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25Oct/100

Whistleblower Actions: Citizens Motivated By Doing Right

This post was written by Jack D. Howard

In 2006, whistleblower rewards were significantly increased, and the Whistleblower Office created, when President Bush signed into law the Tax Relief and Health Care Law.

" If the Secretary proceeds with any administrative or judicial action based upon information brought to the Secretary’s attention by an individual, the individual shall receive as an award at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts resulting from the action), or from any settlement in response to such action... ."

There are interesting limitations, however, on this apparent government largess. The good news was the large increase in IRS whistleblower awards, from 15 to a possible 30% maximum. There were some compromises, however. For example, the whistleblower award is predicated upon a claim against someone whose annual income exceeds $200,000, AND when the total amount in taxes, penalties, and interest owed is more than $2,000,000. In fact, revisions to the whistleblower statute suggest there may be more limits than many whistleblowers anticipate.

Courts have recently weighed in on saying how low can attorney fees in whistle blowing go. The answer is...quiet a tweet: the First US Circuit Court of Appeals lowered an attorney's contingency-based recovery from $292,000 to $50,000. The court noted that government officials did the bulk of the work, and that the attorney was able to 'piggy back' on their efforts. Most importantly, the court reasoned the rationale of whistleblower laws was to protect and serve the interests of the public...and to a large extent, the whistle blower's interests in an award are indistinguishable.

"The whole purpose of the discretionary award to whistleblowers under this statute is to create incentives for the whistleblower to take risks that may disadvantage the whistleblower in his relationship to his employer....The amount of the fee that will be siphoned off by the lawyer significantly affects the size of that award and the power of the incentive. The court in administering this statute is obligated to ensure his excessive legal fees will not diminish the statutory incentive." Judge Dyk, U.S. v. Hawthorn, entered 10/18/2010.

The importance of any potential limitations, or even reductions in anticipated awards, is that whistleblowers, without adequately motivated legal counsel, frequently have no means to deal with the costly and career debilitating efforts to maintain a whistleblower case. Since first introduced in 1863, qui tam laws have routinely allowed up to 30% awards.

At the end of the process, however, government may always reduce a Whistleblower award the good old fashioned way: by collecting taxes on it. Happily, the IRS allows legal fees to be deducted. (Campbell v. Commissioner of Internal Revenue, January 21, 2010).

Tagged as: Bush, healthcare, tax fraud No Comments

18Oct/100

TARP fraud uncovered: Bank CEO pleads guilty in New York City

This post was written by Jack D. Howard

The ironies of TARP — the Troubled Assets Relief Program---may take decades to be understood. In the same manner of most great American financial crises, from the days of railroad bribery and trust-busting to world war munitions graft... claims of rights and wrongs are usually obscure. The October 2010 conviction of a white collar TARP criminal, however, suggest the days of reckoning for TARP may not be as long in coming as is historically usual.

Acting with unusual speed, federal officials went from closing a prominent New York City bank (March 12, 2010) to arresting its CEO and President at his home (March 15, 2010). The president and CEO of New York's Park Avenue Bank, Charles J. Antonucci (59), this fall took a plea agreement with federal prosecutors. Antonucci admitted to taking more than $11 million illegally from TARP.

Antonucci's guilty plea was the conclusion of the first prosecution of misappropriated TARP funds.

As with TARP's national premises, Antonucci's offenses also crossed state lines...literally and figuratively. What remains shrouded, however, is the extent to which federal prosecutors will use their discretion to pursue a potential slew of unindicted co-conspirators. Count Three in the complaint gives an inkling to the potential breadth of this problem, given recent revelations into how high flying banks have cozied up with influential customers:

Antonucci accepted bribes from customers of the Bank, including but not limited to over $250,000 in cash bribes, free use of a customer's airplane, and free use of another customer's luxury automobile, in exchange for Antonucci's approval of various banking transactions. Indeed, on more than ten occasions in 2008 and 2009, Antonucci used a private plane owned by a co-conspirator ("CC-1") to fly to, among other places, Florida, Panama, Arizona (so that Antonucci could attend the Super Bowl), and Augusta, Georgia (so that Antonucci could attend the Masters Golf Tournament). All the while, Antonucci approved over $8 million in overdrafts on accounts for entities controlled by CC-1 at Park Avenue Bank.

