New York State Amends False Claims Act


New York is leading the way at preventing tax fraud at the state level becoming the first state to creates a reward for whistleblowers. The amendment to New York’s False Claims Act will provide for an award to the whistleblower so long as the defrauding taxpayer earns more than $1 million in annual net income and defrauds the state of more than $350,000.

The whistleblower may earn up to 30 percent if he brings the case alone and up to 25 percent if the government decides to intervene. These percentages are based upon a number of factors including the amount of the whistleblower’s assistance.

As reported on The Post Standard, “The tax department guesses that billions of tax dollars go unpaid every year. In recent years, starting with Gov. Eliot Spitzer, the state has poured money into the department’s enforcement unit for staff, sting operations and sophisticated data collection systems to bust tax cheats. Spitzer appointed Comiskey to lead the effort and he set a record in his first year, bringing in $3 billion — $1 billion more than the year before. The effort continued under Gov. David Paterson. This year’s state budget relied on $221 million in extra tax fraud collections to help close the budget gap.

“New York state’s been exceptionally aggressive in the last few years during the budget crisis at collecting any source of tax revenue they can find, fairly or unfairly,” said Tim Lynn, a lawyer at Green & Seifter, an expert in business tax credits. “This is another weapon in their arsenal to cure their budget problems.”

Lynn said he suspects cases could come in the area of sales taxes or fuel and highway use taxes — the kinds of taxes where employees are aware of the amount of money that should have been paid. It is less likely there will be cases involving income taxes, which are confidential and handled by bookkeepers, he said.

The state first passed a whistle-blower law, called the False Claims Act, in 2007. It is modeled after the federal law. Until now, the law has mostly been used in Medicaid fraud cases. The old state law, like the federal law, specifically exempted tax fraud.

In three years, Medicaid fraud cases brought under the False Claims Act have recovered about $200 million for the state.

By 2014, the state estimates it will recover about $20 million a year from tax fraud.

Schneiderman likes to call it “the false claims act on steroids.”

McEldrew Young represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 to speak to one of our whistleblower attorneys.

DoD Implements Change to Internal Confidentiality Agreements at Government Contractors


Last week, the Department of Defense announced that federal funds would not be provided to entities requiring employees or subcontractors to sign internal confidentiality agreements prohibiting or restricting the reporting of waste, fraud, or abuse to the Government.

Solicitations for DoD contracts will require the entity to represent on submission of its offer that it does not require its employees or subcontractors to sign or comply with such an agreement. When obligating FY 2015 funds on existing contracts, the DoD will now require contractors to comply with the provision and specifically notify its employees that any internal confidentiality agreements prohibited by this policy are no longer in effect.

The policy implements section 743 of Division E, Title VIII, of the FY 2015 budget legislation, known as the Consolidated and Further Continuing Resolution Appropriations Act, 2015. It declared:

“None of the funds appropriated or otherwise made available by this or any other Act may be available for a contract, grant, or cooperative agreement with an entity that requires employees or contractors of such entity seeking to report fraud, waste, or abuse to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contractors from lawfully reporting such waste, fraud, or abuse to a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information.”

Other government agencies and offices are also expected to implement similar policy changes in order to comply with the terms of the budget legislation. The complete DoD announcement of the new policy is located at

The change in policy will have an important impact on whistleblowers and potential whistleblowers in two ways. First, a company in violation of the terms of the policy opens themselves up to a False Claims Act lawsuit when they receive federal funds. Second, the change in policy may ultimately free whistleblowers from concerns that they will be subject to a counterclaim for taking documents in violation of a confidentiality agreement to provide to the government.

Momentum for this policy began to build early last year when a deposition conducted in the whistleblower lawsuit against Kellogg, Brown and Root revealed the company’s use of confidentiality agreements to threaten employees.

The SEC announced an investigation into the practice in March. SEC Rule 21F-17(a), adopted as part of the whistleblower program, specifically prohibits any person from taking an action to impede communication with SEC staff about a possible securities law violation. This includes enforcing, or threatening to enforce, a confidentiality agreement.

