Whistleblower Cases Hit New Records

The federal government is on track to receive record payouts this year for contractor-fraud lawsuits, and it’s all thanks to whistleblowers—workers more apt to lose their jobs than win big cash settlements.

Following a $2.2 billion payment in November by Johnson & Johnson for its alleged off-label use of Risperdal and other drugs, the Department of Justice should collect more than $5 billion under the federal False Claims Act by the close of fiscal year 2014, said Patrick Burns, co-director of the nonprofit Taxpayers Against Fraud Education Fund.

That may be a drop, compared to what the feds are owed—including some $300 billion in unpaid taxes—but it’s a significant jump over the $86 million the government collected in 1987, the year it decided to significantly boost payouts to whistleblowers in an effort to fight fraud. That year, 30 citizens filed cases qui tam, a term stemming from the latin for “he who sues in this matter for the king, as well as for himself.” In 2013, a record 753 did, making whistleblowers responsible for 89 percent of DOJ fraud cases filed that year.

These days, health-care fraud makes up the bulk of DOJ’s cases, and whistleblowers  receive 16 percent of the settlement amount, on average. This has helped the government collect $39 billion since 1987 ($55 billion, if you include criminal fines). Whistleblowers have earned $4.3 billion, including $388 million in 2013.

All this comes at great risk to the whistleblowers. Lawyers say the DOJ fails to join in on roughly three-quarters of qui tam cases, leaving little chance a law firm will continue on its own. Even if a suit is one of the 150 or so per year that reach a favorable settlement, payouts are rarely “life changing,” said lawyer Erika Kelton, of Phillips & Cohen, in Washington.

Few whistleblowers land like the Alabama nurse who was paid $15 million in April for reporting alleged fraudulent Medicare billing. Typically, “whistleblowers still have to work,” said Kelton; in spite of federal protections, many end up blacklisted in their professions. Among her clients: a senior engineer who ended up mowing lawns and bagging groceries and a senior pharmaceutical sales rep who took to painting houses.

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