Is there Hope for the IRS Whistleblower Program?

The IRS Whistleblower Program has been the subject of repeated criticism from several corners.  For example, in a Forbes article last March, "IRS Whistleblowers See Little Reward," Erika Kelton of the Phillips & Cohen firm, one of the leading relator firms, accused the IRS of "sitting on a mountain of whistleblower claims" and  asserted that the "real problem" in processing these claims is "the IRS itself and institutional resistance to whistleblowers within the IRS that is hobbling the whistelblwoer program and draining its enormous promise." In fact, Kelton quoted the former IRS Chief Counsel as saying, "The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they were forced on it by the Congress."

Criticism of the IRS Whistleblower Program has not been limited to relators' counsel. As detailed in Whistleblower Protection Blog, Richard Renner discusses two recent reports prepared by the Treasury Inspector General for Tax Administration and the General Accounting Office that were critical of the IRS Whistleblower Program. See IG Report says IRS Whistleblower Office falls short and resists audit.

According to a recent article in Accounting Today, "IRS Plans to Fix Whistleblower Program," the IRS is responding to this criticism.  In a June 20th memo, the IRS Deputy Commissioner for Services and Enforcement pledged to work with "the Whistleblower Office and with internal and external stakeholders on a comprehensive review of operating guidelines and procedures . . . . . to improve the timeliness and quality of decisions as the Service evaluates and acts on whistleblower information."  Outlining proposed internal deadlines for reviewing whistleblower claims, the Commissioner stated: claims received by the Whistleblower Office "should be initially evaluated by the office within 90 days" and review by subject matter experts from the Operating divisions and Criminal Investigation "should be completed within 90 days of receipt."

The Accounting Today article, which I commend to readers, further discusses efforts by U.S. Senator Charles Grassley to pressure the IRS to improve the Whistleblower Program and highlights a recent Bloomberg article that was critical of the IRS Program as well, as it relates that "in the past five years, over 1,300 claims have been filed against nearly 10,000 companies and individuals, alleging tax underpayments of at least $2 million, but only three whistleblower awards have been paid so far under the new program." 

A. Brian Albritton
July 4, 2012

GlaxoSmithKline to Pay Largest Health Care Fraud Settlement in US History

In the largest health care fraud settlement in U.S. history, the U.S. Department of Justice announced today that "global health care giant" GlaxoSmithKline LLC ("GSK") agreed to plead guilty and to pay $3 billion to resolve "its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices."

Deputy Attorney General James Cole described the plea and settlement with GSK as follows:  "GSK will plead guilty to criminal charges and pay $1 billion in criminal fines and forfeitures for illegally marketing and promoting the drugs Paxil and Wellbutrin for uses not approved by the FDA – including the treatment of children for depression, and the treatment of other patients for ailments ranging from obesity, to anxiety, to addiction and ADHD – and for failing to report important clinical data about the drug Avandia to the Food and Drug Administration.  GSK will pay an additional $2 billion to resolve civil allegations that it caused false claims to be submitted to federal health care programs for these and other drugs as a result of the company’s illegal promotional practices and payments to physicians.  This settlement also resolves a civil investigation of the company’s alleged underpayment of rebates that were required under the Medicaid Drug Rebate Program."

As with previous criminal and False Claim Act settlements with Big Pharma discussed in the blog, GSK's conduct as detailed in the plea and the allegations of the False Claim Act complaint is disturbing and reprehensible.  For example, the factual allegations of the Information detail GSK's marketing of the prescription drug Paxil for use in treating depression in children and adolescents even though the drug had not been found to have any efficacy for such a population. 

Paxil had been approved by the FDA for the treatment of depression in adults, and it was one of the top 10 selling drugs in the U.S., with sales surpassing $1.8 billion a year in 2001-2002.  Paxil, however, was never approved by the FDA "for any purpose" in the treatment of children and adolescents.  In fact, GSK conducted three placebo-controlled studies in the safety and efficacy of using Paxil to treat depression in children and adolescents, and those studies failed to demonstrate any "efficacy" for the treatment of this population between the "patients in the study who received the drug being studied and patients in the study who received a placebo."  After these studies, a GSK contractor hired to write an article about one of the studies misrepresented the study's findings as being favorable for the treatment of children and adolescents with Paxil, going so far as to say that "the findings of this study provide evidence of the efficacy and safety of [Paxil] in the treatment of adolescent depression."