Members of Congress also investigated the KBR agreements, with top Senate and House Democrats sending a letter to KBR in November expressing concerns that an employee with information about possible wrongdoing might decide not to provide it to the government because of the non-disclosure agreement.

Should the CFTC Prepare for More Commodities Whistleblowers?


We may get our first look at the effect of market problems on the number of whistleblowers utilizing the Dodd-Frank programs in the next few months or years. The commodities market has hit bear market mode as 18 of the 22 components of the Bloomberg Commodity Index have dropped more than 20 percent from recent highs.

Bloomberg seized on the drop in prices to run an article titled Commodities Are Crashing Like It’s 2008 All Over Again. According to the report, the number of commodities in a bear market is the same as at the height of the financial crisis in October 2008. The price of Bloomberg’s Commodity Index has fallen to below its 2008 lows and is quickly approaching the 2001-2002 lows.

Hedge funds are getting nervous. There are already a few pulling out of raw materials and liquidating their funds in this area. The amount of money under management in this area is about 15% lower than three years ago as demand among investors has fallen.

The stocks of mining and energy companies are also feeling the effects of prices at their lowest point in more than a decade. Demand for raw materials is falling in emerging markets as the double digit growth boom in China has died down. As a result, miners have lost more than $100 billion this year in market capitalization.

The CFTC whistleblower program has generally received about 10% of the tips that go to the Securities and Exchange Commission. It is in charge of enforcing the Commodity Exchange Act and has oversight of commodities and derivatives trading. It is a smaller agency, both in terms of budget and the number of personnel.

Yet with falling prices in commodities, fraud and manipulation in the industry could be more easily exposed to ethical employees who may report the corporate misconduct to the whistleblower program. Previously, we’ve written about how corporations let the good times roll during economic expansions and their wrongdoing comes to light when the recession hits. With the Dow Jones still near its all time high, the CFTC might be the first to experience any increase in the number of whistleblowers.

Earlier this year, CFTC Whistleblower head Chris Ehrman told Law360 that he expected the regulator would be awarding one or two significant monetary rewards to whistleblowers. To date, the only announced payment by the CFTC to a whistleblower was for $240,000 in May 2014.

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More FCPA Whistleblowers Expected in Customs and Tax Bribery Cases


We have long looked at cases of customs fraud for whistleblowers as part of the False Claims Act. And Eric Young in our office was the first to represent a client receiving a tax whistleblower award under the IRS whistleblower program. But the growth of international whistleblowers has opened up the possibility that we will now see tax and customs whistleblowers located overseas reporting violations of the Foreign Corrupt Practices Act to the Securities and Exchange Commission instead.

The SEC Whistleblower Office pays rewards to eligible individuals providing information resulting in monetary sanctions of more than $1 million. The program was created by Congress in the Dodd-Frank Act which passed in 2010 and recently celebrated its five year anniversary. An SEC employee previously said that they expect the FCPA to be fertile ground for whistleblowers

We’re seeing a number of news reports in the last year about foreign officials caught up in scandals related to bribery of government tax and customs workers, and we expect based on this that there are potential whistleblowers out there as well that will come forward.

In Guatemala, there is reportedly a reasonable suspicion that the former Vice President took $3.7 million in bribes. Businesses evaded import duties by calling “La Linea”, a special number available to those paying bribes.

Cases like this one have already led to FCPA investigations. FedEx has disclosed allegations of bribery of government officials in Kenya in order to clear shipments through customs without inspections. A similar investigation is under way against Ford for bribing officials at a port in Russia to get through the logjam at the docks in that country.

It is not limited to customs. In Brazil, the corruption reportedly allowed business to avoid paying more than $1 billion in taxes to the government. If I remember earlier reports correctly, U.S. companies were involved.

Normally, FCPA violations involve securing or retaining business contracts. But a 5th Circuit ruling previously held that the FCPA applies broadly and customs or tax cases in order to avoid payments are also covered.

