May 6th, 2012
In a recent article entitled “Source’s Cover Blown by the SEC,” the Wall Street Journal claimed that the SEC “inadvertently revealed the identity of a whistleblower.” The alleged disclosure occurred during the SEC’s investigation of Pipeline Trading Systems LLC. According to the article, an SEC lawyer “showed an executive who was being questioned a notebook from the whistleblower filled with jottings about trades, calls and meetings.” From that notebook, the executive claims he recognized the handwriting as that of Peter Earle, who happened to be the whistleblower who prompted the SEC’s investigation.
In a scathing response to the Journal’s story, the SEC disputes the allegations against it. In stark contrast to the story told by the Journal, the SEC asserted that it “in no way exposed Peter Earle as a whistleblower.” In fact, the Commission claims that the use of the notebook was neither “inadvertent” nor a “breach.” Instead, it was a “deliberate decision,” discussed by an SEC lawyer and his supervisor prior to the deposition in which the notebook was exhibited.
Going further, the SEC strongly disagrees with the allegation that the use of the notebooks in no way comprised Mr. Earle’s identity. According to the SEC, “it was widely known…that, after the termination of his employment in 2009, Mr. Earle had approached the SEC – a fact volunteered by witnesses and acknowledged by Mr. Earle long before the exhibition of his notebooks in November 2010.” Yet, despite this knowledge, the SEC maintains that, throughout the investigation, the Commission treated his status as a cooperating witness as confidential. There was “nothing about the notes…or about the SEC’s use of them as exhibits…that revealed anything about whether Mr. Earle or others were cooperating in the SEC’s investigation.”
If you have knowledge of Securities Fraud and would like to discuss the possibility of a whistleblower award under the SEC whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, including your ability to remain anonymous in filing for an award, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: SEC, SEC whistleblower, SEC Whistleblower Program, whistleblower award, whistleblower reward
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April 24th, 2012
New York has filed suit against Sprint Nextel for more than $300 million. Attorney General Eric Schneiderman announced the “first-of-its-kind” lawsuit against the company for “deliberately under-collecting and underpaying millions of dollars in New York state and local taxes on flat-rate access charges for wireless calling plans.”
The complaint alleges underpayments of more than $100 million, costing the State nearly $210,000 per week.
The lawsuit is the first ever tax enforcement action filed under the New York False Claims Act. Twenty-nine states and the federal government have passed False Claims Acts, but only New York’s Act expressly covers tax fraud. Under the NYFCA, the Attorney General may seek triple damages, plus penalties and interest.
According to the complaint, beginning in 2005, Sprint, the third-largest U.S. mobile service provider, failed to collect and pay New York sales taxes on an arbitrarily set portion of its revenue from fixed monthly access charges. The scheme was a part of a nationwide effort by the company to obtain an advantage over its wireless competitors, all of which have complied with the “extremely clear and unambiguous” state tax law, according to Schneiderman. “Everyone else had no trouble figuring out what the tax law was – except Sprint.” In executing its fraudulent scheme, Sprint repeatedly and knowingly submitted false records and statements to New York State tax authorities.
“By deliberately evading sales tax, Sprint cost state and local governments over $100 million that could have been used for critical services and much needed resources that our state and its citizens need given the challenging economic times we are in,” said Schneiderman. The message of our office is clear – tax dodging is not acceptable and we will use every tool in our arsenal to make sure that taxpayers’ money is protected, and that honest businesses and consumers are not placed at a disadvantaged for collecting and paying their fair share of taxes.”
The State’s lawsuit was prompted by a whistleblower complaint from Empire State Ventures. As whistleblowers, they may be eligible to receive up to twenty-five percent of any money recovered by New York as a result of information they have provided.
In response to the lawsuit, Sprint issued a statement denying the allegations: “This complaint is without merit and Sprint categorically denies the complaint’s allegations.”
If you have knowledge of Tax Fraud and would like to discuss the possibility of a whistleblower award under the New York False Claims Act or the IRS whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: False Claims Act, New York False Claims Act, Sales tax, Tax Fraud, tax underpayment, whistleblower award
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April 11th, 2012
Wednesday, April 11, 2012- An Arkansas judge ordered Johnson & Johnson to pay $1.1 billion after a jury found that the company’s Risperdal marketing campaign violated the state’s consumer-protection laws. Specifically, the jury found that J&J downplayed and hid risks- diabetes and weight gain- associated with taking its antipsychotic drug.
Circuit Judge Tim Fox determined that J&J and its subsidiary, Janssen Pharmaceuticals Inc., committed nearly 240,000 violations of the state’s Medicaid fraud law — or one for each Risperdal prescription issued to state Medicaid patients over a 3 1 / 2-year period. Each violation carried a $5,000 fine, the state’s mandatory minimum amount, bringing the total to more than $1.1 billion.
