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Behind the Scenes of Whistleblower Litigation

Sep 18, 2023
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David Lieberman represents whistleblowers who provide information to the federal government about their employer's fraud against the government. He discusses workings of whistleblower cases under the False Claims Act, a Civil War era law that's newly under attack as unconstitutional. David discusses whistleblower motivations, how he counsels them about the risk of coming forward, and the intricate journey from filing a case under seal to working collaboratively with the Department of Justice to potential settlements of $100 million or more. David is a 2008 graduate of Columbia Law School.

Transcript

Katya Valasek:

We're joined today by David Lieberman, a 2008 graduate of Columbia Law School. He practices in Boston for the Whistleblower Law Collaborative, a boutique law firm with a narrow focus on government programs that reward people known as whistleblowers for providing information on wrongdoing.

So, David, there are a number of programs out there that are established by federal statute. You primarily focus on a program under the False Claims Act, which is where the Department of Justice, the whistleblower and their lawyers pursue wrongdoing against the government collaboratively. What are the main types of wrongdoing you deal with under the False Claims Act?

David Lieberman:

So the False Claims Act is a very old law. It was started during the Civil War. They call it Lincoln's Law. So they passed it during the Civil War because the Union Army was being defrauded by unscrupulous defense contractors. And so in the intervening 100 and some odd years, the law has been used in a number of different ways. The core of the law was defense contractors. There's still a number of defense contract cases. We do a number of those. There are other kinds of government procurement cases, small-business set-aside kind of cases, bridges-and-highway kind of cases. We do some of that, but the core of what we do is healthcare fraud, which has become the really biggest area from government recoveries. And so anytime someone commits healthcare fraud, they are likely committing fraud against Medicare and Medicaid, and that fraud is recoverable under the False Claims Act.

Katya Valasek:

Can you give an example of facts that will lead to you getting involved? What's the wrong? Who noticed?

David Lieberman:

Imagine a very large drug company and imagine they are doing something improper in the selling of their drug. They're lying to doctors to get it prescribed or perhaps they're paying kickbacks to get it prescribed. Both are very common. The most common way this will come about is that someone in that company who knows about that fraud, will realize it's wrong. Usually they'll try to report it. They won't be listened to and then they'll come to us, and we will file a case on their behalf, informing the government that their employer has been defrauding the government.

Katya Valasek:

So, essentially, it sounds like these are situations where if the government knew what the whistleblower knew, they wouldn't have paid the defendant.

David Lieberman:

That is the standard understanding of that kind of case – that if the government knew all of the facts that the whistleblower knew, they would not have made the contract. They would not have paid for the item.

Katya Valasek:

Let's talk more about the nature of these cases. They seem like they take forever to reach a conclusion. How does this impact your initial conversations with the potential whistleblower who reaches out?

David Lieberman:

Yeah, so they're not always large and sweeping, although a lot of the ones we do are, but they almost always take a very long time because once you file your case, you file it under seal and give it over to the government and then the government manages the case because, again, it's their claims. The government will take as long as the government needs to understand that case and that's usually several years – three to five years is very, very common. Many of them go more. I'm currently working on the appeal of a case that was filed in 2007. So, when we talk to our clients initially, there's a few things we look for. One is we only work with clients that we really believe in, partly because we are about to have a very long relationship with them. Second of all, these cases rise and fall based on what they know and what they're able to communicate. And so when we look at these cases, we look at all of the things that could go wrong. In a lot of ways, I think we look at them more with a more critical eye than defense counsel does.

I'm still learning a lot about the law and about what makes for a good case. But having a client that you like to work with, that is, appears to be, that comes across as sincere and honest and doing these for the right reasons. Those are the things that you look for, and you know, if they make a connection with you, if you believe that then it's likely the government's going to believe that. But that's real, core instinctual stuff, I believe.

Katya Valasek:

Eventually that conversation has to shift towards the question of when and if you're going to talk to the government. What is that conversation like with the client?

David Lieberman:

So because we are so niche, it is usually from the very beginning we are talking to the clients with an eye towards, “would this be a case we would bring to the government?” And so we lay out very early the things a client needs and they need a set of facts that meet the requirements of the law. They need an understanding of the situation that makes the story they're telling not just believable but comprehensive. So they need to have seen enough or been privy to enough or have enough documents that they can really explain what's going on. And that issue needs to not only be a fraud against the government, but remember the government is likely going to take this case on and prosecute it. And so it needs to be – and they get hundreds of these a year, thousands – and so it needs to be an important enough fraud, either financially or patient health and safety or soldier health and safety. An important enough issue that we think the government will devote its scarce resources to that case versus all of the other cases that come in.

