While I am as big a fan of the D.C. Examiner as anyone—and I especially enjoy the work of William Flook, one of their staff writers—I cannot let the blather that was passed off as an editorial yesterday stand without comment.

Of course, I realize that editorials are specifically intended to take controversial positions on pressing issues of the day.  Editorials are intended to spark letter writing, discussion, and debate.  Moreover, there is no doubt that the False Claims Correction Act of 2007 is among the pressing issues of the day, regardless of whether you agree or disagree with it, so it is fair game for editorial writers. 

My problem—and the reason I label the editorial as blather—is not that the article takes a position I disagree with.  The article yesterday is blather because it is not an editorial at all.  In fact, the article yesterday does a grave disservice to the art and tradition of editorializing in the American press. I would have enjoyed reading a well-written, intelligent editorial raising good arguments against the False Claims Correction Act—although I would still reserve the right to blog in response. 

The simple fact is that this editorial was written by someone without any understanding at all of basic legal terminology and basic legal concepts—never mind the political history and economics of the False Claims Act.  It was obviously written by someone with an obvious bias who was not concerned with being taken seriously by educated readers—in other words, someone with no business writing editorials for a D.C. area newspaper.     

First, the author's complete ignorance of basic legal terminology is offensive.  The article consists of 408 words total, and the words "class action" appear no less than seven times.  This is complete stupidity, because the FCA does not, never has, and never will, have anything to do with class actions.  Rather, I mention this first because it shows the author's obvious ignorance, and highlights his or her efforts to trot out the old familiar terminology instead of actually contributing something to the debate.  Any further discussion of this logical error would quickly devolve into dry legal stuff, so I will move on. 

Second, the politics and history of the False Claims Act was profoundly botched. The author fails to recognize that the FCA is a bipartisan issue that crosses party lines.  The author refers to Sen. Grassley (R-IA) and Sen. Specter (R-PA), both Republicans, as if they were turncoats who are hurting their own party in an effort to cater to "plaintiffs lawyers."  (By the way, the phrase "plaintiffs lawyers" is used no less than eight times in the 408 word essay.) 

Leaving aside the fact that the FCA enjoys bipartisan support, Republicans have often been at the forefront of the FCA.  The primary proponent of the original statute was Abraham Lincoln, the very founder of the Republican Party.  In fact, the FCA was known for years as "Lincoln's Law."  In 1986, Ronald Reagan breathed new life into the FCA by signing the 1986 FCA amendments.  John Ashcroft, the first Attorney General under President Bush, was a zealous advocate for the FCA—and he was in no way in favor of class actions or plaintiffs lawyers.  These are just two examples that occur to me off the top of my head—the list could go on and on. 

The most offensive part, however, is the following: 
  
   The details [of the FCA] are a bit abstruse; what’s important is that the bill would enrich 
    the class action plaintiffs’ bar, while encouraging witch hunts against businesses 
    for alleged fraud that in most cases doesn’t even exist.

Fraud against the federal government doesn't exist?  The author obviously has no clue—about government contracting, healthcare, social security, the budget process, politics, or anything else.  I wonder why the Department of Health and Human Services bothers to publish all of those work plans for fraud investigations if there is no fraud?  Why do we even have an Office of the Inspector General at all?  Why do we have so many criminal laws criminalizing Medicare and Medicaid fraud if there is so little fraud? 

And then I saw the next page, and everything became clear.  The next page features a quarter-page advertisement from the U.S. Chamber of Commerce and the Institute for Legal Reform, two voices against the FCA.  Obviously, this ignorant editorial was quickly written to pander these deep-pocket advertisers, whom the D.C. Examiner can scarcely afford to lose.  

I cannot resist the urge to throw in a jab at the U.S. Chamber of Commerce here.  Government, in all of its forms, does not create wealth; rather, government redistributes wealth.  A large part of politics today turns on the who, where, when, why and how the wealth of the American people is redistributed.  Players like the U.S. Chamber of Commerce, I think it is fair to say, are generally against increased government, and in favor of the privatization of government functions. 

