wide acclaim for his work in this research but, as he did so, he was also allegedly incurring high personal expenses and using cancer research funds to finance them.

Bennett and his wife allegedly took trips for pleasure and then billed the flight, hotel, and meal costs to the National Institutes for Health, claiming that it was all part of his cancer-fighting work. Bennett also allegedly submitted phony bills for his work from 2003 to 2010 while he was working on numerous grants that provided more than $8 million for research. Some of the travel allegedly occurred on a “near weekly basis, and in some cases incurred expenses that were highly excessive” according to the lawsuit. Moreover, Bennett allegedly used whatever grant money was left over at the end of funding periods to fund his salary.

The lawsuit was brought by Melissa Theis under seal as a whistleblower lawsuit in 2009. Theis began working as a temp at Northwestern’s Feinberg School of Medicine in November 2007 as a purchasing coordinator before she was hired full time by the university. Theis said she first suspected something when she noticed red flags in the invoices and reimbursement requests “almost immediately” after she began working there.

In September 2008, Theis says she discussed her concerns with her supervisor and an accounting services unit at the University. However, according to the lawsuit, “Northwestern refused to seriously address the issues she had brought.” Theis quit her position with the University in 2008 and filed her whistleblower lawsuit in 2009. After she filed her lawsuit, federal investigators from the U.S. Department of Health and Human Services, the FBI, the NIH, and the U.S. Attorney’s office conducted an investigation into Theis’s allegations.

The lawsuit alleged that the University did not have sufficient controls in place to detect or prevent inappropriate spending.

The University has not admitted to any wrongdoing as part of the settlement.
Although the University has agreed to settle with the government, there are still claims against Bennett and the head of the University’s Lurie Comprehensive Cancer Center, Dr. Steven Rosen, which have yet to be settled. The whistleblower lawsuit is a civil proceeding to obtain a refund of government monies allegedly misappropriated. The whistleblower receives a percentage of the recovery or settlement.

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Lance Armstrong caused an international sensation when he finally admitted to using performance enhancing drugs while competing in the Tour de France. Floyd Landis, Armstrong’s ex-teammate, who has also confessed to doping, filed a whistleblower lawsuit in Washington D.C. against Armstrong in 2010. The lawsuit alleges that Armstrong defrauded the American government, which sponsored Armstrong in his races. Now the U.S. Justice Department has joined the legal battle.

Landis filed his case under the False Claims Act which givens private citizens a financial incentive to file suit on the government’s behalf against individuals and entities who they know are cheating the government. Whistleblower cases are first filed “under seal” which means that they are not initially announced to the public. This gives the government an opportunity to investigate the allegations before deciding whether or not to join the case. The Justice Department has recently announced that it is intervening in the lawsuit against Armstrong and other named defendants. This has greatly increased Landis’s chances of success because the government normally only joins lawsuits that it thinks it can win.

Violators of the False Claims Act are liable for up to three times the damages plus an additional $5,500 to $11,000 for each false claim. U.S. Attorney Ronald C. Machen Jr. has said that Armstrong and his associates “took more than $30 millions from the U.S. Postal Service based on their contractual promise to play fair and abide by the rules.” The amount the government might be able to recover in a court of law amounts to between $90 million and $100 million. If they win, Landis, as the plaintiff who first filed the case, can collect up to one-third of that money.

According to media reports, Armstrong offered $5 million to settle the case, but the government wanted at least $10 million. News reports have also said that Armstrong wants immunity from criminal charges as part of his settlement with the U.S. Postal Service. The government does not appear to have offered that as part of the deal.

However, it is not uncommon for settlement negotiations to restart, even as the two teams are preparing for trial. Most civil cases are resolved before trial and the government’s involvement in the case will no doubt put pressure on the defendants to settle.

Armstrong’s attorneys have argued that the U.S. Postal Service made more money off of its sponsorship of Armstrong than it ever paid to Armstrong and his team. However, this is irrelevant to the matter of whether or not Armstrong broke the law. If Armstrong and his teammates received $30 million from the U.S. government by promising to follow the anti-doping rules and broke that promise, then they are liable for having broken their word, regardless of how much money the U.S. postal service gained. Machen’s lawsuit also alleges that the U.S. Postal Service continues to suffer by being associated with Armstrong and his team. The U.S. government can use this to show that they have suffered much more in damages than the initial $30 million paid to Armstrong and his team.

Armstrong is arguing that the U.S. Postal Service should have known that he was taking performance enhancing drugs because of the allegations at the time and an investigation conducted by French police. However, Armstrong, the teams lead rider, was vehemently denying the allegations all the time that he was under investigation.

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A kickback by any other name is still a kickback. Novartis Pharmaceuticals Corp. has already paid the price for allegedly giving kickbacks but it allegedly appears not to have learned its lesson yet. After having settled fraud charges based on kickbacks less than three years ago, Novartis is now facing another lawsuit from the government for allegedly giving kickbacks to pharmacies that transferred kidney transplant patients from competitors’ drugs to its own.