With the article in hand, GSK then forwarded it to its 1900 sales representatives who sold Paxil with a cover letter stating, "Paxil demonstrates REMARKABLE efficacy and safety in the treatment of adolescent depression." This was just the beginning of GSK's marketing of Paxil.  In addition, the Information reflects that GSK created a "150 person neuroscience specialty sales force to promote Paxil to psychiatrists."  The Company also promoted Paxil's use in adolescents at Paxil "Forum Events," dinner programs, lunch programs, and spa programs. GSK had their sales personnel target those physicians --including physicians who only treated patients under age 18-- who prescribed the most antidepressants and provide free samples of Paxil in the hope that they would shift their patients to using Paxil.

GSK, however, did not inform its sales personnel that the FDA had not approved Paxil for the treatment of children or adolescents, and it continued to conceal that its studies did not support its claims for Paxil's efficacy in this population.  In fact, the FDA later recommended that Paxil "not be used to treat depression in patients under 18" and later recognized that antidepressants, such as Paxil, "increased the risk of suicidal thinking and behavior in . . . patients under age 18." 

Paxil was not the only drug that GSK unlawfully promoted:  it unlawfully promoted Wellbutrin and Avandia as well.  As a result of the criminal plea, GSK will pay fines and forfeiture totaling $1 billion.  The "civil settlements" resolve claims relating to these three drugs and others and will require GSK to pay $2 billion. 

One of the civil settlements reported that relators had filed 4 qui tams against GSK and that the U.S. had intervened in them in 2011.  The settlements explicitly did not address the whether any relator was entitled to any share of the proceeds or whether in fact they had filed valid qui tams.

DOJ has posted the  key documents in the criminal and civil matters, and they can be found here.

A. Brian Albritton
July 2, 2012

First Reported Case in Which the Government Declines to Exercise its Veto of Public Disclosure Dismissal

Readers, I commend to you the recent article on US ex rel Sanchez v. Abuabara, No. 10-61673 (June 4, 2012, S.D. Fla.), "Government Declines to Exercise New Authority Over Public Disclosure Motion", by Scott Stein of Sidley Austin's "Original Source" False Claims Act Blog.

I heard about this case at the recent Qui Tam and False Claims Act Enforcement Conference, and it was referred to by one speaker as the first reported case to reference the government's new authority under the False Claims Act to oppose and prevent the dismissal of a relator's claim on the grounds that it had already been publicly disclosed. 31 U.S.C. 3730(e)(4)(A).   I would not describe the opinion itself as a page turner, but Mr. Stein does a good job explaining the significance of this recent case.

A. Brian Albritton
6/20/12

Does Receiving a Tax Benefit Make You a Grantee for False Claims Act Liability?

False Claims Act liability arises not simply for false claims presented to the federal government, but also false claims presented to "a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's behalf or to advance a Government program or interest." 31 U.S.C. 3729(b)(2)(A)(i)-(ii).  So who is a "grantee" of government funds?  It can be an organization that has received some form of subsidy by the federal government.  But, does that mean that any so called false claim for payment presented to that organization which receives a federal benefit or subsidy gives rise to a false claim? The Third Circuit recently applied common sense when it refused to the extend the False Claims Act to every person or organization who enjoyed a federal tax benefit.

The Third Circuit Court of Appeals recently addressed whether a grantee can be an organization that enjoys tax benefits from the federal government, and it found that the False Claims Act simply did not stretch that far.  See U.S. ex rel Garg v. Covanta Holding Corporation et al., (3rd Cir. May 8, 2012).   In the Covanta case, the Court considered whether a state sponsored Utility Authority that issued tax exempt bonds qualified as a "grantee" under the False Claims Act ("FCA") because the tax exemption it enjoyed essentially functioned as a direct "financial subsidy" from federal government.   Faced with the Relator's argument that urged it to apply the FCA to "anyone who happens to receive money from the federal government," the Court balked, holding that the Utility Authority did not qualify as a grantee.

In Covanta, the Utility Authority had issued $280 million in tax exempt bonds to finance construction of a solid waste disposal facility, and it leased the facility to Covanta to control and operate the business and facility.  The Relator, the former executive director of the Utility Authority, alleged that Covanta failed to make two different types of payments that it owed to the Utility Authority and that it issued invoices to the Utility Authority containing false certifications.  The Relator argued that the Utility Authority qualified as a federal grantee under the FCA by "virtue of the fact that it receives a financial benefit from the deductibility of interest on the tax-exempt bonds it issued to finance the facility.  In other words, [the Relator] asserted that the federal government contributes tax revenue it otherwise would collect on interest paid to bondholders directly to the [Utility Authority]."