For those considering blowing the whistle, the FCPA does not require money to exchange hands. The FCPA applies broadly to the provision of anything of value (other than certain de minimus items). The enforcement action against BNY Mellon for the hiring of interns related to family members of sovereign wealth fund officials is just one example of the potential bribes implicated. Paid travel that masquerades as business trips when it is in fact a luxurious vacation, as well as other gifts, are violations of the law as well when they go to individuals classified as foreign officials and are used to obtain or retain business.

If you are interested in learning more about the SEC whistleblower program or wish to speak to one of our FCPA whistleblower attorneys, contact us or call 1-800-590-4116.

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WSJ Criticizes CFTC Whistleblower Program


The Wall Street Journal took aim at the CFTC whistleblower program this weekend, claiming that the agency has spent more than it has paid out since launching in 2011 and has not been able to get tips in the futures and swaps markets.

While technically accurate, the criticism fails to consider the length of the entire process, from government investigations, enforcement actions and the subsequent award determinations. Although the SEC has had roughly two dozen payouts, the SEC also has a broader scope of enforcement power and a budget of more than $1 billion in additional funds. It receives roughly ten times as many tips each year.

The CFTC has paid out just over $500,000 to two individuals so far while administrative costs related to the eight-employee whistleblower staff and its consumer outreach office have totaled $4 million. Last year, a Law360 article suggested that big payouts were coming for CFTC whistleblowers.

Five years have now passed since Dodd-Frank authorized the SEC and CFTC to pay monetary incentives to individuals for reporting violations of the securities and commodities laws.

The early years have not been without some growing pains. In addition to the criticism of the CFTC, the Wall Street Journal also reported last year that the SEC program was backlogged in the determination of awards. According to its calculations roughly 83% of the whistleblowers who applied for an award after the program opened in 2011 were still waiting for a decision. Several months after this report, an SEC whistleblower filed a lawsuit in order to seek a court order for a determination on his eligibility for a reward.

Other government programs for whistleblowers have also been criticized over the past few years. When Senator Grassley issued concerns about the lack of communication coming out of the IRS whistleblower program, there were multiple news articles expressing concerns that the program providing incentives for reporting tax evasion was ineffective.

To speak to one of our CFTC whistleblower attorneys about the Wall Street Journal’s criticism, or to discuss a potential whistleblower tip, please call 1-800-590-4116.

CA Health System to Pay $46 Million to Resolve Whistleblower Suit


Sutter Health, a Sacramento, CA-based health system, announced the resolution of a whistleblower lawsuit regarding unbundling and over-billing schemes for anesthesia services provided.  The 2009 lawsuit was brought against Sutter by billing auditor, Rockville Recovery Associates. The commissioner joined suit in 2011. A trial in Sacramento Superior Court was scheduled to commence later this month.

According to California Insurance Commissioner, Dave Jones, “Sutter patients or their insurers received three separate charges relating to anesthesia including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure code…” “Unbundling” is the practice of submitting bills piecemeal or in a fragmented fashion to maximize the reimbursement for various tests or procedures that are required, pursuant to Medicare and Medicaid guidelines, to be billed together and therefore at a reduced cost.  According to the suit, the services billed were allegedly already captured in an operating room charge.                                                                                                                     Pharmaceutical Layoffs

In touting the settlement, Commissioner Jones stated, “this settlement represents a groundbreaking step in opening up hospital billing to public scrutiny.” “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”  California’s complete press release may be viewed in its entirety here.

“Unbundling” is a frequently utilized tactic by government health care fraud offenders.  An unbundling scheme simply allows a health care provider, or in this case, a health care system, to fraudulently maximize its reimbursement amount by billing the tests and/or procedures separately rather than properly accounting for the test and/or procedures under the single group billing code.