The U.S. Chamber of Commerce would, I think, agree with me that private industry is, as a rule, more efficient and cost effective than government.  So I find it interesting that the U.S. Chamber of Commerce protests so vehemently against the privatization of law enforcement by statutes such as the FCA. 

Could we not get more efficient and cost effective law enforcement through privatization?  You bet, and that is why we have laws such as the FCA.  The U.S. Chamber of Commerce is only in favor of some privatization, however, and they are all in favor of redistribution of wealth, so long as the money is redistributed to business.  

The False Claims Correction Act of 2007, like everything in civil society, is and should be the subject of intelligent debate and discussion.  The D.C. Examiner's Editorial of May 6, 2008 contributes nothing to the public debate about the False Claims Correction Act.  Moreover, by trotting old familiar emotion-laden words like "class action" that have nothing to do with the FCA, the editorial became nothing more than a rant—and a pandering one designed to keep a deep pockets advertiser happy, at that. 

What a shame.

Zachary A. Kitts
Cook & Kitts, PLLC

        

Okay, maybe the headline is a little premature.  Still, the single most exciting development in the 2009 Virginia Attorney General race since my Open Letter has been John Brownlee's resignation from his position as United States Attorney for the Western District of Virginia. 

Why?  Because Brownlee is rumored to be considering a run for Virginia Attorney General.

As you may or may not recall, Brownlee was responsible for the single largest false claims recovery in the history of Virginia in May of 2007.  The recovery, on the order of $634 million dollars, included criminal guilty pleas by three top Purdue executives, in which they admitted that Purdue fraudulently marketed Oxycontin.  Virginia received more than $34 million dollars from these three  Purdue executives, and an additional $25.3 million dollars as part of the settlement.  

In other words, John Brownlee returned almost $60 million dollars to the Commonwealth by his focus on qui tam and the False Claims Act. 

That alone would be enough to qualify him for Virginia's top law enforcement job.  But when we consider the courage and character Brownlee displayed to obtain the settlement, his candidacy gets much stronger.

Brownlee showed exceptional courage in obtaining the Purdue settlement because, by some accounts, it almost cost him his job.  In a little known turn of events, Brownlee rebuffed an apparent attempt from DOJ to obtain more time for Purdue to consider the agreement.  The date was October 24, 2006.  Brownlee stood firm, and the settlement/plea agreement was accepted that day.    

Exactly one week later, on November 1, 2006, Brownlee showed up on the infamous Kyle Sampson's "black list" of U.S. Attorneys to be dismissed.  (He was eventually removed from the list and not terminated.)

So everyone, pass the word—the effort to draft John Brownlee to run for Virginia Attorney General is under way! 

Zachary A. Kitts
Cook & Kitts, PLLC
    

 



 

        

An article published by two professors at the University of Chicago should be of some interest to readers of this blog.  See, Blowing the Whistle: Which External Controls Best Reveal Corporate Fraud? 

The link is to a newsletter distributed by the University of Chicago and not to the paper itself.  While the sub-title of the linked article says, "New research suggests that the best way to promote fraud detection is to extend the Federal False Claims Act to corporate fraud."  At the risk of sounding snobby, I would like to point out that is not, strictly speaking, an accurate way to conceptualize what the study says. 

The Federal False Claims Act, of course, applies to any person—whether a natural person or a corporation or both—who makes a false claim to the government for money.  What the subheading means to say, I think, is that the unique qui tam structure of the Federal False Claims Act—which allows private citizens to prosecute cases on behalf of the government and calls for a percentage of the government's recovery to be paid to the party who blew the whistle on the fraud—should be extended to the corporate governance sphere. 

And thus the article strikes upon one of the themes of this blog:  the utility and effectiveness of private law enforcement generally.  We do not need to go so far as qui tam to see that private law enforcement is effective. 

