Thank you for that kind introduction. And thanks to Cleveland Lawrence and everyone at Taxpayers Against Fraud for inviting me to speak to you today.
This is a particularly poignant time for me to be speaking to you, as this week marks the beginning of a new chapter in my career at the Department of Justice. Today is my first day as the Acting Associate Attorney General, a role in which I will follow some large footsteps in the never-ending fight against fraud.
My predecessor, Tony West, played a leading role in the Department’s efforts to combat fraud – and financial fraud in particular – helping to secure record-breaking settlements that included the $16 billion agreement with Bank of America and a $13 billion agreement with JPMorgan Chase.
Luckily, I have prior experience following Tony’s lead. I also succeeded Tony as Assistant Attorney General for the Civil Division in 2012. As Assistant Attorney General, I continued Tony’s focus on fraud, leading the efforts of our dedicated Civil Division attorneys to recover taxpayer funds and deter future misconduct.
These efforts have paid off. In fiscal year 2012, the government recorded the largest annual recoveries ever – almost $5 billion – and the largest annual recoveries ever in health care fraud cases. Last year, the government followed that up by recording the second-largest annual recoveries ever – $3.8 billion – and the largest annual recoveries ever in procurement fraud cases.
I will continue my commitment to fight against fraud in my new role. But I know that I won’t be missed too badly in the Civil Division.
Most of you know Joyce Branda, who has served as the Deputy Assistant Attorney General for the Commercial Litigation Branch for the past two years. Since Joyce joined the Civil Division in 1982, she has dedicated her career to the protection of taxpayers and consumers, having served as a career attorney at all levels of the Fraud Section.
Joyce is intimately familiar with the issues that your organization faces on a daily basis, and I have no doubt that she will continue the Civil Division’s record-setting efforts to target, and deter, fraud in all its forms. And we should all be happy that she’s there, because those intent on defrauding the government show no signs of stopping.
Lincoln would think of the magnitude and scope of fraud today. Such fraud seems a long step from the unscrupulous behavior of government contractors who peddled decrepit horses and rancid rations to the government during the Civil War – the behavior that prompted the passage of the original False Claims Act in 1863.
On the other hand, while the types and amount of fraud may be different in kind, the government’s need for assistance in rooting out such fraud remains just as compelling today as it did when the Act was passed. Our government has grown, and fraud has grown with it.
That is why your mission – to promote and maintain the integrity of whistleblower reward and private enforcement provisions in federal and state laws – is so important.
The whistleblower provisions of the False Claims Act work because they give someone an incentive to break the culture of silence that creates and promotes fraudulent behavior. And that incentive is necessary because, as this group well knows, blowing the whistle on fraud is a painful professional, and personal, decision.
As this group often tells people, “the False Claims Act is not a tip line,” and there are often financial and emotional consequences to exposing fraud. But the benefits, for consumers and society as a whole, are profound.
Take, for example, the case of the generic drug manufacturer Ranbaxy. In May 2013, Ranbaxy pleaded guilty to felony charges relating to the production and distribution of adulterated drugs from two of its manufacturing facilities in India.
In the years that preceded this plea, the company received early warnings that something was wrong. The company hired auditors and started to investigate evidence of abuses. But those investigations didn’t lead to change.
Change didn’t come to Ranbaxy until someone decided to speak up when no one else would.
Dinesh Thakur, the Director and Global Head of Research Information and Portfolio Management at Ranbaxy, came to the company with high hopes, but found an environment lacking in serious manufacturing or quality controls. When he tried to report his concerns to management, he found that no one was willing to listen. Left with few options, Mr. Thakur decided to file a False Claims Act lawsuit.
As a direct result of that lawsuit, Ranbaxy agreed to a $350 million civil settlement. It also prompted a criminal investigation by the Department of Justice under the Food, Drug and Cosmetic Act that resulted in multiple guilty pleas and a criminal fine and forfeiture totaling $150 million.
Ranbaxy is just one example. But what it shows is undeniable – your mission is an integral part of what makes the False Claims Act so effective.
The unique public-private partnership that is established by the safeguards billions of dollars of taxpayer funds, protects the health and safety of consumers, and improves public confidence in government. It does so by encouraging individuals with knowledge that the government doesn’t have to expose fraud within an organization, while permitting the government to use tools that are unavailable to an individual to respond to and deter fraud in the future.
Those tools include criminal prosecutions. That is why we have worked, and will continue to work, closely with our colleagues in the Criminal Division, led by Assistant Attorney General Leslie Caldwell, who will be speaking to you tomorrow about the role of the Criminal Division in the government’s anti-fraud efforts.
After all, the true success of the False Claims Act is not measured solely by dollars and cents. It is measured by the consumer who doesn’t have to worry about the quality of his medicine, or the soldier who doesn’t have to fear that her equipment is dangerous or defective.
That’s why we have put a renewed emphasis on ensuring that settlements include clear, public statements about the misconduct giving rise to False Claims Act violations. The impact of the cases we bring extends beyond the individuals and companies whose wrongdoing is at issue. We want others to understand what a defendant did, why it was unlawful, and how the conduct affected the government and the American public. And we want each victory we achieve in fighting a single instance of fraud to deter others from following the same path.