Judge Fox issued an additional $11 million fine for more than 4,500 violations under the state’s deceptive practices act.
Arkansas Attorney General Dustin McDaniel issued a statement, claiming that today’s verdict “sends a clear signal that big drug companies like Johnson & Johnson and Janssen Pharmaceuticals cannot lie to the [FDA], patients and doctors in order to defraud Arkansas taxpayers of our Medicaid dollars.”
Arkansas is one of several states who have sued J&J over its marketing of Risperdal, yet the Arkansas penalty is the largest to date against J&J. In 2010, jurors in Louisiana ordered the drug manufacturer to pay almost $258 million to state officials for making misleading claims about the drug’s safety. Less than a year later, in June 2011, a South Carolina judge upheld a $327 million civil penalty against the company. Most recently, in January 2012, Texas reached a $158 settlement with the company, which did not admit fault in connection with the settlement.
Shortly after the verdict, Janssen issued a statement indicating its intent to appeal the verdict, which would be heard by the Arkansas Supreme Court.
The United Stated continues to investigate the sales practices of J&J and Janssen related to Risperdal, including allegations that the company marketed the drug for unapproved uses. “Johnson & Johnson needs to wake up and realize they are playing a losing game. They should be running, not walking, to the settlement table,” said Patrick Burns of Taxpayers against Fraud. “[The Department of Justice] offered a global settlement for $1.8 billion last month. I am not sure that deal is going to stay on the table after this.”
If you have knowledge of Healthcare Fraud and would like to discuss the possibility of a whistleblower award under the False Claims Act, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: attorney general, Department of Justice, False Claims Act, health care fraud, whistleblower award
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April 3rd, 2012
On Monday, the Commodity Futures Trading Commission (“CFTC”) filed civil charges against Royal Bank of Canada (“RBC”), accusing the bank of engaging in hundreds of millions of dollars in illegal stock future trades to gain Canadian tax credits.
“Today’s action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain,” said David Meister, Director of the CFTC’s Division of Enforcement.
The complaint, filed in the Southern District of New York, alleges that from at least June 2007 to May 2010, RBC conducted a massive wash sale scheme in connection with exchange-traded stock futures contracts. According to the CFTC, a small group of senior RBC employees allegedly created and managed a trading strategy whereby they improperly coordinated trades to allow subsidiaries of the bank to buy and sell stock futures without taking a position in the market, thereby eliminating, or washing, the risk of a loss.
Wash trades, the simultaneous and offsetting purchase and sale of futures contracts, are banned under U.S. futures law.
The lawsuit claims that the bank bought and sold stocks in U.S. and Canadian companies, and then took opposing positions on futures written on those same stocks. Specifically, RBC “allegedly non-competitively traded hundreds of millions of dollars’ worth of narrow based stock index future and single stock futures contracts with two of its subsidiaries,” and then executed block trades on OneChicago LLC, an electronic futures exchange.
According to the complaint, those trades were not negotiated at arm’s length, as required by law. Federal regulations allow futures trades between companies and subsidiaries only if they are conducted on an arm’s length basis. In its complaint, the CFTC alleges that the trades were designed and controlled by senior RBC personnel acting on behalf of RBC’s behalf.
The goal of the scheme was to “realize lucrative Canadian tax benefits from holding certain public companies’ securities in its Canadian and offshore trading accounts,” while limiting market exposure.
The complaint also accuses the bank of concealing and making false statements about its scheme from OneChicago and CME Group, Inc., the entity that exercised regulatory compliance for OneChicago. When asked to describe the trades to CME Group, the bank allegedly falsely stated that its trading activity was conducted at arm’s length, and concealed the fact that the strategy was created and managed by a group of RBC personnel.
“A fundamental purpose of the futures markets is to provide an arm’s-length mechanism for market participants to discover prices and shift risks associated with products traded in those markets,” added David Meister. “RBC not only designed and executed a wash sale scheme that undermined that purpose, it went a step further and misled the exchange into believing that its conduct was lawful.”
The CFTC is seeking monetary sanctions and a permanent injunction against further violations of the Commodity Exchange Act and the CFTC’s regulations.
RBC has called the allegations “absurd,” and has promised to defend itself against “such baseless allegations,” said Elisa Barsotti, a spokeswoman for the bank.
To read more about the charges filed by the CFTC, see the Commission’s full press release at http://www.cftc.gov/PressRoom/PressReleases/pr6223-12.