One sophisticated and potentially aggressive component of the TARP program utilizes classic whistle blower techniques...meet the sleuth next door, SIGTARP. Though not a law enforcement agency, SITARP relies extensively on public input: and SIGTARP's inspector has shown a willingness to confront his peers at Treasury.

But critics have argued the enabling language of TARP may be as guilty as Antonucci. Though in Antonucci's case, obtaining a plea agreement was likely seen as being of the highest priority, subsequent prosecutions of TARP offenses may look toward fleshing out intent offenses under the legislation...making insider information, typically obtained best by whistle blowing, ever more vital. Whistle blowing for enforcing "intent" of TARP's vague regulation will complicate the tasks of those given the responsibility of managing the language. And the police powers under TARP are already vague.

"Residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Treasury Secretary determines promotes financial market stability. And any other financial instrument that the Treasury Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress."

The vagueness of TARP's language has led one important voice to attack the intention of TARP: and by implication, similar bailouts. According to Neil Barofsky, who serves as the Special Inspector General for TARP:

"Inadequate oversight and insufficient information about what companies are doing with the money leaves the program open to fraud, including conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering."

The Washington Post has reported (July 20, 2009) the Treasury Department refused to implement Barofsky's recommendations to Congress for TARP reform. Instead, Treasury official insist, tracking TARP funds to banks is akin to tracking "water poured into the ocean."

Source:
"TARP and the Acronym of Trouble: Good Rap, Bad Rap" http://www.examiner.com/law-enforcement-in-national/tarp-fraud-uncovered-bank-ceo-pleads-guilty-new-york-city

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.

Tagged as: federal, TARP, whistleblower No Comments

19Aug/100

How Fraud Can Follow You

This post was written by Bonnie Harris

Do the names Richard Grasso and Mark Hurd mean anything to you? No? How about the New York Stock Exchange (NYSE) and Hewlett-Packard (HP)? Still, no answer? Both Grasso and Hurd are former CEO’s of the companies mentioned, Grasso at NYSE and Hurd at HP. Grasso and HP committed fraud, and both Grasso and Hurd left their positions with damaged reputations. How about a more obscure name to those of us not in Florida: Rick Scott.

Scott is a Republican candidate running for Governor of Florida. A native of Illinois with no former experience in the government, Scott joined the gubernatorial race on April 9. The primary election for the Republican candidate for governor will take place on August 24. Scott is running against Bill McCollum, Attorney General of Florida, and Florida Senator Paula Dockery for the Republican candidacy. Due to Scott’s personal commitment of $4.7 million to his own campaign (more than McCollum has raised in a year), he has been able to buy advertising slots. Thanks to his ads, he is becoming increasingly popular as reflected in polls. Scott, in his few months in the race, only trails McCollum by 14 percentage points. The most recent Mason-Dixon poll, places McCollum at 38 percent and Scott at 24 percent. However, this 14 percent lead is not a good sign for McCollum according to Brad Coker, a Mason-Dixon pollster. He stated, “’McCollum’s 38-24 lead over Scott doesn’t look impressive given his long tenure and high visibility as a Republican office holder.’” McCollum’s place as the front-runner is not secure as Scott’s campaign gains more momentum and support.

Despite the fact that the author of this article has droned on about the race, the question remains, “why would this entry characterize Grasso of the NYSE, Hurd of HP, and new-to-the-political scene Scott, as similar to one another?” The key: the past will always be questioned in the future, and fraud will follow you in future endeavors. While Grasso and Hurd have left their respective companies, they have not decided to run for office. Scott, fraudulent company CEO on one hand, and self-proclaimed honest-politician on the other, is running. The largest Health Care Fraud case in U.S. History took place against Columbia/Hospital Corporation of America (HCA). Rick Scott was CEO of Columbia/HCA when the company committed fraud and during the time of the investigations.

