CLASS ACTION BLOG : qui tam

Wall Street Tip-Off Law Critical to Drawing Out Corporate Whistleblowers

admin — Wed, 11 Aug 2010 21:47:00 GMT

By Steve Berman

At one point in the 1999 movie "The Insider,"60 Minutes producer Lowell Bergman (portrayed by Al Pacino) tells distraught Big Tobacco whistleblower Jeffrey Wigand, "Guys like you are in short supply."

Bergmann's right. Whistleblowers are in short supply because they rightfully fear retribution from their employers for speaking truth to power. In "The Insider," Wigand (portrayed by Russell Crowe) watches as his family is threatened and his personal and professional reputation smeared when he blows the whistle on his former employer, the Brown & Williamson tobacco company.

However, a new law born of the Dodd-Frank Wall Street Reform and Consumer Protection Act will help incentivize and protect those like Wigand who risk coming forward with allegations and proof of corporate malfeasance.

I think the lawmakers behind the new law are on the right track. The law will help fight fraud, which played a pivotal role in the economic meltdown that millions of Americans are still trying to survive. Also, securities regulators are already stretched too thin to chase down all the bad guys. Giving Big Business insiders a monetary incentive to risk their careers and come forward with information about corporate wrongdoing will give investigators a powerful tool for rooting out transgressors.

The mechanics of the "Wall Street tip-off law", as it's come to be known in the press, are pretty simple: The law empowers the U.S. Securities and Exchange Commission to award between 10 percent and 30 percent of any monetary sanctions of more than $1 million to whistleblowers who provide information leading to a successful SEC enforcement.

Needless to say, substantial sums have already been awarded. According to an Aug. 8 Financial Times story, a woman named Karen Kaiser was awarded $1 million after she provided information that helped secure a $28 million settlement in an insider trading action the SEC brought against hedge fund giant Pequot Capital Management.

The new law, which has its foundation in Civil War era measures first put in place to combat military procurement fraud during the 1860s, already has its detractors – mostly attorneys of corporations that have to defend their clients and employers against accusations of wrongdoing.

Those skeptical of the Wall Street tip-off law have voiced concern that the SEC – already overwhelmed by vast amounts of data and information – will be forced to expend precious resources on investigations of allegations of securities fraud based on information coming from whistleblowers whose main motive is a piece of the settlement pie.

The argument is specious, at best.

First, as the law is set up now, no whistleblower is awarded a portion of any financial sanction unless the information provided leads to a successful SEC enforcement. Second, law enforcement has offered monetary rewards for information leading to the capture of suspects or the resolution of so-called "blue-collar" criminal cases for years. Why is it all right to offer monetary incentives for useful information in "blue-collar" cases, but not in "white-collar" cases?

What's more, the Internal Revenue Service has had mechanisms similar to the Wall Street tip-off law in place since at least 2006. Shouldn't the SEC – the agency charged with oversight of powerful Wall Street banks and financiers – have the same investigative tools at its disposal as the IRS?

Though some might question the motives of some whistleblowers, the critical role these individuals play in keeping powerful interests in America on the straight and narrow can be seen time and time again. Think Jeffrey Wigand and Big Tobacco. Or Sherron Watkins, whose testimony blew the lid off the shenanigans at Enron. Or Frank Serpico, the former New York Police Department detective whose testimony exposed widespread corruption among the city's plain-clothes officers during the late 1960s and early 1970s.

The list goes on and on. In many cases, whistleblowers' lives and livelihoods were threatened by their employers and colleagues. At the very least, they had to endure severe social and public ostracism. Take their bitter experiences into account and it soon becomes clear why a monetary incentive is needed for whistleblowers to come forward with useful information.

Americans are still licking their wounds from the latest round of illicit Wall Street activities. We at Hagens Berman believe the new Wall Street Tip-Off law is a step in the right direction that will help regulators crack down on securities fraud and accounting irregularities.

Interestingly, we worked very closely with Jeffrey Wigand. I, along with my partners, represented 13 states against Big Tobacco and worked closely with Jeffrey in making sure the eventual settlements protected him. Back then, whistleblower laws didn't give him nearly the protection they do today. And Mr. Pacino was right – guys like Jeffrey are in short supply. They stick their neck out to try and do a societal good. With luck, these new protections will help convince others to do the same.

