The Justice Department is reportedly investigating efforts by Barclays CEO Jes Staley to unmask a whistleblower who sent two anonymous letters to the bank’s board of directors complaining about the hiring of a mid-level executive. Barclays reportedly asked the U.S. Postal Service for assistance in tracking down the sender of the letters, though it claims that it never learned the identity of the individual. It is now being investigated for possible criminal charges and/or violations of the Dodd-Frank Act. The New York State Department of Financial Services is also investigating.
The Securities and Exchange Commission recently announced that Sean McKessy will oversee the new Whistleblower Office in the Division of Enforcement. The Office will consolidate existing resources to administer the whistleblower provisions called for by The Dodd-Frank Wall Street Reform and Consumer Protection Act.
In that role, Mr. McKessy will lead a program charged with working with whistleblowers, handling their tips and complaints, and helping the Commission determine the awards for individuals who provide the agency with information that leads to successful enforcement actions.
Mr. McKessy rejoins the SEC, where he was a Senior Counsel in the Division of Enforcement from 1997 to 2000. More recently, Mr. McKessy served as corporate secretary for both Altria Group, Inc. and AOL Inc., and as securities counsel for Caterpillar, Inc. In these roles, Mr. McKessy developed and supervised internal compliance and reporting programs related to the federal securities laws, served as corporate compliance officer, and coordinated the reporting of potential violations to boards of directors.
“Sean is uniquely positioned to oversee the Commission’s whistleblower program,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The Enforcement Division and whistleblowers alike will greatly benefit from Sean’s first-hand experience in bringing enforcement cases, handling whistleblower complaints and understanding the workings of internal corporate compliance programs.”
Mr. McKessy said, “I am excited to return to public service and rejoin the dedicated staff of the Enforcement Division in this critical role. Whistleblowers often provide invaluable information that can help uncover securities fraud and protect investors.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC whistleblower program to pay rewards to individuals who voluntarily provide the Commission with original information that leads to successful SEC enforcement actions and certain related actions. The Commission is in the process of developing rules that will guide the whistleblower program.
The SEC deferred plans to set up a whistleblower office in December in anticipation of a budget battle with congressional Republicans, most of whom opposed the law. The SEC stated that the office will “consolidate existing resources” to administer the new program.
The Obama administration’s fiscal 2012 budget plan calls for 43 new positions “to expand investigations of tips received from whistleblowers.”
Brandon J. Lauria, Esquire, represents whistleblowers nationwide. If you would like to speak with Mr. Lauria or one of our other SEC whistleblower attorneys, please email him directly at email@example.com or cal 215.367.5151 for a free consultation today.
The $89 million settlement in May between Financial Freedom and the United States regarding claims under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 resulted in a $1.6 million bounty for a FIRREA whistleblower.
Earlier this week, medical device manufacturer Olympus agreed to pay the largest ever civil False Claims Act settlement by a medical device manufacturer to resolve a lawsuit over violations of the federal anti-kickback statute. In addition to the record $310.8 million, they also agreed to pay $312.4 million in criminal penalties. A reward of around $51 million will go the whistleblower in the case.
The National Highway Traffic Safety Administration issued a fine of $70 million against airbag manufacturer Takata and an additional $130 million will become due if the company fails to meet the terms of the agreement with the government or additional violations are found. If paid in full, the Takata fine will be the largest civil penalty imposed by the NHTSA. Eight deaths and more than 100 injuries are thought to have been caused by the defective airbags.
As reported by the Los Angeles Times here, California Insurance Commissioner Dave Jones announced Friday that his office had joined a previously sealed whistleblower lawsuit against the company, calling it the largest health insurance fraud case ever pursued by a California state agency.
Two of the three whistleblowers in the case are former Lakers player Lucius Allen and his wife, Eve, who worked for the drug company as employees and provided access to the basketball team, whose players participated in “Lakers Dream Camps” set up by the drug company for doctors and their family members, the lawsuit said. The lawsuit was filed in 2007 but was sealed until the state joined the case recently.
New York-based Bristol-Myers Squibb issued a statement: “Bristol-Myers Squibb believes this lawsuit has no merit and the company will defend itself vigorously.”
The case is the latest major legal action against Bristol-Myers Squibb over allegations of health care fraud. The pharmaceutical giant paid $515 million in 2007 to settle allegations by the federal government and other states that it used a kickback scheme to defraud the Medicare and Medicaid insurance programs, officials said.
The California lawsuit alleges that Bristol-Myers Squibb targeted the private insurance industry, making thousands of payments to “high prescribing doctors” who wrote prescriptions for its well-known drugs, including Plavix, Abilify and Pravachol.
