Ropes & Gray's new podcast series, Public Disclosure, is your guide to the False Claims Act. In this inaugural episode, Ropes & Gray litigation partner Kirsten Mayer hosts two guests: Robert Patten, who is currently President and CEO of Taxpayers Against Fraud (TAF), a leading non-profit organization promoting whistleblowers and whistleblower laws, and Joshua Levy, a Ropes & Gray partner and co-chair of the firm's litigation & enforcement practice. They discuss how to navigate the False Claims Act world, including how investigations work, what companies facing the FCA can do to reduce risk, and TAF's role in shaping the law and promoting whistleblower actions.
Kirsten Mayer: Welcome to Public Disclosure, our podcast series about one of the most powerful anti-fraud statutes in the government's arsenal: the False Claims Act. I'm Kirsten Mayer, a litigation partner at Ropes & Gray, and your host for today's episode. The Federal False Claims Act is a whistleblower statute that dates back to the Civil War. At its most basic, it prohibits submitting false or fraudulent claims for payment to the government. If you demand payment to which you're not entitled, you break the law. If you're caught, you'll pay. The government can win up to the three times the value of that false claim, plus additional civil monetary penalties – sometimes this can total in the hundreds of millions, if not billions of dollars. The False Claims Act rewards whistleblowers who come forward. A successful whistleblower could take up to 30 percent of the government's recovery. The False Claims Act is a powerful statute in its own right. Over time, it has evolved to become something bigger: an anchor for a complex enforcement system that encompasses a wide-range of laws at both the federal and state levels with independent government stakeholders throughout the executive branches of state and federal government and, of course, whistleblowers and the lawyers who help them pursue their claims. In today's episode, we welcome Bob Patten and Josh Levy to help us navigate this landscape. Bob, welcome to Public Disclosure.
Robert Patten: Thanks, Kirsten. I am presently the President and Chief Executive Officer of Taxpayers Against Fraud and the TAF Education Fund. TAF is a 33-year-old organization that is dedicated to promoting incentivized whistleblower programs, including the False Claims Act. It's a membership organization of 400-420 whistleblower lawyers who represent clients in False Claims Act cases and in cases brought under the SEC, CFTC and Internal Revenue Service whistleblower programs. Before joining TAF, I was an assistant attorney general in Massachusetts for 21 years, 17 of those years in the Medicaid Fraud Control Unit where I was responsible largely for enforcement of the Massachusetts False Claims Act.
Joshua Levy: Thank you, Kirsten. Bob, good to be here with you. My name's Joshua Levy. I'm a partner at Ropes & Gray in the litigation & enforcement practice. I've been on the defense-side for the last 16 years and I swim in the waters of the False Claims Act every day. Prior to being at Ropes & Gray, I spent seven years as an assistant United States attorney in Boston in the U.S. Attorney's Office, and worked on, at the time, a record-breaking $486 million resolution for national medical care, Fresenius, in a kickback case. I've been fortunate enough to work on some of the largest settlements in the medical field, health care field, over the last 16 years.
Kirsten Mayer: Bob first encountered the False Claims Act in 2000, when he joined the Medicaid Fraud Control Unit at the Massachusetts Attorney General's Office.
Robert Patten: By a happy coincidence, Massachusetts had just enacted its False Claims Act in 2000, and as I have often said, the statute did not come with a user's manual.
Kirsten Mayer: Shortly after he started, he was invited to join a case that was pursuing a novel theory under the False Claims Act, United States ex rel. Franklin v. Parke-Davis.
Robert Patten: Tom Green, who was relator's counsel on that case, came to the office seeing if we might be able to coordinate some state involvement in the investigation.
Kirsten Mayer: The case eventually settled for $430 million in civil fines and criminal penalties, and triggered a historic wave of additional investigations of other companies.
Robert Patten: So that was my first crash course in the False Claims Act. In the next few years, by 2003-2004, Massachusetts, I think, was the fifth state to enact a False Claims Act with qui tam provisions. By 2003-2004 there were, I think, 11 states and the District of Colombia who had statutes, and we were seeing kind of an explosion in the filing of health care-related False Claims Act cases. So I had the opportunity at that time to begin coordinating with other states and working with the federal government on a coordinated approach to investigating and resolving these cases.
Kirsten Mayer: Josh Levy's first significant False Claims Act case as an assistant United States attorney in Boston started in 1997.