If you are aware of an unbundling scheme, or believe you are a victim of unbundling, contact Young Law Group for a free confidential consultation.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented individuals in countless qui tam cases for over a decade.  Young Law Group attorneys represented whistleblowers in two of the largest False Claims Act settlements in history.  Our firm takes every inquiry seriously and considers confidentiality a top priority.    For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to

Massive Implantable Defibrillator Settlement under False Claims Act Approaches


The Department of Justice is reportedly nearing settlements with hundreds of hospitals over their fraudulent billing of Medicare for defibrillators. Medicare covered the $40,000+ defibrillators for the primary prevention of arrhythmia unless they were implanted within 90 days of bypass surgery or 40 days of a heart attack. Doctors implanted the medical devices in patients and then fraudulently billed Medicare in spite of the guidelines.

This is expected to be the largest settlement in terms of the number of hospitals and the amount for a group of hospitals. In 2013, 55 hospitals settled a national investigation for $34 million into the use of cement in fractured vertebrae, a procedure known as kyphoplasty. The government is reportedly using data mining techniques this time around to assist them in their investigation.

The cardiac investigation dates back to at least 2012, when Modern Healthcare reported that the Justice Department was simultaneously emailing hundreds of hospitals with questionnaires concerning their use of the devices. At that time, Modern Healthcare obtained a document from the DOJ called the “Medical Review Guidelines/Resolution model”. It divided the possible scenarios for hospital billing of patients into categories which included those covered by the National Coverage Determination and/or excluded from the investigation, that the government had used its discretion to determine it would not bring enforcement (referred to as buckets), and those which would be included in an enforcement action.

The enforcement action(s) included certain coding errors, patients who were previously qualified but did not have an implantation until they were not within the coverage window, and those where it was not medically indicated. The calculation identified that the hospitals would be charged for the difference between the code they used and the correct code, as well as a per hospital multiplier of damages based on a variety of factors including knowledge, compliance efforts and patient harm.

At least six healthcare systems have already publicly reported the amount of their settlements to shareholders. Tenet announced a settlement of $12.1 million and HCA indicated their number was $15.8 million.

It will be interesting to see how the credit for this victory is shared. It seems likely that there are a number of whistleblowers out there, insiders who reported their hospital to the federal government through a qui tam lawsuit and may be in line for a reward as part of the settlement. The False Claims Act requires the DOJ to pay eligible relators between 15 and 25 percent of the award (in cases like this one where the government has not declined to intervene in the case). However, there are various rules such as the first to file rule and public disclosure which could limit those payments.

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JP Morgan Reported To Be Close To Finalizing A $13 Billion Settlement With Department Of Justice


October 21, 2013 – It is being widely reported that the Department of Justice and JP Morgan are finalizing the details of a $13 billion settlement relating to the 2008 financial meltdown.  JP Morgan has already paid close to $6 billion dating back to 2010 in other fines and penalties arising out of the 2008 financial crisis.  Reports are that this settlement will encompass numerous open investigations into the bank’s fraudulent sale of toxic mortgage back securities.  If consummated, this settlement will be one of the largest settlements ever involving one of the nation’s largest financial institutions.  Reports are that the deal will include $9 billion in fines and provide relief to consumers totaling approximately $4 billion.  It is also being reported that this deal will not insulate JP Morgan from criminal charges.  While this amount seems to be substantial in the eyes of the average American, then certainly the largest penalty ever imposed on a U.S. corporation, however, it is less than half of the $21 billion profit JP Morgan recorded in 2012.

In addition, the bank previously set aside $28 billion to cover the legal costs in connection with the government investigations that have apparently led to the reported settlement.  The reality is that while these settlement amounts appear to be very large, they pale in comparison to the amount of money spent by the federal government to prop up these firms, including JP Morgan, in the aftermath of the 2008 mortgage meltdown.  For example, $4 billion will reportedly go to settle a suit by the Federal Housing Finance Agency against JP Morgan for knowingly making false statements and omitting material information with regard to the sale of $33 billion in worthless mortgage bonds to government-sponsored mortgage finance companies.  However, that is only about two percent (2%) of the almost $2 billion in taxpayer money the government spent so far to prop up JP Morgan and others for this misconduct.  The New York Times reported, “the government also prefers to settle with big companies rather than indict them, fearing that criminal charges can unnerve the broader economy.”