Scott helped to found the Columbia Hospital Corporation in 1987, which merged with HCA in 1989. During Scott’s time as CEO, Columbia/HCA committed fraud against the government by improperly billing Medicare, Medicaid, and Tricare. The cases included evidence that Columbia/HCA overbilled, paid kickbacks, billed for treatments and drugs that weren’t covered and billed for hospitality costs not related to healthcare costs (sports tickets, country club dues, etc.) Scott resigned in 1997 after it was proven that the company kept two books: one that was shown to the government, and one that had listed the actual truthful expenses of the company. Columbia/HCA paid $1.7 billion to settle the case. According to the “Rick Scott for Governor” website when Scott left Columbia/HCA it was revered as “one of the most admired companies in America.” It is unknown how much the average American buys this statement, but then again, the website says nothing about the fraud committed.

Despite Scott’s position as CEO of a fraudulent company, he left with $10 million in severance, $300 million in stock options, spent $5 million to oppose President Obama’s healthcare plan, and it looks as through he will spend $25 in the governor’s race, according to Caputo. Scott was not charged or interviewed in the investigation of Columbia/HCA and claims that he “’denies the chain committed any criminal acts that he was aware of.” To be fair, it is possible that Scott did not know of the fraud committed when he was CEO. However, he has made it known that, “Mistakes were made at the company, and as CEO I have to accept responsibility for those mistakes.’”

So thirteen years after his resignation, Scott returns to the limelight, this time as an “honest-politician” instead of a “fraudulent company’s CEO.” However, Scott’s return certainly has not been easy, as his opponents (McCollum and Democratic frontrunner Alex Sink) have used the lawsuit against Columbia/HCA against him in attack ads. McCollum’s campaign stated that, “’The fact that Rick Scott is running for Governor as a ‘reformer’ would be funny if it wasn’t so outrageous…Rick Scott not only oversaw fraud, Rick Scott is fraud.’” However, when McCollum was in Congress during the investigation of Columbia/HCA, he noted that the crackdown on health care providers was overzealous, and sponsored the Health Care Claims Guidance Act, which tried to cut back on the investigations.

The company’s fraudulent activity aside, Scott thinks that his background prepares him for governor. While he may have a prestigious business background and be quite the entrepreneur, the fraud committed by Columbia/HCA will draw negative attention to his campaign. When asked why he’s running for governor when never holding a political position before, Scott answered, “‘I’m an outsider, I’m a business person, I know how to create private sector jobs, I know how to balance a budget.’” To Scott’s credit, he did create jobs as CEO of Columbia/HCA by employing 285,000 workers, making it the seventh largest employer in the U.S. at the time. But Scott’s budget-balancing skills may be in question when looking at Columbia/HCA’s budget under his watch. Scott responded further to the initial question stating, “‘I know how to get results by holding people accountable.’” This was probably not his best choice of words, considering those who hold him accountable for defrauding Medicare.

The most ironic part of the former-CEO-turned-politician’s campaign must be the type of fraud committed by Columbia/HCA with respect to the state that Scott is running in. William March of the Tampa Tribune was likely half serious, half joking, when he questioned, “Can the man who ran the company that committed the biggest Medicare fraud in history get elected governor in a state full of retirees?” This is an ironic possibility.

NOTE: This blog is meant to inform viewers of fraudulent activity and qui tam laws and lawsuits. The Qui Tam Team has no personal or professional feelings on Rick Scott’s campaign, nor the outcome of the election. This entry was written with the intention to educate, not to state an opinion.

Sources:
Appleby, Julie. “HCA to settle more allegations for $631M.” USA Today. 18 December 2002. http://www.usatoday.com/money/industries/health/2002-12-18-hca-settlement-_x.htm.
Caputo, Marc. “Poll: Former healthcare exec Rick Scott trails Bill McCollum in GOP primary.” The Miami Herald. 5 August 2010. http://www.miamiherald.com/2010/05/08/1620055/poll-former-healthcare-exec-rick.html.
March, William. “Rick Scott criticized for heading company that committed fraud.” The Tampa Tribune. 28 May 2010. http://www2.tbo.com/content/2010/may/28/281228/gop-candidate-scott-criticized-heading-company-com/news-politics/.
“Meet Rick.” Republican Rick Scott For Governor. 2010. http://www.rickscottforflorida.com/home/meet-rick/.

Tagged as: elections, fraud, health care, Rick Scott No Comments

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