That’s also why we have included non-monetary requirements in agreements that will help us prevent future misconduct. That happened with Ranbaxy, where a civil consent decree required the company to establish an Office of Data Reliability that would work with its manufacturing, testing, approval, and compliance operations to ensure that all future drug applications are audited for accuracy before they are submitted.
These are presumably the types of quality controls that Mr. Thakur hoped to find when he first joined the company. And they have been successful, allowing the FDA to move swiftly and respond forcefully when it learned of problems at another Ranbaxy facility.
These measures may be an inconvenience for relators and their attorneys at times, as they may prolong or interfere with settlement discussions. But we hope that this group understands the long-term importance of such measures in preventing future harm and effecting real change in the way that companies do business. By protecting consumers, we strengthen the legitimacy of, and public confidence in, the False Claims Act itself.
I also want to emphasize that the Department does not decide which cases to pursue based solely on the size of the potential recovery. Although billion dollar cases draw the biggest headlines and bring the largest share to the whistleblower involved, efforts to expose fraud should not be foreclosed when lesser amounts are at stake.
We routinely bring cases that are noteworthy instead because they protect individuals. This year the Department announced a $41 million settlement with Kings Daughter Medical Center in Kentucky to resolve allegations its surgeons implanted cardiac stents in patients who did not need them. And just last month the Department reached an $18 million resolution with McKesson Corporation to resolve allegations related to the shipment of vaccines on behalf of the Centers for Disease Control without contractually required monitoring to ensure that the vaccines were kept at a safe temperature.
And we have pursued cases involving fraud that threatens the safety and security of our active duty military servicemembers – the modern equivalent of the sale of a lame mule to the Union army in the 1860’s. These cases have involved misconduct ranging from the sale of potentially dangerous products to our armed forces to the failure to test products to ensure that they meet military specifications and safety requirements.
Whether a case involves unnecessary surgeries, adulterated drugs, the abuse of the elderly in nursing homes, or defective military equipment, the Department is dedicated to rooting out fraudulent conduct that harms real people. And we encourage individuals to bring such fraud to our attention no matter the amount of money at stake.
Our success in these efforts depends on our cooperation with those in this room today. We must commit to communicate effectively with you – to help you understand why we make the decisions that we do. In return, we ask that you take our concerns into account when you decide to file or pursue a qui tam action. Such mutual understanding will help make enforcement of the False Claims Act more effective and efficient, benefitting both the whistleblower and the government.
Towards that end, there are three key points that I would like to stress today that are of particular importance to the government’s participation in qui tam actions.
The first is the need for relators to file cases in a manner that satisfies the requirements of the False Claims Act and provides enough information to permit an effective investigation of the relators’ claims. Well-pled complaints permit more reasoned decisions by the government as to intervention, but they also provide a more successful basis for relators to pursue their claims should the government choose not to intervene.
Second, and relatedly, we would ask that these well-pled complaints be screened for material that is potentially privileged. It may seem counter-intuitive to protect information that would otherwise appear to be solid proof of fraud, but the use of privileged material in filings creates difficulties for the government and complicates cases, necessitating the expenditure of additional time and resources to cope with the fallout.
Finally, I cannot stress enough how important it is to abide by the seal period for qui tam actions. When relators or their counsel decide to release information in violation of the seal, it causes enormous complications that can delay, or even disrupt, resolution of the matter at hand. We are fully aware that investigations often take time – time that can be difficult and expensive for those who have brought the cases. But it is essential to the effectiveness of our investigations, and our negotiations toward a recovery, that these matters not be prematurely disclosed.
Once the government’s investigation has concluded and the intervention decision has been made, the government will seek to lift the seal on the entire matter. In our view, the seal is designed to be coterminous with the government’s investigation -- to allow that investigation to proceed without undue interference or obstruction -- not to keep cases, or relators’ identifies, permanently under seal. We are committed to the principle that the public has a right to see the types of cases that are being brought under the False Claims Act and the role that the government plays. We recognize that there may be instances where it might be appropriate for a qui tam case, or parts of it, to remain permanently under seal, but we believe that is the very rare exception.
Like Taxpayers Against Fraud, the Department is committed to the preservation of a strong, and effective, False Claims Act. Towards that end, the Department often takes the long view about issues. We evaluate each case individually, but we also remain cognizant that each matter is part of a larger picture.
That view may be frustrating to someone who is focused solely on his or her case. But it is out of concern for the future strength and effectiveness of the False Claims Act that the Department may decide not to pursue or even to dismiss certain claims of marginal strength or value, or to recommend a relator share that is not as high as the relator may desire.
It is important for you to understand that the Department’s relator share decisions must take into account the broad range of relators who come forward – from those who report a potential fraud but provide little additional contribution, to those that participate in a case through litigation and trial, and sometimes even on appeal and retrial. Moreover, this decision is made with the knowledge that there are those who would point to large share amounts as a reason why the powers, or at least the qui tam provisions, of the False Claims Act should be limited.
This is more than a possibility – it is demonstrated by current proposals to limit the False Claims Act in ways that would harm taxpayers, consumers, and the men and women of our armed forces. That is why we support the mission of this organization in maintaining and preserving one of the most effective weapons that we have against fraud – the False Claims Act.
Thank you for inviting me to participate in this conference with you. Both Joyce and I look forward to working with you in the future.