David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of forensic accounting services including fraud investigation and fraud deterrence programs in Philadelphia and the Delaware Valley. 

Over the last several months, the term “whistleblower” has become commonplace in the news.  However, for well over 100 years, the term “whistleblower” has been commonly used with regards to companies that are accused of defrauding the Federal government.  It is used with what are known as writs of Qui Tam.

To gain a better perspective on Qui Tam, I spoke with David Heim, Esquire, a partner in the Philadelphia law firm of Bochetto & Lentz, P.C.  Attorney Heim is one of the Bochetto & Lentz partners who handle Qui Tam cases.

Attorney Heim stated that the concept of Qui Tam goes back to Roman and Anglo-Saxon law.  In fact, Qui Tam is an abbreviation of the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur” which means “he who sues in this matter for the king as well as for himself.”

In the United States, the American Civil War provided the impetus for the modern application of Qui Tam.  During the early part of the Civil War, unscrupulous contractors sold deficient supplies to the Union Army, including faulty rifles and ammunition, rancid food, and poorly made uniforms, shoes and other supplies.

This led to the passage of the False Claims Act in 1863.  The False Claims Act allowed for people not affiliated with the Federal government to file suit against Federal contractors, claiming fraud against the Federal government.  As an additional incentive, the False Claims Act included a Qui Tam provision which permitted those who filed such suits to receive a percentage of the amount recovered.  The False Claims Act uses an alternative name for “whistleblower” – “relator”.

Attorney Heim described the way a Qui Tam case works, as follows:

• A person (the “relator”) approaches a law firm such as Bochetto & Lentz with the allegation that a business is defrauding the Federal government.
• The relator’s law firm, if they decide to take the case, perform significant due diligence and investigation in order to support the specific fraud asserted. The law firm may engage forensic accountants and other experts as part of their investigation (Note:  if the pre-filing investigation is unable to uncover sufficient proof to support the specific fraud asserted, the case cannot proceed).
• If there is sufficient proof to support the specific fraud asserted, the relator’s law firm files a complaint in the U. S. District Court. The complaint, which is captioned with the name of the individual on behalf of the United States versus the business, is sealed.  Because it is a Qui Tam matter, the case is not docketed.  Hence, no one outside of the relator and the relator’s law firm knows about the case.
• The relator’s law firm approaches the U. S. District Attorney’s office (Department of Justice) about the Qui Tam case.
• The U. S. District Attorney meets with the relator’s law firm and the “relator”. Its office conducts a secret investigation which may include interviews, analysis of the complaint and supporting documents, etc.  The U. S. District Attorney’s Officer may even approach the business which is the subject of the complaint (defendant) and obtain documentation (under seal).  Such an investigation may take months and even years.
• Based upon the results of its investigation, the U. S. District Attorney decides whether to intervene. If it chooses to intervene, the Federal government will take over the case and file the complaint itself (not under seal).
• Attorney Heim explained that if the U. S. District Attorney chooses not to intervene, the “relator” and his/her law firm may choose to pursue the case themselves. However, because most Qui Tam cases are very large, most law firms lack the resources to pursue such a case.  Additionally, since the U. S. Attorney has decided that pursuing the case is not likely to be successful, the private law firm must also weigh the similar risk that it’s case will be unsuccessful.
• Once the Federal government pursues the case, Attorney Heim stated that it is typically the case that the defendant and the Federal government negotiate and settle the case without going to trial (this is because being the subject of such a Federal investigation can be very expensive, and can generate considerable negative publicity).
• The False Claims Act provides for the “relator” to receive between 10% and 25% of the amount recovered from the defendant. When the Federal government takes over a case from them, Bochetto & Lentz will negotiate the fee with the Federal Government on behalf of the relator. Bochetto & Lentz will then receive a percentage of the relator’s payment (based upon the original terms of the engagement when it agreed to take the case).

Attorney Heim described two recent Qui Tam cases with which he was involved:

• Case number one involved a contractor hired by the government of a U. S. territory based in the Caribbean which had been hit by a hurricane. Using Federal funds, the island’s government hired the contractor to clear roadways and cut up downed trees.  One of the contractor’s employees reported to company management that the company was overbilling the Federal government by over-reporting the number of downed trees it had cut up.  The company fired the employee who then approached Bochetto & Lentz with whistleblower complaint.  Bochetto & Lentz filed suit, and the U. S. Attorney intervened in the case, charging the contractor with defrauding the Federal government.
• Case number two involved a publicly held pharmaceutical company which had manipulated the system to get around being paid agreed-upon Medicare rates for certain expensive drugs. The company shipped smaller amounts of the drugs to Medicare authorized pharmacies.  Because these pharmacies were not able to fill all the Medicare demand for these drugs, hospitals and other facilities needing these drugs were forced to go to non-Medicare pharmacies for the drugs.  Because the drugs were purchased from non-Medicare pharmacies, Medicare was forced to pay a higher price for the drugs than it would have paid if the drugs were purchased from Medicare authorized pharmacies.  The whistleblower/relator came to Bochetto & Lentz.  Bochetto & Lentz filed suit, and the U. S. Attorney intervened in the case, charging the pharmaceutical company with defrauding Medicare.

Attorney Heim also noted that other common Qui Tam cases involve Medicare providers (such as nursing homes and durable medical equipment companies) billing for procedures not performed, improper coding of billed procedures (in order to receive higher payments), and improper billing for durable medical equipment provided (such as providing a piece of equipment to a patient but billing a monthly rental fee instead of a one-time purchase fee).

I also asked about various state whistleblower laws.   Attorney Heim stated that most of these laws are designed to protect the whistleblower instead of allowing the whistleblower to sue on behalf of the state government.  For example, Pennsylvania allows a whistleblower to sue for retaliation.  In New Jersey, the applicable statue is known as CEPA (for the “Conscientious Employee Protection Act) and is also designed to protect whistleblowers from retaliation.

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If you require the services of a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting, and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner, and a Certified Valuation Analyst.  Anderson also has served as a divorce accountant or marital dissolution accountant in Philadelphia and the Delaware Valley.

 NOTE: David Anderson’s weekly forensic accounting blog will be on hiatus through the new year and will return on Monday, January 6. Have a safe and enjoyable holiday season!