False Claims Act

Continuing its efforts on the False Claims Act front, the federal government announced today the first FCA settlement with a drug company that sought to charge the government for less than effective drugs. Under the agreement, Eon Labs Inc. will pay the U.S. $3.5 million to resolve FCA allegations relating to the company's drug Nitroglycerin Sustained Release (“SR”) capsules.

Lincoln Fabrics Ltd., a Canadian weaver of ballistic fabrics, and its American subsidiary have agreed to pay the U.S. $4 million to settle a lawsuit against Lincoln for violations of the False Claims Act in connection with their role in the weaving of Zylon fabric used in the manufacture and sale of defective Zylon bullet-proof vests. 

The federal False Claims Act provides that a person or entity may be held liable for knowingly submitting, or causing another to submit, false claims for payment of federal funds. A simple statute, but a complicated law – and one that has grown exponentially in importance over this past year.

“Health Care Fraud” comes in this year as the sixth biggest Financial Fraud Law issue of the year. Why? Well, consider these items:

The U.S. government obtained $2.4 billion in settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2009, the Justice Department announced today. This represents the second largest annual recovery of civil fraud claims in history, and brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to more than $24 billion. 

The False Claims Act (“FCA”) was designed to encourage reporting of false or fraudulent claims that are submitted to the federal government for approval or payment. Typically a relator – a whistle-blowing employee, a business partner or competitor – brings suit “for the benefit of the United States.” The government has discretion to intervene in the suit as a plaintiff. But what happens

There’s a Web site about whistleblower/qui tam lawsuits, at http://www.whistleblower-qui-tam.com/pages/qui-tam-history.html, that explains the history of those actions (in the U.S., the False Claims Act was Lincoln’s idea during the Civil War) and that provides information and attorneys who can represent whistleblowers.

We continue to publish articles in the Financial Fraud Law Report about the broad scope of the False Claims Act. Now, we have another example to mention to hit the point home: The U.S. government announced today that it has joined a whistleblower suit against Public Warehousing Company (PWC), The Sultan Center Food Products Company (TSC), and PWC’s chief executive officer, Tarek Abbul Aziz Sultan Al-Essa. 

The largest nursing home pharmacy in the country, Omnicare Inc. of Covington, Kentucky, will pay $98 million, and drug manufacturer IVAX Pharmaceuticals of Weston, Florida, will pay $14 million to resolve allegations that Omnicare engaged in kickback schemes with several parties, including IVAX, the federal government announced today.

Seeking to recover more than $200 million in allegedly illegal overcharges and penalties, California Attorney General Edmund G. Brown Jr. today announced that he has filed suit against State Street Bank and Trust – one of the world's leading providers of financial services to institutional investors – for committing "unconscionable fraud" against California's two largest pension funds – CalPERS and CalSTRS.