The Court found that the Covanta's alleged false claims and statements to the Utility Authority could not support a claim under the FCA. Citing cases that hold that tax exemptions are the functional equivalent of direct cash grants from the government, the Relator argued that the "grant of tax-exempt status to [Utility Authority's] bonds means the entity has more money in its proverbial pocket . . . than it would if it had to issue non-tax-exempt bonds at a regular rate" thereby making it a "federal grantee."   Acknowledging the Relator's point that tax exempt status may essentially qualify as a direct subsidy, the Third Circuit observed:

"In the tax realm alone, every taxpaying American receives some form of exemption or deduction, such as the home mortgage interest deduction, the charitable contributions deduction, or even simply the standard deduction.  Just like the tax-exempt bonds, the government's decision to grant these deductions is a matter of grace, and the money saved by these deductions goes straight to the bottom line of the American-taxpayer.  . . . . That does not mean, however, that every fraud against a government employee or taxpayer supports a claim under the FCA."

The False Claims Act, observed the Court, "only prohibits fraudulent claims that cause or would cause economic loss to government."  Covanta's alleged false claims, however, did not cause loss to the federal government but established only that the Utility Authority "had to pay money out of its general operating funds that it should not have had to pay."  The Court went on, "The fact that some unknown portion of those general operating funds might be tangentially attributable to a tax break from the federal government is irrelevant."

In contrast to this clear opinion by the Third Circuit, what is not clear is why the Court marked this opinion as "Not Precedential."

A. Brian Albritton
6/20/12

Ninth National Institute on the Civil False Claims Act and Qui Tam Enforcement

Last week, I attended the ABA's National Institute on Civil False Claims Act and Qui Tam Enforcement in Washington, D.C..  It was well attended and a worthwhile event overall.  A few observations:

• The conference was attended by a great mix of people:  lots of plaintiff's counsel (a/k/a relators' counsel), defense counsel, a number of attorneys from state attorneys' general or state Medicaid Fraud Control Units, and a number of federal investigators and counsel from federal agencies.  Unlike conferences such as the ABA's White Collar Crime which are huge with nearly a 1,000 attendees, this conference is still quite small (I would estimate around 200+) and there was a very collegial atmosphere.

•  As with the attendees, so too with the panels as they were always had a mix of defense counsel, relators' counsel, and various government representatives usually from the a U.S. Attorney's Office or Department of Justice.  Most panels provided a very broad perspective.

• Joyce Branda, now Acting Deputy Attorney General for the Civil Division and chair of the first panel, noted that 600 False Claims Act/Qui Tam cases were being filed each year, 2/3 of them health care related, though she said that "other areas were developing."  Branda further observed that the government intervenes in 22% of qui tam cases and that percentage has "held steady over the years."

•  Dan Anderson, co-chair of the Institute and Deputy Director of the Commercial Litigation  Branch of DOJ's Civil Division, told the conference "we are doing much more with much less.  We are doing the best we can  and are stretched very thin."

• More than one speaker discussed the increased use  of Civil Investigative Demands ("CIDs"):  a very effective investigative tool that allows the government prior to intervening in a qui tam case to conduct depositions and obtain interrogatories and the production of documents.  Prior to the recent amendments of the False Claims Act, the Attorney General had to personally approve the issuance of a CID, but their use has now been liberalized and they are now being issued by DOJ-Civil as well as U.S. Attorneys.

•  29 states have passed False Claims Act statutes.  The panel on State Qui Tam Enforcement was one of the best.

•  John Boese, conference co-chair and author of a leading treatise on the False Claims Act, observed rather critically that the False Claims Act has become not just a statute to sanction those making false claims, but with the False Claims Act "jurisprudence being dominated by false certification claims," it is increasingly used as an "enforcement mechanism" for compelling compliance with governmental regulations.  He gave the example of a bid protest.  In the past, he explained, a losing bidder might challenge the legitimacy of a competitor's bid; now, they file an FCA/qui tam claim.

