Catherine Short speaks with Shauna Itri, Partner at Seeger Weiss LLP on the topic of “Fraud, Healthcare, COVID-19 and the False Claims Act.” A whistleblower or qui tam action can provide financial rewards to individuals who have information that a company/individual has committed fraud. The primary statutes under which this relief may be sought are the federal and state False Claims Acts (“FCAs”). In addition to the FCAs, there are other statutes which apply to tax fraud, securities fraud, and in California, fraud on private insurance companies. This episode will provide an overview of the False Claims Acts, the knowledge and skills to be able to recognize a potential whistleblower case, and understand the unique procedures utilized in filing whistleblower cases/tips. We will also delve into recent trends in cases brought (or that could be brought) under the False Claims Act including cases involving mined data and potential fraud related to COVID-19.
Welcome and let’s 1st Talk Compliance. I’m Catherine Short Partnership Marketing Manager at First Healthcare Compliance. Thanks for tuning in. This show is brought to you by First Healthcare Compliance as part of our commitment to provide high quality, complimentary educational resources. We help create confidence among compliance professionals throughout the United States. Please show your support by taking a moment to provide a review on Google, Facebook or iTunes. You can follow us on Instagram, Twitter, or subscribe to our YouTube channel.
On today’s episode, we are speaking with Shauna Itri, Partner at Seeger Weiss LLP, on the topic of fraud, health care COVID-19 and the False Claims Act. A whistleblower or key term action can provide financial rewards to individuals who have information that a company or individual has committed fraud. The primary statutes under which this relief may be sought are the federal and state False Claims Act or FCS. In addition to the FCS there are other statutes which apply to tax fraud, securities fraud, and in California, fraud on private insurance companies. This episode will provide an overview of the False Claims Act the knowledge and skills to be able to recognize a potential whistleblower case and understand the unique procedures utilized in filing whistleblower cases and tips. We will also delve into recent trends in cases brought or that could be brought under the False Claims Act including cases involving mind data and potential fraud related to COVID 19.
Before we begin, I would like to mention at first healthcare compliance we strive to serve as a trusted resource for compliance professionals and every month we celebrate their hard work and dedication with our compliance super ninja recognition. For this episode, we’re spotlighting Super Ninja Jessica Berg, Business Manager at Wayne Radiologists, who says that she enjoys most about working with Wayne Radiologists “is that I get to be involved in all aspects of the daily operations from financials and human resources to the daily IT and clinical operations. This has given me the opportunity to learn various skill sets and develop close relationships with all the employees and physicians within the organization”. Congratulations, Jessica, our team is honored to have the privilege of working with you. So hello, Shauna, thank you so much for joining me today on 1st Talk Compliance.
Shauna Itri: 2:38
Hi, Catherine. Thank you for having me and thank you to first healthcare compliance as well.
Catherine Short: 2:44
Thank you. So why are there not so many successful False Claims Act cases where the government has not intervened?
Shauna Itri: 2:54
Well, just to give some background, I think 15%, generally speaking, of cases that are brought by whistleblowers are intervened in by the government and most of those cases are settled. Out of 100 cases, I think 15 of those will be successful, it will intervene, and they’ll be successful about 85 — I think there’s a two part answer to this question. And the first part is, why are those 15 cases most likely to be successful and settle? and the second part is, of those other 85 cases why are those cases most likely not to be successful? The first reason for the first question is, because 15 cases — I think we have to remember the power of the government. The government has a lot of resources behind it, and mainly they have exclusion power. When I mean exclusion powers, they have the power to tell a company, if you continue to do this, if you don’t settle this case, we’re going to exclude you from seeking and obtaining reimbursement from Medicare and Medicaid. For a lot of healthcare companies, that’s a big deal, because a lot of money that they — a lot of patients that they treat are Medicare and Medicaid beneficiaries and that basically means hey, you can’t treat these beneficiaries and a large part of that company’s income is then gone. So, there’s a lot of incentives for companies to settle cases when the exclusion power is on display. And not only that, out of those 100 cases, the government has resources, but they also don’t have unlimited resources, so they pick very carefully which cases they want to bring. Those cases are cases that have a clear theory of liability, those cases have a lot of documentary support, a lot of witnesses to support. So those cases tend to be very, very good cases.