Attorney General Holder has been quoted as saying, “If we do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”  As such, the government appears to be concerned that if it levies harsh criminal sanctions against banks, including JP Morgan, that it will rattle the financial markets, and therefore, the government apparently shies away from taking such direct action to eradicate the type of misconduct that led to the 2008 collapse.  Does such an approach make sense?  Considering that these penalties appear to be nothing more than a slap on the wrist, when considering the damage that was caused and the profits that JP Morgan and others have made since 2008, isn’t it time that our government takes a tougher stance?  Unfortunately, it appears that the financial privileged in our country are above the law.  Until our government prosecutes corporations and executive who devise and carry out the fraudulent schemes, this type of misconduct will continue because it is profitable to do so.  In other words, it is the cost of doing business.

So long as these companies and their executives know that they will not be held to account for fraudulent misconduct, so long as that conduct is profitable, they will continue to engage in it.

Reports are that the Justice Department’s case against JP Morgan is being bolstered in part by the involvement of a whistleblower from inside the bank who is aiding the government.  The Wall Street Journal has reported that, “the cooperating person has provided information – including emails – suggesting the bank vastly overstated the quality of mortgages that were being bundled into securities and sold to investors before the financial crisis, the people said.”  The Wall Street Journal also reported, “Justice Department lawyers are embolded by documents, uncovered in the course of their investigation, that point to JP Morgan knowingly peddling mortgage back securities whose underlying loans were of lesser quality than pitched to investors, according to people familiar with the investigation.”  Reports of insider assistance to the government in pursuing a case against JP Morgan further highlights the critical nature that whistleblowers play in allowing our system to self-correct.  The simple matter is, without the assistance of an insider such as the person being reported to be assisting the Justice Department in the JP Morgan case, the government would be at a severe disadvantage at the pre-litigation stage in leveraging any meaningful resolution.

Whistleblowers provide detailed uncontroverted evidence that otherwise would be unavailable to the government.  It is believed that this insider may have filed a claim under the Federal False Claims Act, which includes a qui tam provision that enables individual citizens to bring claims on behalf of the taxpayers against companies such as JP Morgan, who are alleged to have defrauded our government.  To encourage such whistleblowers to come forward, the False Claims Act includes bounty provisions that compensate whistleblowers for the courageous efforts that are necessary for someone to step forward and report powerful corporate interest, such as those in the JP Morgan case.  These bounties can range anywhere between 15 and 30 percent of civil penalties and fines collected by the federal government as a result of the underlying qui tam action.

Young Law Group, P.C., represents whistleblowers in the United States and abroad, in a variety of cases, including IRS Whistleblowers, False Claims Act (Qui Tam), and SEC related fraud.  For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to


CFTC has New Boss: President Obama Taps Timothy Massad


President Obama has selected Timothy Massad to succeed Gary Gensler as chairman of the Commodities Futures Trading Commission (CFTC).  Skeptics seem justifiably concerned about Massad’s ability and/or willingness to be tough with Wall Street banks.  As a Treasury Department Official, Massad oversaw the bailout of Wall Street’s biggest banks.  Prior to joining the Treasury Department, Massad was a partner at a New York law firm with strong ties to Wall Street.

Massad is now charged with holding wrongdoers on Wall Street accountable at a time when banks seem overrun with dishonest, unethical and scandalous behavior.  This job has become even more challenging as a result of budget concerns and massive fiscal deficits.  Hopefully, Mr. Massad will see the benefits associated with the CFTC working with whistleblowers to better focus scarce resources at serious wrongdoing.

McEldrew Young attorneys have represented clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here. To learn more, read about our CFTC practice.