• Panelist Peter Hutt II of Akin Gump noted that  non-intervened qui tam cases impose very real and substantial costs on the businesses as a result of the discovery that stems from such suits.  Invited to say what he would change about the False Claims Act, he argued that there was too many meritless qui tam suits and that such suits resulted from the "over-incentive" of damages presently allowed under the FCA.  To discourage meritless suits, Hutt argued that real fee shifting should be introduced and that it should apply not just to the relator but to a relator's counsel as well.  He also argued for a cap on relators' recoveries. Hutt's comments about meritless suits brought an interesting reaction from other panelists. The relators' counsel on the panel did not believe meritless qui cases were a problem, but they also discussed that they carefully review potential qui tam cases and only file a handful of the cases they review.  Speaking for herself, an Assistant U.S. Attorney from the Northern District of California who handles FCA/qui tam cases argued that if qui tam cases had been investigated and found to be without merit, then they should be dismissed by the government as permitted by the statute --though she did not cite any instances of that occurring.  Boese argued that since dismissals of qui tam required hearings and that such hearings had often been hotly contested by relators, DOJ rarely exercised its authority to dismiss.

A. Brian Albritton
June 10, 2012

US ex rel Davis v. District of Columbia: The D.C. Circuit Extends Benefit of Bargain Damages for FCA Claims

Last week, I wrote about U.S. ex rel Davis v. District of Columbia, a False Claims Act case where the D.C. Circuit sustained the District Court's ruling that the relator was not entitled to treble damages because he had failed to allege any actual damages to the government payor.  The relator in Davis alleged that the District of Columbia Public Schools submitted false claims for Medicaid reimbursement because its claims did not have adequate documentation to support their payment by the government.  The Court, however, ruled that the relator was not entitled to damages because there was "no allegation that what the government  received was worth less than what it believed it had purchased . . . The government got what it paid for."  Essentially, the government received the benefit of its bargain even though the paperwork was inadequate to support the reimbursement claims.

In their recent article, Civil False Claims Act:  D.C. Circuit Reinforces SAIC Decision in False Certification Case, Rejecting FCA Damages Claim in Case Based on Lack of Supporting Documentation, which I commend to you, John Boese and Douglas Baruch at Fried Frank argue that with Davis the D.C. Circuit extended the Court's previous holding on False Claims Act damages announced last year in the case of United States v. Science Applications International Corp., 626 F.3d 1257 (D.C. Cir. 2010) ("SAIC").  The SAIC case was a False Claims Act "false certification" case wherein it was alleged that SAIC violated its contract with the Nuclear Regulatory Commission by falsely certifying that it complied with the regulations forbidding conflicts of interest.  As a result of the false certification by SAIC, write Boese and Baruch, the Justice Department argued at trial "and the jury agreed, that the FCA damages were three times the full amount paid under the contract ($1,973,839.61), even though the actual breach of contract damages were only $78."  The jury awarded the entire amount of SAIC's contract with the Nuclear Regulatory Commission, which was trebled, based on a jury instruction that required the jury to "limit its calculation of damages to the governments payments" and forbid the jury from "attempt[ing] to account for the value of the services, if any, that SAIC conferred upon the Nuclear Regulatory Commission."

The Court found that calculating FCA damages so as to assume that SAIC's services "had no value" in the face of evidence that SAIC had, in fact, provided valuable services to the NRC was error.  Adopting a "benefit-of-the bargain framework,"the Court observed that to "establish damages, the government must show not only that the defendant’s false claims caused the government to make payments that it would have otherwise withheld, but also that the performance the government received was worth less than what it believed it had purchased." (emphasis added).  Boese and Baruch argue that "[t]he Davis and SAIC decisions, as well as other recent decisions rejecting claims for astronomical penalties where no damages have been proven, show that courts are aware of the high stakes in FCA allegations, and are focusing on the actual impact of the underlying false claims, rather than imposing grossly disproportionate damages that ignore the actual benefits obtained by the government from the conduct at issue."


A. Brian Albritton
May 31, 2012

D.C. Circuit Overturns Long Held Requirement That False Claims Act Relator Make Disclosure to Goverment Before Public Disclosure of Same Allegations

Whistleblowers Protection Blog recently wrote about the the District of Columbia Court of Appeals overturning its earlier ruling in U.S. ex rel Findley v. FPC-Boron Employees Club, 105 F.3d 675 (D.C. Cir. 1997).  In that case, the D.C. Circuit had held that to be "an 'original source' [in a False Claims Act case] a whistleblower must make his or her disclosure to the government before there is any public disclosure of the same allegation."  In U.S. ex rel Davis v. District of Columbia, No. 11-7039, May 15, 2012), the D.C. Circuit relied on the Supreme Court's ruling in Rockwell International Corp. v. United States, 549 U.S. 457 (2007), to reject the view, found in Findley, that a "relator could provide nothing new after a public disclosure."  Noting that the False Claims Act has been changed to further clarify who can be an original source (see 31 USC 3730(e)(4)(B)), the Court held "[a]pplying the 1986 version of the Act, we will no longer require a relator provide information to the government prior to any public disclosure of allegations substantially similar to the relator's and will instead enforce the text's deadline of 'before filing an action.'" 