Jones said that insurance companies in California had spent more than $3.5 billion to cover the costs of the drugs Bristol-Myers Squibb sought to promote through its kickback scheme.
“We need to be sure that doctors are prescribing drugs because those drugs are best for their patients and not because a pharmaceutical company provided doctors with trips and kickbacks,” Jones said. “These illegal practices drive up the cost of health insurance for millions of Californians.”
This is just another example of pharma companies illegally utilizing a “pay-to-play” strategy. The concept is simple, pay doctors and they will write scripts for our drugs. The concept is clearly illegal, drains taxpayer funds and most importantly creates serious patient harm issues. When choosing which drug to prescribe, the doctor’s primary concern should be the patients’ health and not the doctor’s bottom line!
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 lawyers.
The Securities & Exchange Commission has settled its first ever enforcement action focusing on misstatements concerning structured notes, with UBS AG agreeing to pay $19.5 million without admitting or denying liability. In connection with the announcement, SEC Director of Enforcement Andrew Ceresney told reporters there were other active investigations involving structured notes.
Structured Notes are a type of complex debt securities product that is pegged to the performance of other instruments. The SEC issued an Investor Bulletin warning about potential risks of structured notes in January, 2015. Among the issues identified by the SEC are credit risk (the risk the investment bank issuing the instrument will not pay), complicated payoff structures, and liquidity issues (the inability to trade or sell them in the market).
In August, the SEC issued a risk alert after reviewing sales of a large number of structured notes in an examination of broker-dealers at ten firms. The alert identified issues such as mischaracterizing the underlying product, targeting inappropriate individuals and substantial price movements downward shortly after selling them to retail clients.
The specific issue at issue in UBS involved misstatements concerning the performance of the structured note. The product measured an algorithmic trading strategy designed to identify and exploit trends in G10 foreign exchange forward rates. UBS told investors that the trading strategy tied to the notes was transparent but failed to warn investors that UBS was hedging the trades at a cost of about five percent of the index price.
This seems like an area that is ripe for tips by whistleblowers to the SEC. The Dodd-Frank Act provides for rewards to a whistleblower when their information results in monetary sanctions of at least $1 million and they meet the laws eligibility requirements.
On October 15, 2013, the United States Court of Appeals for the Eighth Circuit green-lighted a whistleblower lawsuit brought by a former Bayer employee, alleging that the company deceptively marketed its Baycol cholesterol drug. See U.S. ex rel. Laurie Simpson v. Bayer Healthcare, et al., Case No. 12-2979 (8th Circuit, October 15, 2013). The case was commenced seven (7) years ago by a former Bayer market research manager, Laurie Simpson. Notably, Bayer withdrew Baycol in 2001 after fifty-two (52) reported deaths and countless other injuries that led to kidney failure. Ms. Simpson appealed the dismissal of her qui tam whistleblower action brought under the False Claims Act, 31 U.S.C. Sections 3729-3733. Whistleblower Simpson claimed Bayer fraudulently caused the government to make reimbursements for Baycol prescriptions through federal health insurance programs, including Medicare, Medicaid, and the Department of Defense. The District Court previously dismissed Simpson’s claims, concluding that she failed to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. Interestingly, the Eighth Circuit affirmed the District Courts a dismissal relating to the Medicare/Medicaid claims, but reversed the District Court’s decision with regard to the Department of Defense contract claims, and remanded for further proceedings.
In early 1998, Bayer began marketing Baycol to compete with other cholesterol-lowering statin drugs. Certain studies concluded Baycol was less effective at lowering cholesterol than competing drugs when Baycol was prescribed at the dosage initially approved by the FDA. Bayer then sought and obtained approval from the FDA to sell Baycol at higher dosage levels. Doctors began to report, however, that patients who were prescribed Baycol developed rhabdomyolysis, a rare but serious muscle disorder which destroys muscle cells released into the bloodstream. In July 2001, the FDA asked Bayer to address these concerns about Baycol. Bayer voluntarily withdrew Baycol from the market in August 2001.
In October 2006, relying in large part upon information through which she was privy to during her time at Bayer, Simpson filed a qui tam whistleblower action against Bayer as a relator on behalf of the government under the False Claims Act. The whistleblower alleged that Bayer knew about, but downplayed, the risks of developing rhabdomyolysis through the use of Baycol. Whistleblower Simpson also alleged Bayer misrepresented Baycol’s efficacy when compared to competing cholesterol-lowering drugs sold by other manufacturers, such as Lipitor and that Bayer paid illegal kickbacks to physicians to increase Bayer’s share of the market for statin drugs.