At any rate, check out the study, and I welcome your comments.

ZAK
http://www.cookkitts.com

        

It is well known that the Virginia Fraud Against Taxpayers Act—like its counterpart the Federal False Claims Act—provides for treble damages against anyone submitting false claims to a government entity for payment. 

Both the VFATA and the Federal False Claims Act also create civil penalties for each violation of the law—that is, for each false claim submitted for payment.  These civil penalties are, for all practical purposes, a liquidated damages provision that encourages individuals to blow the whistle, and encourages lawyers to learn about and prosecute these claims, even in cases where the dollar amount of each individual false claim might be very small.  

Civil penalties under the VFATA and the FCA are mandatory.  A trial court may exercise its discretion as to whether the higher or lower amount of penalties is awarded, but the Court does not have discretion to reduce the number of penalties.  See, United States v. Cato Bros. Inc., 273 F.2d 153 (4th Cir. 1959).

Civil penalties have been a feature of the Federal False Claims Act since it was first passed during the American Civil War in 1863.  The civil penalties called for in the first Federal False Claims Act were $2,000 per claim.  Currently, the VFATA provides for civil penalties of between $5,000 and $10,000 for each false claim submitted to the Commonwealth.  The Federal False Claims Act provides for penalties of between $5,500 and $11,000 for each false claim.   

As proof of Congress' intent to add teeth to the FCA by adding civil penalties, consider that after adjusting for inflation, in today's dollars the original False Claims Act called for penalties of $41,000 for each false claim.  

Comments? 

ZAK
Cook & Kitts, PLLC   

        

One of my stated purposes in starting this blog was to create interest in the Virginia Fraud Against Taxpayers Act and in qui tam practice in general.  In order for statutes such as the Federal False Claims Act and the Virginia Fraud Against Taxpayers Act to achieve their goals, it is necessary to build a public-private partnership between qui tam attorneys in private practice and our counterparts in the Virginia Office of the Attorney General and the United States Department of Justice. 

Today's blog will focus on the history of litigation under the VFATA since January 1, 2003 when it became law.  I have attached to this entry a list maintained by Guy Horsley, who serves as the co-ordinator for the VFATA in Virginia Office of the Attorney General.  I obtained this list from Guy via a FOIA request for publicly available information on cases filed under the VFATA.  

A few items of note about this list. 

First, note the volume of the redacted material on the list.  The material was redacted because these cases are still under seal, either in Virginia or somewhere else in the country.  (For those of you new to state qui tam statutes, claims under the VFATA are often included as pendent state claims in qui tam cases filed in federal courts throughout the United States.) 

The chart attached shows a total of nine cases under the VFATA that have been unsealed since January 1, 2003.  There appear to be close to 100 cases that are still under seal and were thus redacted.  Even if the vast majority of these redacted cases are nationwide complaints filed in a federal court somewhere, the volume of cases under seal is surely a good trend for the VFATA. 

Second, notice that of the nine cases unsealed since 2003, the Commonwealth moved to dismiss four, four were settled immediately after unsealing, and in only one cases did the Commonwealth not intervene and not move to dismiss.     

More to follow in future postings. 


Zachary A. Kitts
Cook & Kitts, PLLC

    

        

I recommend everyone interested in this blog check out Stewart Weltman's Lean and Mean Litigation blog.  While it does not address qui tam or false claims practice in particular, its focus on efficient litigation practices is invaluable to those interested in qui tam practice.

Weltman's blog ranges over a wide variety matters relevant to trial practice, from effective deposition techniques to the psychology of litigation, but in my mind one point is woven throughout his blog: in litigation, just like in any other competitive professional endeavor, lawyers who want to win cases focus on the fundamentals, because they know that the case is won or lost on those basic elements of this profession. 

By that I mean the following.

