Confronting Qui Tam: Defending The Corporation In False Claims Act Litigation

Wednesday, September 1, 2004 - 01:00

Editor: Like many white-collar defense counsel, you started out as a
Department of Justice attorney. What can you tell us about your background?

Whitaker: I started with the Department of Justice in 1976 and was
assigned to the Federal Programs Branch of the Civil Division. As Special
Litigation Counsel, I handled some of the remaining Nixon tapes cases, the Karen
Silkwood plutonium contamination case in Oklahoma City and two actions against
former CIA employees Frank Snepp and Phillip Agee. In addition, I represented
the United States in three separate proceedings to enjoin national strikes,
which we believed threatened the economic security of the United States. I left
the Department of Justice in 1980 and returned to my hometown, Cincinnati, Ohio.
I have represented corporate and individual defendants in many high profile
criminal matters including one of the first Medicaid fraud trials against a
physician, which was televised for eight weeks and resulted in an acquittal. I
have represented government contractors and healthcare providers in fraud
actions, both in criminal and civil proceedings. My involvement in criminal
defense led naturally to the defense of the same clients in parallel
proceedings, including qui tam actions. Usually, we have been able to get these
cases dismissed on a motion or settled for a reasonable amount. Not many qui tam
cases go to trial, but I won a jury trial in a major qui tam action a few years
ago, and I am preparing for another such trial in January 2005.

Editor: Mr. Whitaker, in view of your excellent track record in court
defending corporations in both civil and criminal cases in Ohio, what prompted
the recent decision by Vorys to expand its white-collar defense practice to
Washington, D.C.?

Whitaker: Although I intend to continue to spend much of my time in
Cincinnati, it has become increasingly apparent that many of the firm's clients
require representation in Washington. I find myself making many trips to the
Department of Justice to meet with the government about cases I am handling.
Most of the litigation that I am involved with has been the subject of some sort
of federal investigation by the FBI, the Defense Criminal Investigative Service,
the HHS/OIG or any number of other federal investigators. It just makes sense to
come back to Washington and devote part of my practice to being where these
federal investigations originate.

Editor: You mentioned qui tam litigation under the 1986 amendments
to the False Claims Act. Can you give us a little background on the False Claims
Act and its history?

Whitaker: The False Claims Act dates back to the 1860's. In an effort to
control rampant fraud during the Civil War period, Congress passed this statute
to permit private citizens to bring an action on behalf of the United States.
The statute has evolved over time, but in 1986 it was amended to arrive at its
present form. Essentially, the statute allows a private citizen to file an
action under seal in federal court against a defendant or defendants who are
allegedly engaged in some fraud on the United States.The kinds of cases that
have been brought under the statute have been expanded over time from defense
procurement to healthcare and even beyond to environmental violations. There is
even some discussion of including securities violations within the ambit of the
False Claims Act. The people who bring these suits are eligible for a percentage
of any recovery - and the recovery can be substantial because the government is
entitled to treble damages, statutory penalties, and attorneys' fees.

Editor: What has been the impact of the False Claims Act on corporations
over the last 18 years?

Whitaker: The government has recovered approximately $7.5 billion in
suits and investigations of fraud. In the fiscal year that ended last September,
the government recovered a record $2.1 billion in suits and investigations.
Recoveries have been skyrocketing in recent years and have expanded from
$355,000 in 1988 to $1.39 billion in 2003. The risks of being found liable for a
violation of this statute are incredibly severe and can result in a company
going out of business. Meanwhile, whistleblowers are becoming greatly enriched.

Editor: As you said earlier, False Claims cases seemed to have gone beyond
defense contractors to healthcare providers. Which industries do you see being
targeted by the plaintiffs' bar for the next several years? Or, to put it a
different way, what is the next big thing?

Whitaker: I think healthcare will be a substantial portion of the False
Claims Act docket for the foreseeable future. Pharmaceutical companies have also
become substantial targets, and, as I said, there is movement afoot to expand
the scope of the False Claims Act to include a wide variety of other companies
and entities that receive federal funding. I have defended contractors in
actions brought by qui tam relators who have alleged that construction
contractors have violated various environmental laws and, thus, have breached
the provisions of their contracts that require compliance with all environmental
statutes and regulations. These cases are becoming increasingly popular, both
with qui tam relators and the government.

Editor: Is the war in Iraq likely to produce a deluge of False Claims Act
cases?

Whitaker:I think any upsurge in defense procurement is bound to trigger
more False Claims Act cases, but I think the lure of the potential rewards for
qui tam relators is going to mean a continuing increase in the numbers of False
Claims Act cases which are brought in every line of business that has federal
funding.

Editor: How has Vorys responded to the upsurge in these qui tam
cases? How has the firm structured its False Claims Act practice?

Whitaker:We have created a group of attorneys who have experience in
dealing with the government, both in the healthcare industry and in government
contracting. We now have nearly 10 lawyers who devote either full or a
substantial portion of their time to the defense of False Claims Act cases. One
of the advantages that our firm has over many of the other firms that do this
kind of work is that we have come at it from a trial perspective. Most of the
law firms that are involved in the defense of False Claims cases are more
technically government contract oriented or healthcare oriented firms. Our law
firm has that technical expertise, but our False Claims Act group is also more
litigation oriented. I believe that we have a better perspective on what
arguments and evidence will persuade a judge or jury. Too often, the more
specialized firms are focused on the technical elements of a government contract
issue and miss the big picture. With our extensive experience in jury trials, we
approach cases from the point of view of how best to persuade fact-finders. Our
attorneys have a lot of courtroom experience in both criminal and civil matters
and we feel that this experience gives us a unique advantage in defending False
Claims Act lawsuits.

Editor: How do you go about determining whether to settle or to litigate
these False Claims Act cases? As you have said, you actually try cases. If you
decide on litigation, what is the key to winning a qui tam case? What
strategies and tactics are effective?

Whitaker: Every case is different and there is no hard and fast rule as
to which cases should be tried and which cases should be settled. Obviously, the
clients' interest is the most important part of this determination. Sometimes
even if the merits are strong for the defense, the cost of going forward doesn't
favor a trial. Our goal is to put the case in a posture where it can either be
tried successfully or settled favorably. I think that one thing that separates
our group from others in the defense of these cases is that we attempt to
formulate a strategy at the front end of a case in order to get it to where it
ought to be. Most qui tam actions have involved a great deal of investigation by
the government and/or the relator prior to the action being unsealed. We attempt
to duplicate that level of intensity at the front end of an action so that we
can understand where the relator or the government or both are going with the
action so that we have a strategy during discovery which positions the case for
a favorable resolution early on. We also believe in being aggressive in
attacking the complaint at the very first opportunity through motions.

Editor: What can corporations do to avoid False Claims Act lawsuits? Does
the creation of a compliance program help a corporation?

Whitaker: It's clear that a compliance program is essential
in this day of Sarbanes- Oxley and increased emphasis on
corporate wrongdoing. In fact, the Department of Justice has recently taken the
position that the absence of a compliance program or an ineffective compliance
program satisfies the scienter requirements of the False Claims Act. If there
are effective internal procedures available to allow for employees to complain
about issues that they become aware of during their employment, it is much less
likely that the same employees will feel compelled to bring their issues to the
attention of federal investigators. In any event, it is more likely that the
company will learn about these issues through its compliance program and make
corrective action before the matter becomes serious enough to warrant government
intervention in a qui tam lawsuit.