Blowing the Whistle on the Pharmaceutical Industry

Steve Berman — Thu, 30 Jul 2009 18:23:00 GMT

By Steve Berman

Healthcare reform - depending on your point of view or even your political affiliation - is either a long-overdue step to insure our nation’s health, or the first step on a slippery slope of socialized healthcare.

Regardless of your view, we spend about $8,000 for every man, woman and child in our country, gobbling up nearly 18 percent of our gross national product. By contrast, we spend twice as much as many western nations, but still have higher rates of infant mortality and lower life expectancies.

One thing we can agree on is the idea that waste, greed, and corruption hamper our current healthcare system. High on that list of bad actors is the pharmaceutical industry. It seems there isn’t a week that passes without a story of a drug company stacking the deck with bogus studies, pushing products for off-label uses, or attempting to rig the pricing systems to boost the bottom line.

Today I want to talk about an oddly named legal principle that, in many respects, is one of our biggest tools in reigning in these abuses. The principle is called Qui tam, which is short for the Latin phrase, "qui tam pro domino rege quam pro se ipso in hac parte sequitur." The phrase translates to "he who brings a case on behalf of our lord the King, as well as for himself."

Most people know the concept by its more common term – whistleblower. While some might think the term comes with negative baggage, I can say that in my years of practicing law, whistleblowers have been some of the most potent, positive forces in bringing positive change. More on that later.

First, though, what is the role of a whistleblower? It’s no secret the government is short-handed. There are never enough people to police every business, every transaction and every industry in this country. Private litigators help fulfill that role to some degree, investigating bad practices, and pursuing legal action when needed.

Both private litigators and the government also rely on one more source – you, the people inside these companies. Employees serve as the eyes and ears in identifying corrupt practices, and over the years have helped taxpayers and the government recoup significant amounts of money wrongfully obtained by pharmaceutical companies.

The role of a whistleblower is pretty simple – if you are aware of corrupt practices within an organization, step forward and help the government investigate if an issue is worth litigation. If a case develops and reaches a settlement or verdict, whistleblowers can keep as much as 30 percent of the amount of the fraud uncovered.

Here are a few examples to help paint a broader picture of what this means:

Medicis Pharmaceutical - $9.8 million settlement

From Nov. 2001 through April 2004, Medicis sales reps targeted pediatricians in an effort to sell a topical skin ointment, Loprox, as a treatment for diaper rash. The problem: the Food & Drug Administration did not approve Loprox for use on children under the age of 10. This was an instance of off-label marketing.

Employees stepped forward and helped the government pursue legal action against Medicis for off-label marketing.

The company settled at $9.8 million. Through Medicaid, the government paid millions of dollars for Loprox prescriptions that would not have been reimbursed if government authorities had known that prescriptions resulted from the company’s off-labeling marketing campaign.

The employees in this case recouped a percentage of the millions lost by the government and helped stopped the wrongful use of a prescription ointment on young children.

Jazz Pharmaceuticals - $20 million settlement

In another case involving off-label marketing, Jazz Pharmaceuticals agreed to a $20 million settlement after a sales representative for the company filed a lawsuit on behalf of the U.S.

The lawsuit claimed the company wrongly marketed and sold the drug Xyrem for unapproved uses. The company promoted the drug for fatigue, insomnia, chronic pain, depression, bipolar disorder and weight loss when the FDA had only approved it for narcolepsy.

The drug’s active ingredient, GHB, also known as a “date rape” drug, was sold as safe to use on children and the elderly and a compensated psychiatrist advised doctors on how to conceal the off-label prescriptions to ensure insurers would pay them.

The company also admitted that it relied on a psychiatrist to give talks around the country promoting the unapproved uses, while paying him tens of thousands of dollars for speaking engagements.

In both cases, off-label marketing was the issue and foundation for litigation. Drug companies desperate to make sales and increase market share succumbed to marketing unapproved uses of drugs to do so.

These are instances where sales representatives and insiders at these companies had everything at their fingertips and knew what they were doing was not only morally wrong, but illegal and hurting patients and federal programs.

Employees have the power to speak up when they know there is corruption within their company. Blowing the whistle on fraud in the pharmaceutical industry is necessary to instigate change and hold big corporations accountable to the public.

If you’re interested in learning more, visit our Web site, www.pharmawhistleblowers.com.

If you’re looking to speak to someone about questionable practices you’ve seen or experienced, contact our attorneys for advice on next steps and involvement at (206) 623-7292, or fill out our report a fraud form.