In upholding the DOD claims, but not the Medicare/Medicaid claims, the Eighth Circuit emphasized the direct contractual relationship between Bayer and the DOD, with respect to the government’s purchase of Baycol. In addition, the Eighth Circuit focused on Bayer’s intentional downplaying of concerns about Baycol and rhabdomyolysis, and the fact that Bayer dismissed these concerns when raised by the DOD. The fact that the DOD subsequently contracted for the purchase of Baycol was critical to the Eighth Circuit’s decision to uphold those claims as opposed to the alleged Medicare and Medicaid fraud.
In its motion to dismiss, Bayer contended that Simpson’s allegations were deficient because she did not include representative examples of false claims submitted for payment to the government. Bayer argued the particularity requirements of Rule 9(b) required a relator to allege representative false claims in order to survive a motion to dismiss. The District Court agreed with Bayer’s arguments and granted the Motion to Dismiss the Appeal, which followed.
While this decision may appear to be a positive development in support of whistleblower claims, in reality it is a mixed bag. The reality is that by affirming the district court’s dismissal of the Medicare and Medicaid claims, the Eight Circuit essentially eliminated a large part of the case whereas the government presumably expended far more money on those claims as compared to DOD expenditures. In addition, the basis upon which the Eight Circuit dismissed that part of the case, Rule 9(b), is troubling in the sense that it is the most recent case in which courts have held relators in pharmaceutical qui tam cases under the False Claims Act to a heightened pleading standard when bring such cases. The reality is that the specificity now required to satisfy Rule 9(b) in many courts is difficult, but not impossible, to overcome.
What is the take away from the Simpson qui tam False Claims Act case? Hire an experienced whistleblower attorney who understands the ever-evolving case law requiring detailing pleading requirements in order to maximize the likelihood of success in whistleblower cases.
Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous 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.
Earlier this year, Francesca West, the Director of Policy at UK whistleblower organization Public Concern at Work, noted an increase in individuals engaged in regulatory shopping. In a Wall Street Journal article about the surge of tips to a regulator in the UK, West indicated that more and more people were weighing the benefits and drawbacks of reporting to different jurisdictions. The justifications for choosing the best government agency to report could not be better elucidated than in a report about the problems facing Brazil whistleblowers reporting corruption.
The OECD Working Group on Bribery published an update about whistleblowing in Brazil as part of its attempt to encourage implementation of the OECD Anti-Bribery Convention in the country. The information about domestic whistleblowing within Brazil is disappointing but not altogether surprising. You can get a copy of the Phase 3 Report here (pdf).
Since 2000, there has not been one investigation of foreign bribery in Brazil started as a result of a tip from a domestic whistleblower. Of the 14 investigations that have been opened during that time period, only one resulted in prosecution. The company facing prosecution disclosed to shareholders that it was under investigation by the United States for the conduct in 2011.
There are also limited protections for private sector whistleblowers. Information provided to the government is only kept confidential until the indictment. And even that confidentiality guarantee is limited to instances of a formal statement made by the complainant. Although Brazil proposed a bill to address the lack of protections in 2009, it was not adopted.
A survey of whistleblower protections in G20 countries put Brazil in the bottom half in its protection of both the public and private sector.
Given these facts, it should be no surprise that Brazil has problems getting individuals to come forward. When corruption implicates a country with stronger protections, like the United States, why not report to the SEC instead? Indeed, there have been 7 tips originating from Brazil during the first two full years from the open of the SEC whistleblower office.
Brazil continues to have trouble getting whistleblowers to come forward despite implementation of tools for individuals to report corruption, including an anonymous hotline and website with a reporting mechanism. One panelist told the working group there is a cultural aversion to reporting. Others cited distrust of the government and the police as the reason.
Regardless, reports like this one specific to Brazil suggest that individuals will continue to forum shop internationally for the best place to report when they have information about bribery and corruption. When it implicates the FCPA, the SEC will generally be an excellent choice. Our FCPA whistleblower lawyers provide a free, confidential consultation if you are interested.
The International Ethics Standards Board for Accountants (IESBA) has revised the Code of Ethics for Professional Accountants to address ethical concerns about how to handle a client’s suspected non-compliance with laws and regulations (frequently referred to as “NOCLAR”). The changes to permit whistleblowing in the Ethics Code, which serve as guidance for professional accountants around the world, will be effective on July 15, 2017, although early adoption is permitted.