There have been a number of significant developments recently in whistleblower lawsuits. I will mention a few of them below.
NORTHROP GRUMMAN-TRW WHISTLE-BLOWER CASE SETTLED
In one of the nation’s largest settlements in a whistle-blower case, Northrop Grumman Corp. has agreed to pay the federal government $325 million to resolve claims that TRW, which it acquired in 2002, provided defective parts for a spy satellite program in the 1990s. But in a rather weird twist, the federal government also has settled a separate, long-running dispute with Northrop and under that settlement the government will pay the aerospace company exactly $325 million. This essentially means that the two settlements are a wash and, as a result, no money will change hands.
Though Century City-based Northrop was the loser in the whistle-blower case, it successfully resolved a 13-year-old dispute over a missile program that was cancelled in 1995 for what the government said were cost and schedule overruns. In the TRW-Northrop whistle-blower case, the settlement ended a seven-year legal fight initiated by a whistleblower. Robert Ferro, an engineer, in his role as a whistleblower, was awarded $48.7 million. But instead of that award being paid by Northrop, it will be paid by the federal government.
TRW sold the government electronic components that it knew would fail. Ferro is an electrical engineer for the Aerospace Corp., a federally funded research lab that was evaluating a satellite transistor for the Pentagon. He filed the lawsuit in 2002 under the False Claims Act, which allows people not affiliated with the government to sue federal contractors on behalf of the government. Ferro alleged that research conducted in 1995 “clearly demonstrated” the parts would fail if placed in satellites that were being developed for the secretive National Reconnaissance Office. But TRW didn’t inform the government of the findings even after problems were intensified.
When the claimants are successful, they are entitled to receive 15% to 25% of the total settlement. This settlement was the largest ever in a Pentagon whistle-blower case. Eric R. Havian, a lawyer from San Francisco, represented the whistleblower and did an outstanding job.
Source: Los Angeles Times
COMPANY ACCUSED OF CONTRACT FRAUD
NetApp Inc. of Sunnyvale, California, a data-storage company, has agreed to pay the General Services Administration $128 million to settle a whistleblower complaint about its federal contracting. The Justice Department alleges that the company, NetApp Inc. of Sunnyvale, Calif., made false statements to the GSA about the discounts it was giving other customers and failed to extend proper discounts to the government. Roger Goldman, an attorney for the company, declined to comment.
The agreement represents the largest-ever settlement involving the GSA’s federal supply procurement program. NetApp provides hardware, software and storage management services. The investigation relates to contracts NetApp had with the GSA between August 1997 and February 2005 to sell technology products to various federal agencies. GSA contract guidelines require companies to provide the government with accurate information about the discounts they offer to non-government commercial customers, helping the GSA to negotiate its best price. NetApp failed to give the Government accurate and complete data about the discounts offered to commercial customers.
Under the terms of the settlement, NetApp was obligated to pay the $128 million by April 27th. Igor Kapuscinski, then the federal systems manager for NetApp, filed a complaint in 2006 in U.S. District Court in Washington alleging fraudulent behavior by the company. This started the Justice Department investigation. Virgil McKnight, a lawyer with the Washington D.C. firm of Ashcraft & Geral, represented the whistleblower and did a very good job.
Source: Washington Post
FORMULA FOR JUSTICE CHEMIST BLOWS WHISTLE ON MEDICAL COMPANY
A settlement has been reached by the federal government in another significant whistleblower suit. It appears that a giant lab was making inaccurate test kits for dialysis patients. Thomas Cantor, the biochemist whose company supplied different test kits to clinical labs and who blew the whistle on the company, had this to say:
I’m not going to pocket it, the money part was never the motivation. It was always about patients. It broke my heart and was shocking what a company would do for money. I made it my business to go on a mission to make it stop.
The whistleblower says the award money will fund research to treat drug-resistant infections like HIV and hepatitis. Five years ago, Cantor and his lawyers at the Washington firm of Phillips & Cohen sued Quest Diagnostics and its subsidiary Nichols Institute Diagnostics (NID) for Medicare fraud. The suit contended Quest and NID were billing the government for faulty medical tests and harmful Vitamin D therapies for inaccurately-diagnosed kidney disease. Cantor, president of Scantibodies Laboratory Inc., in California, learned of problems with Quest’s faulty test kits after some doctors who disputed Quest’s results asked him to conduct a second test. Cantor’s tests showed Quest’s findings were “consistently out of whack” and led him to check further.
NID has pleaded guilty to a felony charge of misbranding relating to a thyroid test for dialysis patients and agreed to pay a $40 million fine. In addition, Quest and NID agreed to pay the government a $262 million civil settlement. Under the federal False Claims Act, Cantor is entitled to a percentage of the settlement as an encouragement for whistleblowers to come forward. Before suing, Cantor sent thousands of e-mails to health care providers about the inaccurate tests without success. The Justice Department then investigated his allegations. Brooklyn U.S. Attorney Benton Campbell observed:
The American public has a right to expect medical device manufacturers to make accurate claims in their labeling, especially when the failure to meet those claims could indicate that the performance of the device is suspect.
There has been a massive amount of fraud in federal programs and that is a sad commentary on our times. Companies can do well without cheating in these programs. The job of regulation and monitoring of government contractors must be done by the government. That simply has not been done well over the past several years. Whistleblowers are actually doing their job for the regulators and that’s not the way it should be.
Source: New York Daily News
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