Katya Valasek:

And what is the motivation for the clients to coming to you?

David Lieberman:

The clients almost always wanted to be at their job, wanted to do their job, and thought they were helping their employer when they complained about certain practices. And only after they were ignored or sidelined or retaliated against, did they realize they needed to go to an outside lawyer. They are almost always surprised that their concerns were not taken seriously. They always, almost always, they expected that once they, you know, they found a problem and they would be praised and celebrated for helping find these problems.

Katya Valasek:

Okay, with this in mind, the fact that your clients have likely been trying to fix the situation for some time on their own, what is the conversation with that client like when deciding to talk to the government?

David Lieberman:

The first thing you have to do with a client is tell them the range of potential outcomes that they're going to face. Sometimes the government will do their investigation and decide either the facts were not as they understood it, the client believed them to be, or that while the client was right, there were facts they just couldn't have known. Or sometimes the issue is, while everything they said is correct, factually correct, it is not a priority for the government. And they will decline and the case will then come out from under seal. And the client’s name as the whistleblower will become public. And that can be a huge risk because, in many industries, that's the end of that client in that industry. Now, if the case is successful, their name also will become public, almost always becomes public. They do have a recovery that can help them. But again, they'll often be blackballed from their industry. And you need to have a very serious conversation with your client about what is the amount of money that allows them to walk away from the career they've spent their whole life doing. And so many of these clients, particularly the ones with very large cases, were executives, scientists, were very credentialed and well-educated people who've devoted their lives to one career path, and they need to make a choice about the possibility they're gonna walk away from that career for the sake of telling the government about the fraud. And it's a very difficult decision for any client to make.

Katya Valasek:

What kind of settlements or judgments do your clients typically see with the False Claims Act?

David Lieberman:

So it runs the gamut. The False Claims Act itself allows for three times damages, treble damages, plus a penalty for each false statement. They also allow for damages for retaliation against the whistleblower themselves. And so some of these are very large. We've had settlements that have run into the hundreds of millions of dollars, particularly when you're talking about drug companies. Sometimes you're talking about just a much smaller fraud, and then sometimes you have cases that are limited for other reasons. For example, that the defendant goes out of business or the defendant can't afford to pay more. And then, I should say, the False Claims Act allows the whistleblower to recover anywhere from 15 to 30 percent of what the government recovers.

Katya Valasek:

How long after starting a case does the firm get paid?

David Lieberman:

We're a full contingency firm and so we only get paid once our clients get paid. And so when we take on a new case, we are, you know, we are looking at recovery, if possible, in the same three to five year span. Sometimes settlements are paid over time. So sometimes it's longer.

Katya Valasek:

You said your fee structure is contingency based. So that means you get a cut of what your client recovers, correct?

David Lieberman:

You get a cut of the client's recovery. The False Claims Act also allows for fees to be paid directly from the defendant to the whistleblower's attorneys. But again, only on a successful case, but that's another avenue of recovery.

Katya Valasek:

Because these cases are long-term, how many do you close successfully a year in that you're getting paid?

David Lieberman:

So it's really uneven, as you can imagine. Last year we had a very good year. I think it was on the order of eight to a dozen, depending on how you count, was a very good year for us. This year, it's probably more on the order of five or six. But somewhere between those, I think, are where we'd be.

Whistleblower Law Collaborative was started by two of my partners, Bob Thomas and Suzanne Darrell as a partnership with two lawyers. We started bringing on more lawyers. I came on in 2016, but if you do that math from 2016, it's only been – we're right now in the, in the sort of five to seven years since we started – so it's only now that we're starting to see the results of the first wave of cases that were filed. And so that's the kind of the timeline you're looking at.

Katya Valasek:

These cases take a long time and the payout is good, but if it's unreliable from year to year in terms of how much money is coming into the firm, how do you make sure that you have the money to keep the doors open and to pay the attorneys and to do the work that you need to do as you are working with new clients coming in the door?

David Lieberman:

There are six of us at our firm. We try to file, uh, about a dozen to two dozen cases a year. And we have been doing that as a six-person firm, since 2019. Most of our costs here are our own; the salary for the lawyers and our staff that works with us. Those recoveries tend to allow us to tend to pay for our expenses. By working with the government, we do have some expert costs, some discovery platform costs, but because the government is the primary investigator during the pendency of the case, it is not the norm that we need to hire experts or make significant outlays like that. But I think like all plaintiffs' attorneys, you need to have a financing system to make sure that you can make it through lean years. And so there are a few different ways we do it, but frankly, we are incredibly lucky to be the successors to two very successful lawyers who've been doing this for a while. I know when they started, for example, they were taking on traditional defense work to make their ends meet. We now have enough of a cushion that we can survive leaner years.