Joshua Levy: I had some experience with the False Claims Act as a young attorney at Ropes & Gray on the defense-side, but this was really my first time taking a significant role on the matter. What I remember most about that was the company counsel asked to meet with us in the early weeks of the investigation, came into our offices, and I'm still getting my feet wet, figuring out where the restrooms are, etc., and they put $100 million dollars on the table to resolve the case. They said they wanted to get it done quickly – they were willing to step up to the table. They left and the doors closed, and we all looked at each other and said, "Wow, we're on to something big if they're willing to put that much money on the table this early." That started a process of working on that False Claims Act case and learning the back and forth with the role of the whistleblower in developing investigative theories, and as you get into the documents, that being a resource on issues, and that was really my first experience in the government-side.
Kirsten Mayer: The False Claims Act itself, the federal statute, dates back to the Civil War, but it has evolved. In 1986, a significant set of amendments ushered in the modern era of False Claims Act enforcement. Those amendments strengthened the role of whistleblowers and facilitated their bringing these cases. Between 1987 and 2018, the number of cases filed annually by whistleblowers jumped from 30 in 1987 to 645 in 2018. Bob and Josh have seen other changes, as well.
Robert Patten: Beginning about 20 years ago, I think we saw a shift in significant False Claims Act cases from the defense industry to the health care industry. Particularly, beginning in 2000 and over the last 20 years or so, it seems that the majority of significant false claims investigations and recoveries have been in the health care field, with some significant cases in the banking industry, some cases in the defense industry as well. But the False Claims Act permits the government and whistleblowers to follow the money, and when the cost of the American health care system grew exponentially over this past two decades, we saw a lot more in the way of conduct that got the government's attention in the health care field. My experience as a government lawyer was that the majority of medical providers are law-abiding. But in a system that costs so much, the opportunity for stealing significant amounts of money is there, and a very few bad actors can have a big impact and can be responsible for a lot of loss to the government.
Joshua Levy: Just picking up on what you said, Bob – health care fraud is one of the very few issues in America in 2020 that both parties are united behind. We've seen a tremendous amount of increase in the number of prosecutors assigned to these matters, agents assigned to do the legwork to bring these cases, and it's a snowball effect – as you have big settlements, they sort of beget big settlements. It's not just the government that's driving that, it's also the whistleblower bar and it's people working in companies who read about a big settlement and think, "Well, I'm seeing something in my company that's not right." It's the internet and the dissemination of information and knowledge and social media. So there's all sorts of forces that I think have contributed to this great growth of cases and settlements.
Robert Patten: I think it's a synergy. I think that all of the folks that you mentioned have had a role in this and it's been a gradual evolution of the law through cases that have been brought through trial and error, and some theories have not been successful.
Kirsten Mayer: We've also seen novel theories emerge and new ways of using the False Claims Act. Where is that innovation coming from? Is it from the Department of Justice or the State Attorney General's? Or is it being driven by whistleblowers and their lawyers?
Joshua Levy: I don't know exactly what's happening behind the scenes. My guess is you have some really smart people who are whistleblower lawyers out there. I think in the last ten years we've seen more former prosecutors become whistleblower lawyers. If you ask me to tick off who are the ones I respect the most, a couple of them are former federal prosecutors who know how to do case analysis, know how to build cases. So you have smart lawyers bringing cases to smart DOJ lawyers who have experience, and I think the synergy there is really what's driven this expansion of new theories.
Kirsten Mayer: Bob's organization, Taxpayers Against Fraud, also plays a role in shaping the law through the use of "friend of the court" or amicus briefs.
Robert Patten: We have a very talented and effective amicus committee, and we field requests from lawyers in this practice area, both members and non-members, to weigh in, both in the Federal Circuit courts and at the Supreme Court on issues relating to various whistleblower laws. We sometimes will take positions on specific legal questions. Typically, we leave it to the parties to weigh in on the merits of specific cases, but where we think a question of interpretation of the False Claims Act or one of these other laws is important to weigh in on, we will continue to do that.
Kirsten Mayer: Taxpayers Against Fraud follows legislation and weighs in when it can.