Why It’s Worth It To Be a Whistleblower


Many question the worth of being a whistleblower.  “Is it worth the time and effort?”  “Will I lose my job?”  “What good will it bring me?”  Overall, “is it worth it?” Being a whistleblower is a tedious process—cases can take years, to hire lawyers you need to have money, and many people seem to think that it may even make you lose your job.  Let’s go through each of these pieces to the whistleblowing process: time, money, and risk.

Whistleblowing is a time commitment.  It requires gathering first-hand specific information about fraudulent activity, working with lawyers, spending time in negotiations or court, etc.  Many qui tam cases take years to settle.

Whistleblowing also requires money as hiring lawyers is necessary.  However, the money used to pay lawyers may be reimbursed to you after winning a case.  In our recent article on, “Jury: College & Faculty Member Committed Fraud,” the whistleblower in the case, Dr. Daniel Feldman, is likely to be reimbursed.  Dr. Feldman filed the case in 2003, and it has taken 7 years for the final ruling to be issued.  Dr. Feldman’s fees and costs to his lawyers cost several hundred thousand dollars, which may be reimbursed to him in full!

Many think whistleblowing is a risky business.  But, contrary to popular belief, the risks are not very high as whistleblowers are protected by law.  For instance, many people think that whistleblowing involves the risk of losing your job, but under the False Claims Act (FCA), the Occupational Safety and Health Act (OSH Act), and other laws that protect whistleblowers, whistleblowers cannot be fired for whistleblowing.  According to the Department of Labor website, “Whistleblowers may not be transferred, denied a raise, have their hours reduced, or be fired or punished in any other way because they have exercised any right afforded to them under one of the laws that protect whistleblowers.”  So while whistleblowing may seem risky, the law is on the whistleblower’s side to protect him/her from any punishment as a result of whistleblowing.

So whistleblowing takes time, can take money, but is not very risky.  But still “why do it?”  “Is it worth it?” “What good will it bring you?”  The reward of being a whistleblower is not only self-satisfaction, but a heavy pay-off if you win the case.  In order to receive a reward for being a whistleblower, the government must recover at least $1 million in the case. Whistleblowers receive a mandatory minimum of 10 percent, to a maximum of 30 percent of what is recovered.  Therefore, if whistleblowers are awarded in cases recovering $1 million or more, a whistleblower will make between $100,000 and $300,000 at least.  For larger cases, a whistleblower must still receive at least 10 percent of the claim, and can make more than $100,000 to $300,000.  In the HCA case in 2003, the numerous whistleblowers received $151,591,500.  The largest Healthcare fraud settlement in U.S. history, against Pfizer Inc., paid six whistleblowers more than $102 million.  So while whistleblowing may take time, it is worth it. Overall, you can be reimbursed for payments to attorneys, you will not incur much risk, and you will make at least $100,000 if your case wins.

Dr. Feldman sums up why it’s worth being a whistleblower.  He stated that, “being a whistleblower is not something you undertake without tremendous sacrifice,” because of the time and risk involved.  However, he agreed that “In the end, prevailing certainty feels great and worth the cost to do the right thing” (Source: Salmanson Goldshaw).

Henning, Peter J. “Come Blow Your Horn for the S.E.C.” The New York Times DealBook Blog. 26 July 2010.
Montopoli, Brian. “Obama Signs Sweeping Financial Reform Into Law.” CBSNews. 21 July 2010. Salmanson Goldshaw, P.C. as per PR Newswire. PR Newswire. “Federal Jury Finds Cornell University’s Medical College Committed Fraud.” 29 July 2010.
Savage, David. “Financial reform law includes big cash incentives for whistle-blowers.” Los Angeles Times. 23 July 2010.,0,6099636.story.
United States Department of Health & Human Services. News Release. “Justice Department Announces Largest Health Care Fraud Settlement in its History.” 2 September 2009.
United States Department of Justice. “Largest Health Care Fraud Case In U.S. History Settled HCA Investigation News Record Total of $1.7 Billion.” 26 June 2003.
United States Department of Labor. “Whistleblower Protections.”

This article is brought to you by the QTT, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

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