Now for the second part about what happens with those 85 cases. They’re very complex, and they cost a lot of money to litigate. When the government declines, they usually give a reason why they’re declining. Sometimes it could be, hey, we don’t have the resources to pursue this. Sometimes it could be, hey, we interviewed witnesses, they didn’t support the allegations of the complaint, or we talked to our agency, and they don’t really support this complaint or this case. In those cases, the whistleblower attorney is not going to pursue it. In some cases, maybe the government doesn’t pursue it because the company they’re suing isn’t big enough or they’re not solvent. Depending on the reason why the government is declining, a lot of those cases are not continued. Also, even if a case is good, even if a case there’s liability and there’s great facts, and the government says, hey, this cases here, we just don’t have the resources, it takes a lot of resources for private attorney to bring those cases near, they’re going to have to pay for the entire discovery, the entire litigation. So, without the government’s backing, an attorney might not want to pursue it, and maybe it was or can’t afford to pay the attorney’s fees. There’s a lot of reasons why those 85 cases will not be brought there. Some of those cases, I’d say about 10 of those cases, are brought and they are litigated and a lot of those cases are successful. But for the most part, the cases that the government brings us 15% of the cases and they intervene, those cases are more likely to be successful, because they’re the cream of the crop, and there’s the government exclusion power.
Catherine Short: 6:24
Okay. In 2020, so much government money was pumped into the economy through COVID relief funds. Why are there less recoveries under the False Claims Act then from 2020?
Shauna Itri: 6:38
Yeah, if you look at the stats, DOJ post stats every year online, if you look at the stats, there has been a definite decline in successful False Claims Act cases from 2019 to 2020. I think a part of that is because everything slowed down. I know in March, for a period of three months, the whole economy was shut down. The courts were shut down the courts, attorneys’ offices are shut down. I think we have learned to work remotely and been quite successful doing it, but because of that stall, cases were all put on hold, the government was having problems doing investigations, because at the time, it was really unclear about how the COVID-19 virus spread and in person communications were definitely not encouraged. Everything slowed down, government investigations slowed down, therefore, any sort of litigation slowed down. I think that was a big reason why you’ll see a lower amount of cases from 2019 to 2020 being settled or recoveries being gained.
I also think, the reason why we haven’t seen a lot of recovery, despite the fact that COVID-19 money has been pumped into the economy is because it’s in the future. National crisis, unfortunately fraud surrounds national crisis. It takes some time for fraudulent schemes to develop, number one, it takes some time for the government to pump the money into the economy, it takes some time for those fraudulent schemes to be uncovered and once the case is filed, the False Claims Act filed, it’s under seal, so we don’t hear a lot about it. So, despite the fact that so much money was pumped into the economy in 2020, it’s going to be a little bit of a delay, fraud delay, and it’s going to take some time. I don’t think we’ll really see an increase due to COVID 19 funding until 2022 and beyond, just because of the reasons I said. It just takes time.
Catherine Short: 8:37
So you think it will be coming kind of a rev up back but it’s just going to take time for us to see?
Shauna Itri: 8:43
I do Catherine. Trillions of dollars have been pumped into the economy and if you see it, if you look at statistically, I mean, the False Claims Act was enacted in 1863 during the Civil War, when there was a national crisis. The Union army was getting defrauded by third parties. And then you’ll see every time there’s a natural disaster, the government pumps money to recover from the national disaster and two years later, you’ll see a bunch of fraud related to that money that was pumped into the economy. The 2008 financial crisis, the TARP funds, money was pumped in. You didn’t see a lot of TARP fraud in 2008 but you sure did in 2010. The money is continuing to get pumped into the economy for these COVID-19 relief funds. You’ll see the fraud start to develop, the fraud start to get uncovered and then a few years, you’ll see the whistleblower cases come forward.
Catherine Short: 9:34
I think you’re right. So, there’s another question I have here, can you file a false claims act anonymously?