Robert Patten: We monitor potential opportunities for influencing legislation for the good. We have regular meetings with senior staffers for various key lawmakers who are interested in supporting and promoting these laws. We've weighed in recently on potential rule changes in the anti-kickback arena and then the enforcement of the Stark Law. There's pending proposed legislation in the SEC arena to help fix what I think was a drafting error back in the passage of the Dodd-Frank Act that resulted in creating a loophole for whistleblower protection in the SEC arena. We've been suggesting some potential improvements to the SEC and CFT statutes as well. So that's been a great opportunity to work with Congress on some of those issues. We have regular contact with folks in state government who are considering either adopting a False Claims Act or amending and approving their existing False Claims Acts. There are a couple of potential opportunities to assist states in amending their FCAs to permit, again, with appropriate safeguards, whistleblowers to bring tax-related cases, since most of the state False Claims Acts exclude tax cases from their jurisdiction.
Kirsten Mayer: So I want to turn now to how these False Claims Act investigations work. Bob explained how they began.
Robert Patten: In my experience, the first step when a False Claims Act case is filed, and, again, I'm talking about whistleblower cases as opposed to the cases where we were starting the investigation on our own, the first step is to interview the whistleblower and have discussions with whistleblower counsel to determine what information they have – and this can take place before filing or can take place after the case is filed. What information and documents do they have available to support their theory of recovery in the case? What witnesses are they aware of in the defendant company or elsewhere who might have information relevant to the case? Essentially, exhaust all the information that the whistleblower brings to the table. And then typically at some point after doing an initial evaluation, if we had determined that the case was worth pursuing, then we would engage in some kind of outreach to the company, whether through compulsory process or through some negotiated, voluntary disclosure of documents and information to enable us to pursue the investigation. That point we typically would not reveal whether or not there was an underlying false claims case or a whistleblower involved in the case. Perhaps only after a couple years of investigation, that information might be forthcoming from the government.
Kirsten Mayer: Part of the False Claims Act's power comes from the incentives it gives whistleblowers to come forward with real evidence of fraud. One issue that DOJ and State Attorneys General face though is whether the whistleblower wants to keep investigating, even after the government has been brought in.
Robert Patten: I think that the general approach of government lawyers is to make clear to the whistleblower and whistleblower's counsel at the outset that the whistleblower is not an agent and the government is not investigating on behalf of the government, that it's up to counsel to manage the relationship between the whistleblower and the government, and that to the extent that there is information that comes the whistleblower's way through the regular discharge of her duties as an employee, that certainly that information can be shared with the government. But they are not, under any circumstances, being deputized to go out and dig for information, and especially not to venture into areas or data sources or computer files that are not within their regular scope of their duties.
Joshua Levy: I think that's right. The only thing I'd add to the triage that Bob's talking about, which is well articulated, I think there's a point before you go over it with defense counsel, we decide: are there any covert techniques we can take that are going to advance our investigation? And this gets into: is this going to be a criminal and civil, or not a criminal? So can you do consensual recordings – put a wire on someone and have them record some phone calls? Can you put a pen register on people's phones? Are there other things you can be doing to covertly investigate for a period of time? As an old maxim among DOJ lawyers, you can't cross-examine a tape. It's very powerful evidence and it can change the trajectory of an investigation, the duration of an investigation if you have that kind of evidence. Now certainly not every case, but it sort of depends on who your whistleblower is, what they have access to, who they have access to in the normal course. But all of Bob's other comments about reducing the cowboy effect, which you get sometimes, and people feeling like they're deputy assistant attorney generals and they're going to go investigate this and stick their heads in the files which they wouldn't see normally in the course of their business, maybe get exposed to privileged information that can taint the prosecutor, so there's all sorts of problems that can occur if the relator's going off the reservation, so to speak.
Kirsten Mayer: As a lawyer representing defendants in these cases, you don't get to see what goes on behind the scenes between the government and a whistleblower, but there are things you can do at the beginning of an investigation, to start off on the right foot. Josh explained.
Joshua Levy: A lot of this business is a relationship business. I tell young lawyers when they come into our firm, just be relentlessly kind and considerate to everyone you interact with because whoever's at one point on the totem pole today may be down below tomorrow and vice versa, and establish a credibility early. So one of the things I try and do at the very outset of an investigation is make sure the government understands how important this is to our client. That means be responsive. That means getting them information as quickly as you can and establishing a level of credibility. If you do have a good working relationship with the prosecutor and is someone that trusts you and you trust, you can get to the substance, I think, a lot quicker than you do in other cases. One of the hardest conversations I think you have at the outset of a matter, Kirsten, with clients is, "Let's just get real right now. The duration of this matter is not going to be measured in weeks or months. This could go on for years." That really isn't how business operates. In the legal system, the wheels of justice grind slowly, to the extent they're moving at all. I think finding ways to accelerate the timeline a little bit is it's in your client's interest, it's in the government's interest, and it's in the whistleblower's interest.