Katya Valasek:

It's obvious how much you love what you get to do and who you get to work with. Is this a good way to get wealthy?

David Lieberman:

Their successful cases are very successful. I think like all things, successful cases are really successful. It takes a lot of work to get them. It takes a lot of work to build credibility with the government for so that your cases, your good cases appear to be good. But lawyers like those I work with who are very good at this do quite well in this area. And it is one of the few areas I know that you can have a successful business doing what is exclusively civil rights, pro-government, pro-democracy kind of work, only taking clients you really believe in, you really want to work with, and still be a successful private lawyer. I think it's an amazing situation to be in.

Katya Valasek:

I want to shift now to the cases themselves. At a most basic level, what are the stages of a whistleblower case and how long do these stages last?

David Lieberman:

So these cases I think are very different than at least what I was doing with commercial litigation. The case begins with a client coming to you, telling you what happened. And one thing to understand is, the more I do this, the harder it becomes. But all I think about is the false claims act. But for my clients who come in and these are very smart, very savvy people, they probably did not know this law existed yesterday. And today it's the most important thing to them.

And so maybe they've read my website, some of the stuff we've written, maybe they've read a little bit online. Maybe they were subject to compliance trainings at their jobs. But the first thing is they are going to tell us what happened in the terms they understand it. And we are going to match that to what we understand about the False Claims Act. So we're looking for things like, are they a government contractor? Was this issue fraud and not a mistake or disagreement? Is it important? And when you move from there, then you have things like, is it a good case? Is there evidence to support the allegations, either specific witnesses or specific incidences or documents? Can we verify some of the information if we need to through our own investigation? So that process can take weeks to months for us to decide it's a good case.

Once that we've decided to take that case, we then begin to work on the complaint. That tells the government what happened. We need another document that gives the government all of the evidence that our client has that's part of the law. Around that time, we'll start talking to the government. And one huge advantage I think we have that we've been very strategic about is all of the partners at our firm did work for the government doing these kinds of prosecution things. So we understand what the government's looking for. We understand what they need to see from us and we understand what makes a good case versus a not so good case with them. Also, we have at this point developed a lot of relationships with different offices. So we think very hard about where we file it. Many of these cases could be filed in multiple jurisdictions and we file them in the places that take these seriously, devote real resources to it, and are excited about it and have the bandwidth at that moment to do it.

That's another several months to get the complaint and the information ready to go. We file it under seal with the court. We give it to the government, and then we begin to work with the government to make sure they have everything they need.

Katya Valasek:

I want to make sure everyone understands what you mean when you say something is filed under seal.

David Lieberman:

So at a high level, it means it has a number, but if you looked in the public dockets, you would see a gap. So whatever the docket number of that case is will not be shown on any public document. They won't admit that there is a case number, but you could see the other skip. You cannot find the case name anywhere. So it's not available anywhere. But it also means that the client, the whistleblower, is prohibited from discussing that case, as are any of us, or the government cannot discuss the existence of that case. And the point of this is to protect the government's investigation.

The defendant will eventually learn that they are being investigated, but even at that point, the defendant won't know that it was a false claims act that is causing them to be investigated as opposed to anything else. Often, the defendants don't know that it was a false claims act case that they were settling until at the very, very end that the government talks to them about the specifics. And in some cases, they don't see the complaint we filed until after they've already agreed.

Katya Valasek:

And then when the DOJ does begin its investigation, what they are really trying to do at that point is to corroborate the complaint and decide if they care.

David Lieberman:

That’s right. They'll usually keep us apprised of what's going on and we usually look for opportunities to help, whether that's with research, whether that's talking to our clients. One of the ways that clients can be really helpful is to tell the government where information is and what all the internal jargon was that defined that. And so when the government can come in and say, we're gonna need all the information on the chat server you call Babel, as opposed to a general term for, “tell us all the communications you ever had,” that can get to the heart of the matter very quickly and alert the defense that the government knows a lot of this and these are issues to take seriously. So we'll work with the government for as long as it takes until the government has reached a decision on the case. Hopefully that decision is positive and the government wants to intervene and settle the case. Sometimes the government wants to intervene, take over the case, but we'll need to litigate it. At that point, we may come in to litigate along with the government. We do that sometimes. And then sometimes the government has decided for whatever reason that it is not a case they want to take on and we have the option with our client to take the case over for the government. We tend to do that relatively rarely for a bunch of reasons. One is usually the government has a good reason that they're not intervening in the case. It's often something we didn't know at the beginning. And so often that reason is a reason we and our client don't wanna go forward with the case. But that tends to be the life of one of these cases.