Shauna Itri: 9:42
I get a lot of requests from clients to file anonymously because when you file a case there are some risks involved and there’s a potential for someone to get blackballed. You don’t want to be known as a whistleblower, especially a whistleblower with an unsuccessful case and there’s no guarantee your case is going to be successful no matter how good it is. So whistleblowers would prefer to remain anonymous and in fact, the SEC whistleblower statute allows whistleblowers to remain anonymous, but it’s not an option really, for the False Claims Act. I have seen people try to get around it by filing John Doe complaints, and I have done it myself. There has been a recent DOJ policy to, even if the case is declined and in fact going forward to, unseal the name of the whistleblower so that the defendant has the right to know who they’re being sued, on public policy grounds. There also have been attorneys that have been successful, forming an LLC and having the LLC being the whistleblower, but there’s ultimately a possibility that the members of the LLC will be disclosed in discovery. So, while I guess technically it’s possible, there’s a desire, there’s some attorneys working to make it happen, I never promise a client that they can remain anonymous, I just never do because anything really could happen, and their identity can get disclosed.
Catherine Short: 11:01
Okay, what are counterclaims a company can file against a whistleblower who brings a False Claims Act case?
Shauna Itri: 11:10
There are several counterclaims and they’re usually combated, and I would say unsuccessful, but the threat of a counterclaim is still there. And some of the counterclaims are, hey, this person stole documents and therefore violated confidentiality, this person stole documents and violated HIPAA, and PHI (Protected Health Information) was subsequently disclosed and violated trade secrets. There’s a lot of campaigns that can and have been brought. Now, these are litigated. What the whistleblower attorney would say is that there’s an exclusion or exemption for fraud. Typically, counterclaims are unsuccessful. I know, one counterclaim that has been successful and that’s a case out of New Jersey where a client brought a whistleblower case. In the ordinary course of her business, she came across these the file, Redweld of documents, and she brought the whole Redweld. She got sued for a counterclaim, for taking documents that she wasn’t entitled to, and the court ended up granting the counterclaim and saying she brought a whole Redweld of documents when all she needed was a manila folder full of documents and those were the ones that supported her claim and by bringing the whole Redweld she didn’t need those documents, and so therefore, she stole documents. But generally speaking, I always advise clients, if they come across documents in the ordinary course of business, they’re not breaking into file cabinets, they’re not accessing databases that they don’t have access to normally, if the file comes across their desk, they take a picture of it, they take a copy of it, and the defendant sues on a counterclaim, that document specifically supports the fraud that the whistleblower’s alleging, a counterclaim against that whistleblower for taking that document will likely not be successful because there’s an exemption to disclose fraud to the government.
Catherine Short: 13:08
Okay, if you’re just tuning in, you’re listening to 1st Talk Compliance brought to you by First Healthcare Compliance as part of our commitment to provide high quality complimentary educational resources. We help create confidence among compliance professionals throughout the United States. My guest today is Shauna Itri, partner at Seeger Weiss LLP, on the topic of fraud, health care, COVID-19 and the False Claims Act. Please show your support by taking a few minutes to provide a review of first healthcare compliance on Google or Facebook. You can also follow us on Instagram, Twitter, and subscribe to our YouTube channel.
So Shauna in the challenges of data mining False Claims Act cases based on the public disclosure bar, what is the whistleblowers response to the data being determined news media?
Shauna Itri 14:06
That’s a complex question and I’m going to break it down a little bit and just give you a little bit of background. Under the False Claims Act, there’s a bar to recovery, if the information has been publicly disclosed. This was put into place because during World Two, I’m going to bring it way back here, there was amendments to the False Claims Act, because what was happening was people are reading newspapers, articles, getting information in newspaper articles, and then using that information and filing a False Claims Act case in order to get a recovery, and Congress wanted to eliminate that. So, they invented the public disclosure Bar In 1986 the public disclosure bar was amended and it says if information, and I’m summarizing here, if information is disclosed in these enumerated sources, one of them being “news media”, then in order to not violate the public disclosure bar, the whistleblower needs to be “original source”. It’s a real issue and it has been used by defendants and False Claims Act cases regularly and cases have been dismissed because news media is, you know back in 1986 we didn’t have things such as the Internet, and so news media could have been defined as a newspaper. But now with the internet, courts have construed news media TV very broadly, to include anything on the internet. So, there could be a random blog, there could be, an OIG report that’s been published that rather discusses fraud, and that could technically be considered a public disclosure.