Kirsten Mayer: Not surprisingly, relationships matter on the whistleblower's side, too.
Robert Patten: There are many of our members who have, over the years, developed very successful working relationships with government enforcers and have participated in substantive ways in advancing investigations. I think one of the important motivating factors, particularly in the 1986 amendments to the False Claims Act, are to promote that kind of public/private partnership so that the government can benefit from a force multiplier, having experienced counsel. In some cases, the whistleblower, him or herself, participating in the investigation, bringing expertise in whatever technical field, maybe at the basis of the case, providing resources for securing experts and doing analysis and working together on pleadings and motion practice, so I think that the potential is there. It's really, as Josh suggested, as in so many areas of this kind of law practice, it depends on the relationships that the lawyers build. Some of the same lessons that he described in terms of working with a defendant as a client apply to the relationship between the government and whistleblowers and their lawyers as well. Government wants whistleblowers to reveal both the strengths and the weakness of their cases. They don't want to be learning about potential problems down the road. They want as transparent and as complete an exchange of information early on so that they can get to the appropriate result in the investigation in the most efficient way.
Kirsten Mayer: Taxpayers Against Fraud provides another way for whistleblowers' lawyers to maintain good relationships with the Department of Justice. TAF has the opportunity to meet with the Department of Justice from time to time, to discuss key False Claims Act legal issues, like the scope of the False Claims Act, interactions with federal agencies, and the exercise of DOJ's dismissal authority.
Robert Patten: In addition to bilateral conversations with nefarious officials in U.S. attorney's offices and at main justice, I think the Justice Department currently is interested in maintaining dialogue, not just with our bar but with the defense bar as well, to solicit our thoughts on issues such as the dismissal authority, the what is referred to as, the "Brand Memorandum" on the use of sub-regulatory guidance as potential legal basis for false claims liability and on the subject of litigation financing. We have met with senior DOJ officials to talk about those issues and members of the defense bar have as well, so I think that's healthy and a good development.
Kirsten Mayer: TAF has the opportunity to meet with representatives of State Attorneys General in a similar way.
Robert Patten: In the context of health care cases, since my time in government, I would say dating back 15 years, there's been a working group of whistleblower lawyers who meet regularly with state enforcers in the Medicaid Fraud Control Units once or twice a year to talk about subjects of common interest, common concern. I don't think that there has yet developed the same kind of national working group on the non-Medicaid front, but that's certainly something that I talk to some of my former colleagues in various state AG offices about promoting as we move forward.
Kirsten Mayer: Turning to the end of these False Claims Act investigations, they can conclude in a number of ways, some subtle. For others, the government decides not to pursue the case and the whistleblower has to decide whether to litigate herself on the government's behalf in court or to drop her claim. If settlement is the right outcome, a defendant needs to decide when to approach the government and when to bring the whistleblower and her lawyer into the discussion.
Robert Patten: I think the approach the defendants take as a best practice is to consider all of these elements as part of a complicated whole, and I think it's important to understand that the government has ultimate responsibility to prove the nature of a settlement. There are separate conversations that defense counsel has to have with whistleblower's counsel over attorney's fees, potentially with government agency enforcers.
Joshua Levy: Having done a lot of these over the years, I think the most important a defense lawyer can do in dealing with the government is to not hide from the bad facts. You're usually at the table because there's bad facts. If you don't address those bad facts in your presentation to the government, put them in context, explain why your overall approach to proposal for the resolution is a right, fair and just one, you're going to lose the government, you're going to lose the supervisors, you're going to lose the whistleblower, etc. So your credibility, which starts at how you approach the investigation in the beginning, but also how do you deal with the facts of investigation when you're at the table I think is really important to having these things go smoothly.
Kirsten Mayer: If the government decides not to pursue the case and does not want the whistleblower to litigate it, the False Claims Act gives DOJ the right to move to dismiss the whistleblower's case. Some whistleblowers have argued recently that this right is more limited than the Department of Justice maintains.