If you have knowledge of Securities Fraud and would like to discuss the possibility of a whistleblower award under the CFTC whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: CFTC, CFTC whistleblower program, Commodity Futures Trading Commission, wash trades, whistleblower reward
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March 21st, 2012
Pfizer Inc. has agreed to pay Oregon more than $3.3 million to settle claims that the company used misleading statements and studies to market Zyvox. The settlement comes after a two-year state investigation into the marketing of the company’s drug, which is used to treat pneumonia and bacterial skin infections.
Oregon Attorney General John Kroger announced the settlement on Tuesday. The settlement follows a 2009 multistate settlement concerning Zyvox, as well as other drugs, which included $2.3 billion in fines against the company.
“Our investigation was aggressive, detailed, went placed that the federal settlement didn’t and provided additional settlement to the state of Oregon,” said David Hart, a senior AG who headed the investigation.
The complaint, filed in Marion County Circuit Court, alleged that Pfizer used “unreliable and unsubstantiated claims” in marketing Zyvox as a better alternative than its generic competitors.
Pfizer denied the allegations, yet released a statement saying it was “pleased to resolve this investigation and avoid the further time and cost of litigation.”
For more information on the settlement, see the full article in the Washington Post at http://www.washingtonpost.com/business/industries/pfizer-agrees-to-pay-oregon-33m-in-antibiotic-marketing-case/2012/03/21/gIQAfGx1QS_story.html.
If you have knowledge of Healthcare Fraud and would like to discuss the possibility of a whistleblower award under the False Claims Act, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: False claims, False Claims Act, Qui Tam, reward, whistleblower
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March 21st, 2012
The SEC’s new whistleblower award program is already making an impact, as many insiders are coming forward with investigative leads, hoping to cash in on the program.
The SEC whistleblower program allows individuals who present original information that leads an enforcement action resulting in monetary sanctions of over $1 million to collect an award. The award may range from 10-30%, depending on factors such as the significance of the information. Whistleblowers range from current insiders, former employees, and outside observers.
The SEC vets the tips through its market intelligence unit, which is comprised of nearly fifty attorneys. Potentially good leads are then funneled to enforcement attorneys.
SEC officials have recently commented that the quality of the tips received is surprisingly high, and some have resulted in “huge cases.”
According to the Financial Times, some insiders are taking on the role of detective. Recently, due to concerns with a deal on which he had worked, a company insider submitted a tip to the SEC. That tip resulted in an internal investigation and an SEC inquiry, which uncovered other problematic deals by the targeted company.
“In the stock market we’ve had good intel simply because of the surveillance by self-regulatory organizations and the firms themselves,” says Thomas Sporkin, head of the SEC’s market intelligence unit. “This program similarly provides a set of eyes and ears on the corporate side,” he said.
To read more about the SEC turning whistleblower tips into cases, see the full Financial Times article at http://www.ft.com/intl/cms/s/0/15e5a89c-6a27-11e1-b54f-00144feabdc0.html?ftcamp=published_links/rss/companies_us/feed//product#axzz1pl9KTUK8.
If you have knowledge of Securities Fraud or Corporate Fraud and would like to discuss the possibility of a whistleblower award under the SEC whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: corporate fraud, SEC, SEC whistleblower, SEC Whistleblower Program, whistleblower award
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March 14th, 2012
PHILADELPHIA—On December 8, 2011 the United States Tax Court handed down an important ruling favorable to maintaining the anonymity of whistleblowers during the appeals process following the issuance of a final award determination. See Whistleblower 14106-10W v. Commissioner, 137 T.C. No. 15 (2011).
Pursuant to the Court’s decision in Cooper v. Commissioner, 135 T.C. 70, 73 (2010), under § 7623 (b)(4) of the Internal Revenue Code, a letter from the Whistleblower Office denying a claim on the grounds that no award determination could be made under § 7623 (b) constitutes a determination conferring jurisdiction on the Tax Court. As a result, when the Petitioner received such a letter, P’s counsel, K&M, timely filed an appeal of the determination along with a motion to for a protective order.