Davis is a odd case and with an unsympathetic relator.  In the other part of the case, the Court sustained the District Court's ruling that the relator, Davis, was not entitled to treble damages and that the relator had failed to allege any actual damage to the United States.  Davis had been an accountant to the District of Columbia Public Schools ("DCPS") and his firm prepared Medicaid reimbursement claims made by DCPS to Medicaid for 1995 - 1997.  Apparently, DCPS replaced the realtor's firm with another in 1998, and the other firm submitted the DCPS Medicaid reimbursement for 1998.  According to Davis, however, DCPS submitted it claims without the required documentation since "only [Davis] had the required documentation supporting the claim and he never gave it back to DCPS."  DCPS subsequently received a Medicaid reimbursement of over 10 million , but most of that amount had to be returned to Medicaid after an auditor found that the DCPS 1998 claim had "not been adequately documented."  Four years after the Auditor's Report on the 1998 claim, Davis filed a qui tam against DCPS and the District of Columbia alleging that they had improperly submitted the 1998 Medicaid reimbursement claims without proper documentation -- thus the issue about whether he could be an original source.

Davis, the Court observed, did not allege in his suit that any of the claimed services were not provided to the DCPS or that any costs were exaggerated --in short, he did not allege that the government has suffered any damage as a result of the alleged lack of documentation.  In fact, "[b]ecause all agree that the services paid for were provided, the maintenance of documents to prove that they were has no independent monetary value.  This is the rare case in which there is no allegation that what the government received was worth less than what it believed it had purchased. . . . . The government got what it paid for and there are no damages."  The Court noted that Davis may still be entitled to "share" in any statutory penalties assessed against the District.

In view of the lack of damages, this case sounds like a great waste of time for everyone, and it appears to be an strange vehicle for the Court to change it position that a relator can still be an original source even if the relator approaches the government after disclosure.  The relator's conduct in Davis certainly does not justify such a change.


A. Brian Albritton
May 20, 2012

Middle District of Florida Permits Arbitration of FCA Retaliation Claim

Middle District of Florida U.S. District Judge John Antoon II recently held that both False Claims Act ("FCA") retaliation claims, 18 USC 3730(h), and claims brought pursuant to the Florida Whistleblower Act are subject to arbitration where the parties have previously agreed.  In United States ex rel Hepburn v. Northrop Grumman Systems Corp., (May 8, 2012) 2012 W: 1631682 (M.D. Fla.), the Court granted a motion to compel arbitration of the FCA and Florida Whistleblower Act claims pursuant to an "arbitration policy" that was contained in the relator's employment agreement.

This is the second case I've featured in the blog on arbitrating such claims:  see Court Finds FCA Retaliation Claim Subject to Arbitration.  The Court in Hepburn did not cite any FCA specific authority in making its ruling, nor did the prior case, James v. Conceptus, Inc. (S.D. Tex. 2012).  A review of the Defendant's Motion to Dismiss and to Compel Arbitration in Hepburn, however, cites several cases that find that arbitration is appropriate for FCA claims, and readers might find those cites to be helpful.

A. Brian Albritton
May 20, 2012

Abbott Labs $1.5 Billion Plea and False Claims Act Settlement: the Facts at Issue

By now, Readers, I am sure you have heard of the announcement this week by the U.S. Department of Justice that Abbott Labs has agreed to pay $1.5 billion  in a False Claims Act settlement and a criminal plea regarding its off-label promotion of its drug, Depakote. A number of blogs have covered it including Sidley's Original Source blog as well as MintzLevin's Health Law & Policy Matters blog, both of which I commend to you.  The four relators will receive $84 million of the $800 million paid for the False Claims Act portion of the settlement.

I suspect that some Readers may think this settlement --one of many settlements against pharma companies alleging the promotion of off-label drug usages-- may be just another instance in which the government has overreached and used it power to extract a ruinous settlement from the defendant.  A review of the facts admitted to by Abbott, however, shows that the company's conduct was reprehensible and that this settlement and the criminal charge against it could have been far worse.  The company clearly benefited from great counsel, including former Deputy Attorney General, Mark Filip.