Joshua Levy: I have yet to encounter the government lawyer who's not in it for the right reasons and trying to advance the mission. I think if the government for programmatic reasons, the effect on future downstream cases, what have you, makes a reasoned determination that they should decline a case, I think it should be declined. I think the purpose of the whistleblower is not to create an independent Department of Justice, it's to create a notice mechanism so that things get faired up and floated to the government so the government can pursue it. So I'm much in the camp that this is a right that DOJ has to pursue these cases or not pursue these cases for the reasons that they deem fit.
Kirsten Mayer: Bob shares some of the whistleblowers' concerns.
Robert Patten: One of the concerns I have is that we're seeing a tendency for some lawyers in the Department of Justice to defer excessively to an agency's position on a particular false claims case. I think it's incumbent on the Department of Justice to do its own independent evaluation of each case. I've heard Senator Grassley speak about this – the concern is that if there is a bureaucratic indifference or potential wrongdoing within an agency, and an agency doesn't want the scrutiny of the Department of Justice on how it's running its programs or if there is too cozy a relationship between a government contractor in the agency personnel that it deals with, that that could give rise to situations in which an agency says, "There's nothing to see here. Let's all move on." I think it's important for the Department of Justice, on behalf of the taxpayer, to do an aggressive, independent evaluation of the allegations and not defer excessively to the agency.
Kirsten Mayer: Looking ahead, Bob sees the False Claims Act turning again toward the defense industry.
Robert Patten: I think under the current administration we're seeing an increase in defense spending and I wouldn't be at all surprised to see that more defense cases are coming. Typically, it takes a number of years for new developments to become evident because these cases are filed under seal and they can be under investigation for two, or five or seven years, or sometimes even longer than that. So we will know in a few years if that prediction is correct, but I wouldn't be surprised to see a renewal of interest in the defense industry.
Kirsten Mayer: I asked Bob what companies in all industries facing the False Claims Act can do now to reduce their risk.
Robert Patten: I see the False Claims Act as a secondary or backup mechanism in trying to enforce compliance and integrity in industry generally. I think it's an important notion to say that corporations in particular that have seen the experiences of their competitors or corporations in other industries being held liable for conduct under the False Claims Act to institute and promote real, effective, internal compliance programs to prevent situations arising which will give rise to false claims liability. The False Claims Act is there to catch the conduct that falls outside of the parameters of good corporate governance and corporate compliance. And I distinguish between compliance and integrity – we hear about corporate integrity agreements. Compliance, to me, is a floor; integrity is what companies should be aspiring to. I had an occasion within the last year-and-a-half or so speaking at a state enforcer's training program, and a former higher-level DOJ enforcer, who is now in private practice, was on the panel with me. I asked her how frequently now in her role as outside counsel to false claims defendants she has occasion to say to her clients that they need to be thinking about making improvements in their compliance departments, and her answer was, "Virtually all the time."
Kirsten Mayer: There have been a number of articles in 2020 already, suggesting that the heyday of the False Claims Act has passed. Bob disagrees.
Robert Patten: I think it's very much cyclical and I think it's natural that there are some down periods in terms of the size and scope of recoveries. But if you look at the Department of Justice's statistical reports to refer to fiscal year 2019 as being a down year, when they recovered $3+ billion or around $3 billion, is perhaps not an accurate description. But I think that we'll see continued interest both on the government-side and in the whistleblower bar in bringing cases forward.
Kirsten Mayer: As for Bob's biggest challenge going forward.
Robert Patten: I think that defense counsel are more and more willing to put the government and whistleblower counsel to the test and insisting on more involved litigation before these cases can be resolved. So, again, the challenge is to provide the resources for our members to properly evaluate the cases, bring the good ones and recognized when it maybe it is not in their or their client's interest to bringing a case that is not going to be successful.
Kirsten Mayer: Bob and Josh, thank you both for joining me today. And thank you to our listeners. For more information about our False Claims Act practice, please visit www.ropesgray.com/falseclaimsact. If you have comments about our episode, we'd love to hear from you – please email us at firstname.lastname@example.org. Our next episode will feature two former DOJ lawyers, Erica Hitchings, a formal Trial Attorney at Civil Frauds and former Assistant U.S. Attorney in the Northern District of California, and Kim Friday, also an alum of Civil Frauds and former Deputy Chief of the Civil Division in the Northern District of California. Now they are whistleblower attorneys, and we look forward to discussing emerging issues under the False Claims Act with them. Be sure to tune in to hear their perspectives – you won't want to miss it. You can subscribe to our Public Disclosure podcast series wherever you regularly listen to podcasts, including on Apple, Google and Spotify. Thanks again for listening.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.