Wednesday, April 28, 2010
K&M Represents Whistleblower in $520 Million AstraZeneca Settlement
AstraZeneca has agreed to pay $520 million in civil fines, penalties, and damages to settle allegations that the company defrauded Medicare, Medicaid, and other government-funded health care programs in connection with its marketing and promotional practices for the blockbuster atypical antipsychotic Seroquel. This is the largest settlement of off-label marketing claims brought under the False Claims Act to date that involved civil-only fines. The $520 million settlement resolves a qui tam lawsuit filed by whistleblower Dr. Stefan Kruszewski, one of two relators to file a case. Dr. Kruszewski was represented by Brian Kenney and Tavy Deming of Kenney & McCafferty, along with William Leonard of Obermayer, Rebmann, Maxwell & Hippel. For more information about the settlement, click here.
Friday, April 9, 2010
Not Fundamentally Designed to be Successful
"Not fundamentally designed to be successful." That's what the Inspector General's Office had to say in its March 2010 Assessment of the SEC's Bounty Program. OIG identified problems with the program when it released its August Report on the "Investigation of Failure of the SEC to Uncover Bernie Madoff's Ponzi Scheme." The latest report details the follow up investigation of the SEC's whistleblower program.
According to the OIG report, the SEC has had its bounty program in place for more than 20 years. The program provides for rewards to whistleblowers for reporting insider trading. The OIG found that the program was not recognized inside or outside of the SEC and that few applications had ever been received by the program.
Many of the recommendations that followed the OIG's findings appeared to basic, common sense management practices. For example, one recommendation is to keep some kind of file, whether it be hard copy or electronic, for each bounty application. The file, according to the OIG report, should contain, at minimum:
A bit of a concern is the recommendation that the SEC Bounty Program should incorporate "best practices" from the IRS Whistleblower Rewards Program. One hopes that that new SEC program would incorporate ideas from the latest incarnation of the tax fraud program under Director Stephen Whitlock and eschew past versions. Prior to Whitlock's leadership, the tax reward program showed similar problems to those currently capturing the attention of SEC watchers. While much improved in the last few years, the Service is still struggling to find lost complaints and improve communication with whistleblowers.
The SEC is charged with providing OIG with a written corrective action plan designed to address the recommendations. The plan should appear in late May.
According to the OIG report, the SEC has had its bounty program in place for more than 20 years. The program provides for rewards to whistleblowers for reporting insider trading. The OIG found that the program was not recognized inside or outside of the SEC and that few applications had ever been received by the program.
Many of the recommendations that followed the OIG's findings appeared to basic, common sense management practices. For example, one recommendation is to keep some kind of file, whether it be hard copy or electronic, for each bounty application. The file, according to the OIG report, should contain, at minimum:
- The bounty application
- Any correspondence with the whistleblower
- Documentation of how the whistleblower's information was utilized
- Documentation regarding any significant decisions made with regard to the claim
A bit of a concern is the recommendation that the SEC Bounty Program should incorporate "best practices" from the IRS Whistleblower Rewards Program. One hopes that that new SEC program would incorporate ideas from the latest incarnation of the tax fraud program under Director Stephen Whitlock and eschew past versions. Prior to Whitlock's leadership, the tax reward program showed similar problems to those currently capturing the attention of SEC watchers. While much improved in the last few years, the Service is still struggling to find lost complaints and improve communication with whistleblowers.
The SEC is charged with providing OIG with a written corrective action plan designed to address the recommendations. The plan should appear in late May.
Monday, April 5, 2010
SEC Whistleblower Program Proposals – Another dismal failure or real opportunity?
Senate Banking Committee Chairman Christopher Dodd of Connecticut introduced a financial reform bill on March 15, 2010. The proposal includes a new whistleblower program to reward those who assist the Securities and Exchange Commission (SEC) in its enforcement of securities violations, like violations of the Foreign Corrupt Practices Act.
The SEC already has a program in place to reward whistleblowers in insider trading programs. The existing program is widely regarded as a dismal failure, having paid only four rewards totaling only $67,570. In the last year, at least three proposals have been discussed to establish a new SEC whistleblower program, including the most recent Dodd proposal.
Dodd's bill proposes that whistleblowers who provide original information that leads to monetary sanctions would be paid between 10and 30 percent of any money the government collects that results from the information provided by the whistleblower. Whistleblowers would also receive rewards if their information leads to other successful "related actions," i.e. actions brought by other federal and state regulatory agencies, including the DOJ and foreign law enforcement agencies.
Most commentators watching the process feel that the final version of the new SEC program will be very similar to the IRS whistleblower rewards program. They expect the SEC program will include the IRS's one bite rule, for example, though the IRS itself appears to be moving away from full implementation of the civil investigation prohibition against talking to tax whistleblowers more than once. The Service's criminal division never adhered to the one bite rule, and now, the IRS civil division is embracing whistleblowers to a greater degree as well. It would be unfortunate if any new SEC whistleblower program blindly adopted IRS rules, like the one bite rule, without learning from the IRS's mistakes. The SEC has a dismal record with whistleblower incentive and protection programs. It would be best for the American people if any new SEC provision learned from, rather than repeated, the mistakes of other whistleblower programs.
The SEC already has a program in place to reward whistleblowers in insider trading programs. The existing program is widely regarded as a dismal failure, having paid only four rewards totaling only $67,570. In the last year, at least three proposals have been discussed to establish a new SEC whistleblower program, including the most recent Dodd proposal.
Dodd's bill proposes that whistleblowers who provide original information that leads to monetary sanctions would be paid between 10and 30 percent of any money the government collects that results from the information provided by the whistleblower. Whistleblowers would also receive rewards if their information leads to other successful "related actions," i.e. actions brought by other federal and state regulatory agencies, including the DOJ and foreign law enforcement agencies.
Most commentators watching the process feel that the final version of the new SEC program will be very similar to the IRS whistleblower rewards program. They expect the SEC program will include the IRS's one bite rule, for example, though the IRS itself appears to be moving away from full implementation of the civil investigation prohibition against talking to tax whistleblowers more than once. The Service's criminal division never adhered to the one bite rule, and now, the IRS civil division is embracing whistleblowers to a greater degree as well. It would be unfortunate if any new SEC whistleblower program blindly adopted IRS rules, like the one bite rule, without learning from the IRS's mistakes. The SEC has a dismal record with whistleblower incentive and protection programs. It would be best for the American people if any new SEC provision learned from, rather than repeated, the mistakes of other whistleblower programs.
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