Of chief concern in this, and other cases pending under the IRS Whistleblower program, is that while the cases are filed with the understanding that the whistleblower will remain anonymous, such anonymity is lost once the individual elects to exercise his or her right to an appeal of a final award determination. In rendering its lengthy opinion, the Court took into account the nature and severity of the asserted harm from revealing the petitioner’s identity, namely “‘economic and professional ostracism, harm, and job related harassment if my identity is revealed because my new employer and other potential employers will not want to hire or employ a known tax whistleblower.’” and compared that with the relatively weak public interest in knowing the petitioner’s identity. Specifically, the Court held that “granting petitioner’s request for anonymity strikes a reasonable balance between petitioner’s privacy interests as a confidential informant and the relevant social interests, taking into account the nature and severity of the asserted harm from revealing petitioner’s identity and the relatively weak public interest in knowing petitioner’s identity. Consequently, pursuant to section 7461(b)(1) and Rule 103(a) we shall permit petitioner to proceed, effectively anonymously, as a “whistleblower”. Whistleblower 14106-10W v. C.I.R., 14106-10W, 2011 WL 6110061 (T.C. Dec. 8, 2011). Further, the Court ordered that all parties were to redact from the record both P’s and X’s names as well as any identifying information.
Simply, the Court’s opinion reinforces Congress’ intent to protect whistleblowers when it enacted the IRS program in 2006. Although it is too soon to tell, the impact of this case may well be that more whistleblowers who, until now, shied away from appealing final determination (denial) letters for fear of being “outed”, will be inclined to step forward and push the IRS to reward informants who are valuable sources for detecting significant tax frauds.
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March 13th, 2012
Another whistleblower lawsuit with ties to the $1 Billion False Claims Act Bank of America settlement announced on February 9, 2012 by the United States Attorney’s Office for the Eastern District of New York has been unsealed. The suit charges the bank with fraud violations under the Home Affordable Modification Program (“HAMP”).
Gregory Mackler, a former contractor with the servicing outsourcerUrban Lending Solutions, filed the lawsuit in July. The lawsuit charges BofA with developing procedures that kept trainees like Mackler from researching or resolving any HAMP inquiries or complaints in order to avoid millions of dollars in losses while benefitting from the financial incentives of the program. The Treasury Department paid $1.8 billion in HAMP servicer incentives through December, according to the special inspector general of the Troubled Asset Relief Program.
In February, a whistleblower complaint was unsealed from Kyle Lagow, a former employee in a Countrywide appraisal unit which detailed allegations of Countrywide’s “corrupt underwriting and appraisal process. Final settlement documents have yet to be filed in the BoA settlement, which the U.S. Attorney’s Office said was the largest ever False Claims Act payout related to mortgage fraud.
If you have knowledge of Corporate Fraud, including Mortgage Fraud, and would like to discuss the possibility of a whistleblower award under the False Claims Act, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
The Department of Justice has until March 16 to decide whether to intervene in the Mackler and Lagow cases.
Tags: bank whistleblower, False Claims Act, FERA, mortgage whistleblower, Qui Tam
Posted in Bank Fraud, bank whistleblower, corporate fraud, False Claims Act, FHA fraud, HUD fraud, mortgage fraud, Recent News | Comments Off
March 13th, 2012
Yet another mortgage fraud settlement has been finalized, and this time the culprit is JPMorgan Chase & Co. JPMorgan has agreed to pay the federal government $45 million to settle in part a whistleblower lawsuit brought under the False Claims Act that alleged the company defrauded taxpayers and veterans by charging veterans hidden fees in mortgage refinancing.
The whistleblower suit was filed in 2006 by two mortgage brokers. In the same lawsuit, the whistleblowers brought claims on behalf of the United States government against additional lenders, including Bank of America Corp, Wells Fargo & Co and Citigroup Inc. The whistleblowers’ suit against the remaining defendant-lenders is still pending.
The two whistleblowers who brought the suit will share about 26 percent of the JPMorgan settlement, or $11.7 million. They will receive additional relator share awards should they be successful in the litigation against the remaining defendant-lenders.
If you have knowledge of Corporate Fraud, including Mortgage Fraud, and would like to discuss the possibility of a whistleblower award under the False Claims Act, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege
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March 13th, 2012
Those individuals involved in corporate fraud may soon find themselves in the crosshairs of the Department of Justice. According to Attorney General Eric Holder, the DOJ plans to take action against individuals responsible for corporate fraud, adding that fines against corporations are not a deterrent.
“It can’t simply be that you make billions of dollars and then you pay hundreds of millions of dollars in penalties. That’s not a disincentive,” Holder said. According to the Attorney General, “there have been far too many repeat offenders.”
Recently, the DOJ has been the target of strong criticism over its failure to bring actions against individual employees responsible for corporate fraud. In the past, the DOJ has generally brought cases against corporations.
With this new approach, the DOJ hopes to counter its critics.
“We’re gonna make some news with regard to holding individuals responsible for things we tend to think of as corporate crimes,” Holder said at a meeting of state attorneys general in Washington.
If you have knowledge of Corporate Fraud and would like to discuss the possibility of a whistleblower award under the False Claims Act, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: corporate fraud, False claims, False Claims Act, whistleblower
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