Blowing whistle pays off big for fortunate few
By: Bill Myers
Examiner Staff Writer
May 28, 2009
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For the fortunate few, exposing corruption can be their winning lottery ticket.
Since 1986, more than $20 billion has been paid out in fraud lawsuits brought by whistleblowers.
It has made some midlevel bureaucrats very rich.
“I admit it: The money also did help,” said John Schilling, an accountant cum government witness who helped expose massive Medicare fraud by the hospital chain Columbia HCA.
Schilling and another whistleblower shared a $100 million reward for their efforts.
“I can also be proud to my own family — my own kids — and show that I didn’t succumb to peer pressure,” he said. “I did the right thing.”
On Friday, President Barack Obama signed legislation making it easier to bring whistleblower suits and expanding definitions of fraud. That expanded a law that has been on the books since the Civil War, and was enhanced in 1986.
Under the False Claims Act, the government can recover treble the amount of fraud. The so-called “qui tam” provisions of the law give whistleblowers — called “relators” — up to one-quarter of the recovery.
Settlements and judgments from the act have become staggering.
“You used to get a multimillion dollar settlement and that was a big deal. Now the pharmaceutical cases are literally in the billions,” said Rudolph Contreras, a prosecutor who handles civil litigation for the U.S. attorney’s office in D.C.
It’s growing in other areas, too.
In March, lawyers at Ashcraft & Gerel announced a $128 million settlement with Network Appliance Inc., which was accused of skirting its “best prices” promise in its contract with the U.S. General Services Administration.
The settlement — a record for GSA — paid Rockville analyst Igor Kapuscinski more than $19 million for exposing the fraud.
“A lot of the time the relators are insiders who know things that we wouldn’t find out about,” Contreras said.
Kapuscinski’s lawyer, Altomease Kennedy, said that he is a rare bird.
“The reality is, the average recovery is not huge,” Kennedy said. “These are good people trying to do a good thing. They’re taking a huge risk.”
According to a 2006 study by the U.S. Government Accountability Office, the median recovery from False Claims Act cases was nearly $785,000; the median payout to whistleblowers was nearly $124,000.
Even the big winners have scars from their ordeals.
James Alderson, a hospital accountant from Whitefish, Mont., shared Schilling’s $100 million reward and was given another $20 million for exposing the Columbia HCA fraud. It took 13 years of grueling litigation.
“Once it really became public in 1998, I was done in the industry. No one wanted me,” he said. “I ended up doing seminars on ‘thriving and surviving in accounts payable.’ ”
Not everyone walks away a winner. Former Amtrak employee Ed Totten found himself out of a job after he accused two companies of delivering defective rail cars to Amtrak. Then-appellate Judge John Roberts, now chief justice of the Supreme Court, ruled that Totten couldn’t cash in because Amtrak wasn’t technically a government agency.
The bill Obama signed last week changed the provision cited in the Roberts decision.
“At the end of the day, he’s right,” said Totten’s lawyer, Vincent McKnight. “Yet he went through hell. And he loses.”
Texas businessman Robert Lee accused his competitors of selling Chinese-made office supplies to the GSA in violation of federal law. His lawyers obtained a $27 million settlement, and Lee was paid $3 million.
But he says the litigation took years to work through and that his business suffered.
“In the beginning, nobody cared. After a certain period of time, we were very tired of telling them about this,” Lee said.
Lee said he’s not sure his lawsuit made a difference.
“I see that other companies are still doing the same thing,” he said. “We may need to watch this.”
