Whistleblowers play an important role in fighting fraud


According to the Medicare Newsgroup, the Federal Bureau of Investigation has estimated that money lost to fraud each year totals between 3 and 10 percent of all health care billings. Based on those numbers, the news site estimates that, in 2011, Medicare fraud accounted for between $17 billion and $57 billion.

Yet, the federal government recovers less than 1 percent of the billions of dollars lost to fraud each year.

With the new health care expansion, attorney J. Joseph Rossi expects health care fraud will increase.

Rossi established the first Qui Tam, or False Claims Act, practice group in West Michigan at law firm Drew, Cooper & Anding after spending eight years with the U.S. Attorney’s Office in Grand Rapids, where he evaluated every Qui Tam case filed in the Western District of Michigan.

He noted that the False Claims Act covers any federal government money lost to fraud, but health care fraud is certainly among the largest industries where fraud occurs.

In order to recover the lost money, the government relies heavily on whistleblowers — or relators as they are formally referred to — to provide information on the wrongdoings of an organization.

“In return they get a share of the reward, a percentage of the money that the government recovers,” Rossi said.

Rewards can be anywhere from 15 to 30 percent of what is recovered.

Rossi said whistleblower cases are unique in that they are filed under seal so an investigation can take place. Investigations can take years, and the government then decides whether or not be move forward with the case.

“If the government decides to intervene, the case is unsealed and the government gets full authority to run the case,” he said.

The whistleblower’s attorney is retained and is kept informed by the government as the case proceeds.

Rossi said that, nationwide, approximately 1,500 claims are filed per year, and the government intervenes in about one out of five of those cases.

An individual can choose to move forward with a case even if the federal government decides not to intervene.

“In the cases where the government intervenes, about 70 percent of them result in a recovery of money,” he noted. “In the cases where the government doesn’t intervene, the percentage is much lower — 15 to 20 percent. Government intervention is a big signal of the strength of the cases.”

In order to be considered a whistleblower, the individual must be the original source of the information being presented.

“If the government already knows this information and has an investigation started, then sometimes that knocks the whistleblower out of that original source position, as can another whistleblower.”

Cases can include multiple whistleblowers that are providing the government with unique information.

Rossi noted the largest reward so far, $1 billion, was shared by three whistleblowers, each of whom provided different information important to the government’s case.

Being a whistleblower is not an easy road, and often the whistleblower may have participated in the fraud.

“If the person played a supporting role in the fraud — usually they were the next-level-down executive and following a superior’s direction, even though they knew it was fraudulent — then the government will often grant that person immunity from criminal prosecution and allow them to proceed as a whistleblower in exchange for the evidence they present, because otherwise the government would never learn about the conduct,” Rossi said.

He noted how much the whistleblower participated in the fraud would likely impact the percentage of the reward that person is given.

The federal government first enacted the False Claims Act following the Civil War, which included a large loss of money to the government through purchases of what turned out to be sick or injured mules and defective ammunition. The law has changed throughout the years, most recently in 2008 when subcontractors were added.

“Originally, claims could only be made against the prime contractor,” Rossi said. “Now, they’ve expanded the law to allow you to, in effect, follow the federal money all the way through the prime contractor and a series of subcontractors, as long as the money originated with the government.”

Recently, Bank of America was held liable for Countrywide Mortgage’s mortgage fraud. Rossi explained that Countrywide Mortgage skipped quality checkpoints under a program it named “Hustle,” then sold the mortgages to Fannie Mae and Freddie Mac. According to the U.S. Justice Department, Fannie Mae and Freddie Mac suffered a loss of $848.2 million due to the scheme.

In addition to the federal government, states have adopted similar laws, but they are limited to recouping money lost to Medicaid only.

Rossi pointed to the well-publicized Robert Stokes case that occurred in West Michigan. Stokes, a dermatologist, was caught performing unnecessary procedures on patients, charging them and their insurers. The case resulted in a $2.7 million judgment against Stokes.

Another area doctor discovered the health care fraud and was the case’s whistleblower. However, Rossi said the doctor was unable to collect a reward because, after the criminal restitution, there was no money left.

Rossi said he hopes to see the state laws expanded to cover other losses from fraud, such as schools that might inflate their student count numbers in order to receive more funding.

“I’d love to see Michigan adopt a statute like the federal statute that makes any loss of state money eligible for a False Claims Act action under state law,” he said.

Rossi said businesses could avoid whistleblower claims by taking them seriously. He noted that, most of the time, the whistleblower has attempted to go through proper channels within the company to raise awareness of the fraud but is ignored.

He suggests hiring an attorney to do the investigation, saying there are advantages to taking that route.

A company can then decide to self-disclose the fraud to the government and pay a fine.

“You still pay a fine when you self-disclose, but they tend to be a third to a half of what you would pay if the government discovers it, or if you are turned in by a whistleblower,” he explained.

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