With that background information in these data mining cases, which are cases brought by companies or individuals that are mining data that they have purchase, or that’s publicly available, to bring cases, there have been challenges to the ability for the later to collect based on this public disclosure bar. I should mention also that the reasoning behind the public disclosure bar is to prevent predatory lawsuits. They don’t want people looking at the newspaper and bringing a case based on information the government has already known. The whistleblower in response and briefing, they have encouraged courts instead of taking a broad view of news media to take a more narrow view of news media and actually, there’s been several groups lobbying for an amendment to the False Claims Act to more plainly describe what specifically news media includes and what it does not include. I think this public disclosure bar has been used by defendants and companies to eliminate relators and in an unfair way and has broadly construed the work term news media to include any sort of disclosure of information and has used that disclosure against the relator. So relators response is, hey, this news media needs to be more narrowly construed. And it needs to be looked on a fact by fact basis.
Catherine Short: 17:02
That’s very interesting. What are some of the challenges to bringing a False Claims Act case for fraud related to PPP funds?
Shauna Itri 17:12
So, a lot of money has been pumped into the economy for this COVID-19 release, and one of the ways is through PPP funds and that is giving companies money if they’ve kept a certain percentage of their staff. First, let me take a step back to talk about what types of fraud I think will come about for these PPP cases. One of the types of fraud is, in order to receive these PPE funds, the persons or the companies need to sign certifications that they’ve met certain requirements and if they’ve signed these certifications, and they have not met these requirements, but have received the funds, that could be a potential False Claims Act case. These PPP regulations can be unclear and I think they were intended to do so because they just wanted to pump money into the economy and so a big argument is that they did not lie that, hey, we didn’t know what this regulation meant. We thought it meant X, you thought it meant Y it’s a fair interpretation for it to mean X and so we didn’t violate any sort of certification. I think that’s gonna be one of the main barriers to bring these cases, is how vague these PPP regulations are, and the fact that they are purposely vague because the government at that point of time, really just wanted a bunch of money to be pumped into the economy.
Catherine Short: 18:34
Okay. Can you talk about some examples of successful False Claims Act cases related to clinical trials, specifically good commercial manufacture practice violations?
Shauna Itri: 18:47
Sure. First some background again, it’s always helpful to understand what are these good commercial manufacturing practices, also called CGMPs. After a drug is approved by the FDA or a device, and they manufacture the drug, there are certain regulations called CGMPs that a manufacturer has to comply with to make sure that the drug is made per the specification, is made in accordance with the FDA approval. And if you violate CGMPs, it could be potentially a False Claims Act case. We know this because years ago, GSK was sued. The background to this case is quite interesting. There’s a woman by the name of Cheryl Eckard, it is actually a 60 Minutes Episode and I would highly recommend googling it and see if you can pull up a copy of that 60 minutes, but she was a compliance officer. There were issues with GSK’s manufacturing plant in Puerto Rico. She complained about it, she flew down there, she checked it out. She wrote a memo, no one was listening. She continued to press it, she sent a memo to the CEO, the executives, I think they sent a response team down there but didn’t include her. Later, it turns out that they didn’t fix the problems. She was eventually fired. A False Claims Act case was brought on her behalf. I think it might have been 10 years later, millions of dollars in litigation fees later, the case ended up settling for the $700 million. And Cheryl Eckard became a millionaire. I think she got a $90 million relator share or whistleblower fee. The specific violations were something like, certain doses of drugs were intermixed. So, say there’s a five dose bottle there, five milligrams in there, and also 10 milligrams. I think one of the other allegations was that there was a vat of antibacterial lotion that was unsanitary. Those are the types of violations of manufacturing practices that I think deserve attention, you know, some minor flaw that was fixed is not going to be a good False Claims Acts case. But this particular case was egregious and was very successful, but it was after years and years of litigation.