According to the Agreed Statement of Facts for its plea, Abbott's gross sales of Depakote from 1998 - 2008 were roughly  $13.8 billion.  During an 8 year period, Abbot promoted the sale and use of Depakote primarily for the elderly suffering from dementia and for the treatment of schizophrenia, even though it knew that the drug was not effective for the treatment of such conditions.  For example, Abbott conducted a study of the effects of Depakote in 1998-99, but suspended the study due to an "increased incidence of adverse events in the Depakote treatment group," discontinuing it completely in 1999.  The study failed to show that Depakote was effective in treating mania in elderly dementia patients.  Abbott performed another clinical trial on dementia patients in 2000, but according to Abbott, the trial was "terminated for low enrollment  . . . . . [and was] seriously underpowered and definitive conclusions from the data were not possible."  Abbott conducted no other studies, but another 153 patient randomized study was done on the use of Depakote for treatment of elderly patients with dementia in 2000 - 2002, and it concluded that "treatment with [Depakote] did not show benefit over placebo in the treatment of agitation associated with possible or probable [Alzheimer's disease] . . . in nursing home residents included in this trial."

Notwithstanding the lack of evidence of Depakote's efficacy in the treatment of dementia, for several years Abbott engaged in widespread promotion of Depakote as effective for controlling agitation and aggression in elderly dementia patients. Abbott informed its own sales force that "Depakote had been shown effective  . . . to treat behavioral disturbances in dementia patients . . . " and developed "educational programs" to promote the drug's usage for the elderly.  It gave funds for speaker programs to promote the use of Depakote to control agitation and aggression in elderly patients with dementia. It sent out a letter to 4,000 prescribers of atypical antipsychotic drugs and to 1,000 prescribers of another drug to nursing home patients to "help increase overall the use of Depakote  . . . for patients with dementia related behaviors."  The Statement of Facts describes a whole host of things that Abbott did to market Depakote --a drug which had not been proven effective, and in fact appeared to be ineffective, for treating agitation and aggression in elderly dementia patients.  The Statement of Facts reflect similar conduct by Abbott in the marketing of Depakote as a treatment of for schizophrenia

The False Claims Act Settlement reflects Abbott's admission that Medicare and Medicaid paid "hundreds of millions of dollars for claims resulting from the use of Depakote for the control of the agitation and aggression of dementia patients" and paid "millions of dollars for claims resulting from the use of Depakote to treat schizophrenia."

The key documents relating to Abbott's plea and settlement can be found here at the Department of Justice's site.

A. Brian Albritton
May 9, 2012

This Week in the False Claims Act: McKesson's $190 Million Settlement and the Government Intervenes Against Toyo for Failing to Pay Antidumping Duties

It has been a slow week for Qui Tams and False Claims Act matters.

The government has just announced its most recent settlement against another drug company last week: McKesson Corporation for $190 million.  The government alleged that McKesson reported "inflated mark-up percentages" to a publisher of drug prices, First Databank, for a "wide variety of brand name drugs," which in turn caused many state Medicaid programs to overpay for the drugs.  Overall, the DOJ proudly announces that more than "$2 billion" has been recovered from other drug manufacturers that were alleged to have engaged in the same type of conduct.

The most interesting qui tam I found this week was the Department of Justice's announcement  that it is intervening in US ex rel  Dickson v. Toyo Ink Manufacturing Co., Ltd et al.  Filed under seal in 2009 in the Western District of North Carolina, the case alleges that "Toyo Ink companies," a leading provider of printing inks, "knowingly misrepresented the country of origin on [import] documents presented to U.S. Customs and Border Protection to avoid paying antidumping and countervailing duties on" what appears to be an imported ink: "the colorant carbazole violet pigment number 23 (CVP-23)."   According to DOJ, the Department of Commerce assesses antidumping and countervailing duties, which are collected by U.S. Customs, to protect U.S. businesses by offsetting unfair foreign pricing and government subsidies" for certain imports, such as CVP-23, "from China and India."  Toyo is alleged in the suit to have "misrepresented Japan and Mexico as the countries of origin for its CVP-23 imports to avoid these duties."   According to the Complaint, which has not yet been released on Pacer, "Toyo’s CVP-23 imports from China and India underwent a finishing process in Japan and Mexico," but that  "process was insufficient to change the country of origin." 

I find this most recent announcement interesting only because it further shows the breadth of the False Claims Act and the different kind of industries and settings to which it can apply: anywhere there is a payment obligation to the United States, including as shown here, Customs' duties for imports.

A. Brian Albritton

May 2, 2012