Big Award for Compliance Whistleblower in Record Kickback Case

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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.

Kickbacks are probably the hottest area in False Claims Act litigation right now. Referrals for medical treatment paid for by government healthcare programs rewarded by anything of value are prohibited by the Anti-Kickback Statute (AKS) and the Stark Law. The Stark Law applies to physicians. The AKS is a criminal statute that applies broadly. Both laws contain numerous exceptions or safe harbors to permit conduct deemed acceptable in the health care industry.

Violations of these two laws bring on liability under the False Claims Act. The False Claims Act provides for statutory monetary penalties for each false claim and treble damages to the federal government as compensation for the misconduct. As violations of these laws increase the costs on Medicare/Medicaid while encouraging physicians and other treatment providers to make treatment decisions based not on the best interest of the patient but the potential financial benefit.

The whistleblower award comes at a time when many compliance professionals have been expressing concern about the potential for increased liability. Over the past few years, there have been fines to compliance officers by both the SEC and FinCEN over their role in corporate misconduct. The DOJ announcement of increased pursuit of individual liability has no doubt also stoked these fears.

The debate over personal liability for failed compliance really hasn’t touched on the possibility of the individual to become a whistleblower. But it does happen from time to time. Two out of the SEC Whistleblower awards have already gone to individuals in an audit or compliance function. A hospital compliance officer and physician services director reporting kickbacks at her hospital received $20 million last year for a lawsuit which began in 2009. Although there are sometimes special rules for compliance officers in order to earn a reward or prove retaliation, reporting violations externally when internal efforts have failed is still an option for them.

While recognizing that the decision to blow the whistle is a tough one, it is a solution for compliance employees with concerns that they will be charged because of institutional resistance to cleaning up the corporate misconduct. The False Claims Act offers rewards of between 15 and 30 percent of the government’s recovery in order to encourage individuals to report fraud. But for the compliance officer simply trying to do the right thing, it remains an option when the corporation resists their efforts. Our False Claims Act attorneys can assist you – contact us for a free, confidential initial legal consultation.