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On August 30, 2016, the Treasury Inspector General for Tax Administration issued a report following an audit of the IRS Whistleblower Program. The audit was conducted to determine whether whistleblower claims are being appropriately and timely processed for investigation and examination.   The report confirms much of what lawyers who practice in this area already know.

First, the report confirmed that the program has the potential for great success.  From fiscal year 2011 through 2016, the IRS collected more than $2 billion of unpaid taxes based on information reported by whistleblowers.   While this sounds like a great success, lawyers who practice in this area, such as McCabe Rabin, P.A., believe this is just the tip of the iceberg.

The report also confirmed a number of problems with the IRS whistleblower program, most notably, the IRS’s failure to contact whistleblowers to clarify allegations and the IRS’s failure to have proper supervision and oversight to make sure that whistleblower claims are timely processed and referred for examination.  The report makes 10 specific recommendations for improving the manner in which the IRS receives, processes, and handles IRS whistleblower complaints.

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How do you know if you have a Qui Tam Case?

Under the False Claims Act, persons who know about fraud against the federal government can receive a reward for reporting that fraud and helping the Government recover money from the wrongdoer.    We receive many calls from potential whistleblowers who wish to report serious fraud against Government.  Unfortunately, we cannot take every case where fraud exists.   Here is a list of sample questions to help you determine whether you might have a potential False Claims Act qui tam case.

  1. Does your employer do business with the federal or state government?  This would include Government vendors or contractors as well as healthcare companies that receive payment from Medicare or Medicaid.
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If you are considering blowing-the-whistle on government fraud, you are probably wondering what happens once you file a qui tam lawsuit under the False Claims Act. The False Claims Act, 31 U.S.C. § 3729 et seq., contains a very detailed process for bringing a whistleblower case.

Steps involved in a qui tam case

Before the qui tam complaint is filed, the whistleblower (also called the “relator”) must make a “pre-filing disclosure” to the government through his or her attorney.  The pre-filing disclosure contains substantially all of the evidence that is known to the relator about the fraud.  The pre-filing disclosure is not filed with any court and is not available to the defendant.

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Deadly Healthcare Fraud in Florida and Beyond

Do you think Medicare and Medicaid fraud is a victim-less crime? Think again.  Many times, health care fraud only causes monetary damages to the government and taxpayers.  Depending on the type of fraud, however, it can also result in injuries to or even the death of Medicaid and Medicare beneficiaries.  Unscrupulous fraudsters who fail to provide adequate care required by Medicare and Medicaid, not only scam the government and taxpayers, they put innocent lives in jeopardy.

Take for example a recent criminal healthcare fraud case in Maryland against Alpha Diagnostics, LLC, a portable diagnostic services provider of x-rays, ultrasounds, and cardiologic tests.  According to the Department of Justice, the testimony and evidence presented at trial showed Alpha defrauded Medicare and Medicaid by falsely representing that the tests had been interpreted by licensed radiologists, when in fact, the tests had only been reviewed by non-physician employees of Alpha.  In furtherance of the fraud, Alpha employees allegedly created fictitious reports purportedly created by an actual licensed physician to which they would forge the licensed physician’s signature.

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In America today, many hospitals are owned and controlled by massive corporations that operate large chains of hospitals throughout the country.  As a result, your local hospital may not be locally owned or controlled.  Instead, it might be more akin to a McDonald’s restaurant, owned and controlled by some large corporation with a faraway headquarters.

Although this type of “chain” ownership can often lead to efficiency, it can also lead to serious problems.  More and more often, the day-to-day decisions of running hospitals are made by business people who work in the corporate suites, not doctors and nurses who actually deliver care to patients.

Many times, these decisions are made to drive profits rather than to serve the best interests of the patients.  Many times these decisions can also lead to Medicare and Medicaid fraud.

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While we’ve written about the whistleblower programs administered by the IRS and the SEC on this blog, one has been consistently neglected – the CFTC Whistleblower Program.

The Commodities Futures Trading Commission (CFTC) regulates futures and option markets.  Futures contracts are, in their basic form, agreements to purchase and sell assets at a price agreed-to today with delivery and payment at a future date.  Exchanges for trading futures contracts were originally used to trade grain futures; later, people began trading futures contracts on other agricultural products and later for natural resources.   Today, people trade futures in foreign currency, government securities, and stock market indices.  Futures exchanges are regulated by the Commodities Exchange Act.

The CFTC Whistleblower Program

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HIPPA and Whistleblower Cases

Most people in the healthcare industry know that documents covered by HIPAA must be treated with utmost secrecy and care.   Protecting patient privacy is a big deal.  Thus, questions frequently arise when a healthcare worker wants to blow the whistle on fraud.  Can he or she use HIPAA protected documents to support their claims?

The short answer is yes, with certain qualifications.   The government wants to encourage people who know about fraud to come forward and report it.   Therefore, the government has enacted a specific HIPAA exception for whistleblowers.

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The United States is currently at war with the People’s Republic of China – a trade war.  The False Claims Act has an important role to play in this battle.

Every year foreign countries, but most particularly China, engage in a practice of “dumping” goods into the U.S. market.  Generally, this occurs when a foreign country exports goods into the U.S. at a sales price below the producer’s own cost of production.  Often, this takes place because the foreign manufacturer is receiving an unfair subsidy from its own country that makes the U.S. sales price extremely low.   The bottom line is that Chinese manufacturers can sell goods at prices so cheap that it creates an unfair advantage and materially harms U.S. producers of the same goods.

When the government determines that U.S. domestic industries are being materially injured by this type of “dumping,” the government can impose anti-dumping duties or countervailing duties to offset the unfair advantage enjoyed by the foreign manufacturer.  In plain language, this means the importer of these foreign goods must pay an extra fee in order to bring these cheap goods into the United States.   The extra fee is designed to make the foreign goods more expensive so that U.S. industry can remain competitive.

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What is a Violation of the False Claims Act?

Any fraud on a federal government agency could potentially be a violation of the federal False Claims Act.  Not every government fraud involves millions of dollars.  Take, for example, a recent settlement announced by the Department of Justice’s Office of the Inspector General.

According to the DOJ’s press release, Douglas daCosta of Livermore California, a former federal law enforcement agent in the San Francisco field office of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), has agreed to settle allegations that he submitted false claims to the federal government for paid sick leave when he wasn’t sick. Wait. What? An employee got in trouble with the federal government for playing hooky from work?  Yes.

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Business Litigation Attorney Explains: I.R.S. Whistleblower Awards Expanded by U.S Tax Court

The statute governing whistleblower claims, I.R.C. § 7623, grants awards to private citizens who provide information to the IRS that leads to the collection of at least $2 million in taxes, penalties, interest, and “additional amounts.”  The whistleblower can get an award of “at least 15 percent but not more than 30 percent of the collected proceeds.”

This week, the United States Tax Court issued an opinion that expands the definition of “collected proceeds” for purposes of an IRS whistleblower claim.  The IRS has generally taken the position that so-called “tax restitution,” or repayment of back taxes and interest, qualified as “collected proceeds,” but any criminal or civil fines or forfeitures did not.  For instance, the IRS’s Internal Revenue Manual explains that criminal fines cannot be used for a whistleblower award, because the entirety of the fine must be deposited into the Victims of Crime trust fund.  Likewise, a civil forfeiture must be placed in its entirety into a Treasury Department trust fund.