Catherine Short: 20:56
Okay, can someone be retaliated against for filing a false claims act? And are there any specific protections?
Shauna Itri: 21:05
So yes, so Cheryl Eckard, I just I mentioned, she was retaliated against for exposing fraud. A lot of times employee are minimized, harassed or eventually fired. And under the False Claims Act, there is a section H, that’s the statute that allows for an addition to a subsequent complaint on behalf of the government, Section H is an add on claim for the specific whistleblower if they have suffered retaliation for engaging in “whistleblower conduct”. So, the whistleblower case doesn’t even have to be successful, but the person has to have engaged in whistleblowing conduct. And there’s also some damages associated that if the claim is successful, that was for overseas damages. In addition to Section H under the False Claims Act, there are also robust state employment statutes, and some administrative statutes that can be pursued in conjunction with or parallel litigation as to the False Claims Act. So, a lot of times, I end up working with employment lawyers hand in hand for suing these cases on behalf of our client.
Catherine Short: 22:11
Okay, so what if there is fraud, but it doesn’t involve Medicare or Medicaid, but rather, private insurance?
Shauna Itri: 22:22
In order to be a case, under the False Claims Act, or the state False Claims Act, the Federal and State false claims acts, it needs to be Medicare money, or Medicaid money, or it can be TRICARE or veterans’ money, it just has to come from the government. If there’s no government money, you can’t bring a False Claims Act case. However, there is a specific statute in California that is underutilized and it’s a California Insurance Fraud Prevention Act. It allows an individual whistleblower to bring a case on behalf of private insurance companies. It acts in the same way that the False Claims Act procedurally does and substantively does, it’s modeled after the False Claims Act and it’s underutilized. There’s not a ton of case law out there, there have been a handful of successful cases and when it is litigated, the courts tend to follow the case law on the False Claims Act cases. So it’s very, very similar. That was the long answer. The short answer is, under the False Claims Act, you’re going to have a hard time, you really can’t bring a case. But under this California Insurance Prevention Act, if the California Insurance companies are being defrauded, then you could bring a claim.
Catherine Short: 23:31
Okay, this is a question I’ve been wondering about. Why is there are a seal put in place, and what if that is breached?
Shauna Itri: 23:39
A seal is put in place, and when you filed the complaint by letter seal, and only served upon the government. The court obviously has a copy of it. The reason is because the government needs time to investigate the claims without the defendant knowing. It’s really to protect the government’s investigation. They can then disclose to the defendant that they’re investigating, but they don’t disclose that there’s been a whistleblower case and it’s really to protect their investigation. If the seal is breached, the case law has come out more recently that’s more favorable, but if the seal is breached, a relator can potentially be barred from recovering when you breach it. It’s kind of a gray area these days, ever since the Supreme Court case came out where, depending on the extent of the breach, like if you tell your spouse is a lot different than if you broadcast it to a major news station. So, it’s a little bit of a gray area, but a seal breach is problematic, and I always tell my clients don’t tell anybody.
Catherine Short: 24:39
Okay, very good. Well, I wanted to thank you Shauna. Do you have any other advice for us today as we wrap up?
Shauna Itri: 24:47
It’s going to be interesting to see how everything unfolds, given the amount of money that has been funneled into the economy for this COVID Relief Fund. I think it’d be interesting. There’s a lot of information out there publicly. It would be interesting to keep your eye on it and see what happens with these funds and the interesting ways fraud occurs but other than that, I look forward to seeing what happens. I want to thank you and first healthcare compliance again for having me. It’s been a blast, and I hope to talk soon.
Catherine Short: 25:18
Thank you. Thank you so much. And we it’s been a real pleasure to have you on here as well. So, thank you so much again Shauna.
Shauna Itri: 25:27
Catherine Short: 25:29
Okay, and thanks to our audience for tuning into 1st Talk Compliance. We always appreciate you as well. You can learn more about the show on our program’s page on Healthcarenowradio.com and lend your voice to the conversation on Twitter at @1sthcc or #1sttalkcompliance. You can also email me at Catherine Short at First Healthcare Compliance. I’m Catherine Short of First Healthcare Compliance. Remember, compliance is the key to achieving peace of mind.