The civil health care fraud lawsuit was filed in the U.S. District Court in Manhattan and it seeks unspecified damages and civil penalties. According to the lawsuit, the kickback scheme goes back as far as 2005.

U.S. Attorney Preet Bharara said the company allegedly used the “lure of kickbacks disguised as rebates” to turn at least 20 pharmacies into a sales force for its own drug, Myfortic. According to the lawsuit, this illegal behavior cost the public tens of millions of dollars in drugs dispensed by pharmacists who had accepted Novartis’s kickbacks in exchange for selling the more expensive drugs.

Novartis’s system allegedly opposed the use of a cheaper, generic immunosuppressant drug. The lawsuit claims that the pharmaceutical company found that it was highly profitable to pay pharmacies kickbacks of up to as much as 10 or even 20 percent in exchange for switching patients to Myfortic.

According to the lawsuit, Novartis offered one Los Angeles pharmacist a “bonus” rebate of several hundred thousand dollars in order to get the pharmacist to “shoulder the burden” of switching between 700 and 1,000 transplant patients to Myfortic.

The arrangement violates the federal anti-kickback statute which prohibits the offer or payment of rebates and other inducements for the purchase of drugs or services covered by Medicare, Medicaid or other health program.

Novartis denies the claims and said in a statement that it will defend itself. It said that the investigation into the pharmaceutical company’s interactions with specialty pharmacies relating to the handling of Myfortic had been previously disclosed.

The company said, “As a leading healthcare company, Novartis strives to achieve high performance with high integrity. [Novartis Pharmaceuticals Corp.] is committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products.”

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In late October 2012, attorneys representing a tax whistleblower announced that their client had been awarded more than $38 million by the IRS for exposing a corporate tax avoidance scheme. This award comes less than two months after the IRS awarded $104 million to Bradley Birkenfeld for blowing the whistle on his former employer, UBS, and constitutes the second major award since the IRS whistleblower program was revised in 2006.

Of note is the fact that the whistleblower’s identify has not been revealed, consistent with IRS policy. It is reported that the target corporation did not even know that the IRS investigation was triggered by a tip from a whistleblower.

The identity of the target corporation was also not disclosed, though it is said to be a Fortune 500 company. Based on current IRS guidelines which provide that a whistleblower must be awarded between 15 and 30 percent of monies collected by the IRS, the target corporation presumably paid to the government between $126 million and $250 million in taxes and penalties.

This award should demonstrate to other corporate insiders that they can safely report their employer’s improper tax practices without their identity being disclosed. To maintain anonymity, a tax whistleblower’s information can be reported to the IRS through counsel.

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Super Lawyers named Chicago and Oak Brook business trial attorneys Peter Lubin Super Lawyers in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. Lubin Austermuehle’s Oak Brook and Chicago business trial lawyers have over a quarter of century of experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle emergency business law suits involving injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud.

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The Chicago trial attorneys at our firm have experience in complex business and fraud litigation. We work with some of the top whistle blower and qui tam lawyers in the country. The business fraud law firm of Lubin Austermuehle represents whistleblowers who are pursing qui tam lawsuits at any level of government, including claims under the Illinois Whistleblower Act, the Chicago whistleblower ordinance and the federal False Claims Act. Based in Chicago and Oak Brook, Ill., our Illinois and Naperville, and Chicago qui tam and False Claims Act lawyers stand ready to represent whistleblowers throughout the United States — regardless of whether prosecutors have decided to join the lawsuit. If you know about fraud against a government agency and you’re ready to speak up, you can learn more about whistleblower lawsuits at a free, confidential consultation. To set one up, please contact Lubin Austermuehle online or call 630-333-0333 today.

For the fiscal year which ended September 30, 2012 more than $9 billion in civil settlements and criminal fines was recovered by federal and state governments through False Claims Act cases. Moreover, twenty eight out of the thirty largest recoveries were from cases filed by whistleblowers. Not only does this represent a record amount, it more than doubles the previous record set in 2011 of $4 billion, and exceeds the total recoveries over the past three years.

This trend in recoveries is consistent with the increase in cases filed under the qui tam provisions of the False Claims Act over the last three years. In 2009, 433 qui tam cases were filed. In 2010, a record 573 cases were filed, and in 2011, an unprecedented 638 cases were filed by whistleblowers.

Legislative changes designed to encourage suits under the FCA account, at least in part, for the increase in the number of cases filed. In 2009, the Fraud Enforcement and Recovery Act (FERA) was passed, which made several favorable changes to FCA provisions. In 2010, the Patient Protection and Affordable Care Act (PPACA) contained provisions which made it easier for whistleblowers to pursue health care fraud cases. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 strengthened protections for whistleblowers. The increase in recoveries is probably also due to increased enforcement efforts by government entities, including the Justice Department, the SEC, and the IRS.

It is likely that the trend in recoveries will continue. There are already $3.5 billion in settlements reportedly in the pipeline in the new fiscal year.

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