People who really know football will agree, I think, that every football team in the NFL has basically equal talent.  I know, not every quarterback is Dan Marino, and not every running back is Barry Sanders, but no one gets into the NFL without having a rare combination of skills and abilities, and on any given day, any team in the NFL has the ability to beat the daylights out of any other given team.

On the other hand, if you matched the very worst professional team against the very best Division I college team, I would put my money on the pros, and I think most people would agree with me.  The disparity in skill and ability would be too great for the college team to compete.  

But in a competition between two professional teams, the side that executes better on the fundamentals will and does win.  If an NFL team with 12 straight losses plays an undefeated team, and the undefeated team proceeds to throw three interceptions and fumble the ball twice, they are almost certainly not going to win.  

The legal profession, in my estimation, is more like the NFL.  There are certainly a wide variety of skill levels present in the legal community, but at the end of the day anyone with a law license and a little experience can successfully get a case resolved against the best there is if they focus on the fundamentals, avoid sloppy mistakes, and work hard. 

I have never met a lawyer that was not intelligent enough to handle a case well.  I have met many, many lawyers who were too lazy to handle a case well.  I have heard that the three most feared words in any lawyer's vocabulary are "pro se litigant."  I can see the logic behind that, but I submit that the words "lazy opposing counsel" are right behind pro se litigants. 

A lazy opposing counsel who fails to take the time to understand his or her case fails to be able to accurately assess the situation, fails to work with the other side in narrowing the issues for trial, and fails to be of any use whatsoever to his or her client.  In my view, they also fail to live up to their oath as officers of the Court.

At any rate, if more people litigated cases the way Stewart Weltman describes, disputes between parties would be resolved more efficiently, litigants would spent less money on litigation, our court dockets would be less crowded, and life as a litigator would be much easier.  Please check his blog out.

Zachary A. Kitts
Cook & Kitts, PLLC       

 

      

        

 
Senate Bill 2041, also known as the False Claims Act Corrections Act of 2007, has received overwhelming bipartisan support from the Senate Judiciary Committee, which has reported it out to the full Senate for consideration.

     
    "This is common sense legislation that we expect to sail through the House and Senate," said Jeb White, President of Taxpayers Against Fraud.  "This bill has broad bi-partisan support. It's hard to be opposed to building a better rat trap to catch corporate cheats, chiselers, and con artists."

   
   Proponents of S. 2041, note that the new bill clarifies the existing scope of False Claims Act liability, while closing a small number of loopholes that have allowed companies to steal taxpayer dollars with impunity. Specifically, S.2041 would:

 

•     Clarify that False Claims Act liability protects all federal funds;
• Solely vest the Government with the power to dismiss whistleblower-filed False Claims Act lawsuits that are based on public allegations;
• Remove the confusion over the statute of limitations period by adopting a straightforward 10-year period;
• Explicitly clarifies that the False Claims Act applies to those who discover an overpayment and decide to pocket the funds; and provide strengthened employment protection for whistleblowers.

   
     S. 2041, and its analog in the U.S. House of Representatives, is supported by leadership in both parties, including Sen. Charles Grassley (R-IA), Senator Richard Durbin D-IL), Senator Patrick Leahy (D-VT), and Senator Arlen Specter (R-PA).

    More Good news to follow!    

        

Ken Cuccinelli, who has announced his intention to run for Attorney General of the Commonwealth next year, would do well to focus on the Virginia Fraud Against Taxpayers Act.<< MORE >>

Qui tam cases under the Virginia Fraud Against Taxpayers Act must be filed under seal. Given that the first case was not filed in Fairfax County until February of 2007, you should not assume that your particular Circuit Court has experience with the statute, and extra precaution should be taken. This posting contains the wisdom I gathered, such as it is, in filing under seal in the Circuit Court for Fairfax County.<< MORE >>

March 13, 2008 marked the one year anniversary of the Virginia Fraud Against Taxpayers Act's certification under the Deficit Reduction Act of 2005. << MORE >>