Katya Valasek:

Is there a difference in what happens if the government chooses to only take over some of the claims versus all of the claims?

David Lieberman:

Yes. So if the government, and it depends on why the government is taking over the case. If the government is taking over the case to settle it, then a partial – and what this is called a partial intervention – a partial intervention for settling leaves the whistleblower with the choice of, am I going to walk away from this case? And I should say the government has a very narrow, a relatively narrow rule on what they'll intervene in. They will only intervene in claims that they've fully investigated and fully agree with and would be willing to prosecute. And so sometimes a whistleblower will bring – because they don't necessarily know what the government will latch onto – so they'll bring a lot of claims. They may bring a claim that the billings were themselves wrong. They were procured by fraud. They were procured by kickbacks. There may be three or four things, and the government may just latch onto one or two of those because those things are clear and they can go after them easily. So sometimes they will attempt to settle claims that involve the whole case, but were the only ones they really dug into because they were enough to take care of the whole case. And so often in those cases, you'll say, “you've reached a reasonable settlement for all of the wrong I saw, I'm gonna drop the rest of my claims.” That happens sometimes.

But sometimes the government will either disagree with the whistleblower about claims or leave them for other reasons. And so sometimes whistleblowers will, even though part of the case is settled, will pursue the rest of the case on their own. We actually have one where there were multiple parties and the government pursued a settlement with one party, but left the whistleblower to pursue the other parties.

Katya Valasek:

So would you say that it is more typical that the government would take over and it will settle versus going to trial?

David Lieberman:

When the government takes over, they almost always settle. Yes.

Katya Valasek:

Is that because the defendant at that point sort of realizes, “okay, you've caught me, so what do we do now?”

David Lieberman:

I think there's a lot of reasons for that. One is the government has their pick of cases. They only do the really best of them. So it is a signal to the defendant that this case is one of the best filed cases, you know, that they've seen. So that's a point against you. Another point against you is: you are the defendant, you are now going to face the full prosecutorial power of the federal government, plus us, for whatever that's worth. That is a daunting task, even if you think that you might have a shot at winning. And so that deters people from fighting. And then the final piece is that courts because this is the false claims act, this is fraud against the government. When the government is willing to come into court and say, we were defrauded, we want our money back, courts and juries take that really seriously, as opposed to a whistleblower coming in and saying, these people defrauded the government, who's not here. And so all of those things tend to work together, that when the government is litigating a case, they almost always settle.

Katya Valasek:

So the False Claims Act has been around for a long time. You started off by saying it is from the Civil War era. The world has changed dramatically since then and dramatically just in the last decade. If you were to look into a crystal ball, what would you say the future holds for statutes like the False Claims Act?

David Lieberman:

So the legal fighting around the False Claims Act is fascinating. The False Claims Act has been amended by Congress a number of times since the Civil War. In 1986, there were real wholesale revisions that were directed by Senator Grassley that really modernized the law, made it very useful, really brought whistleblowers in as a party to it. And then in 2009 and 2010, there were two series of amendments to it, but there are at any given time, various legal skirmishes around its meaning.

When I started in 2017, the big question was this question of materiality. And so all fraud has to be material. So, someone lies to you that is not fraud. They have to lie to you about a thing that would have mattered. And so there was a question in a case called Escobar about when things are material and this went to the Supreme Court and was decided 9-0 that materiality meant “very important.”

More recently, there was a fight over the aspect of the False Claims Act, which is called Knowledge or Scienter. In this case, the defendant's argument was that it wasn't enough that they believed what they were doing was wrong. Because in that case, they knew what the regulations were, they believed they were violating the regulations, but the court later said that the regulations were sufficiently vague that, even though they thought they were violating the regulations, they might not have been, known it was false. And they wanted to go to the Supreme Court. They went to the Supreme Court and wanted to say, look, we thought we were violating the regulations, but now our new lawyers say maybe we're not. And then you can't find us in violation of the False Claims Act. Again, 9-0 Supreme Court said that is not the rule. The rule is if you think you are violating the law, you are violating the law.

And then more recently in a case, Justice Thomas suggested in a concurrence that allowing whistleblowers to take over litigation may violate the Appointments Clause of the Constitution because they are exercising litigation functions that can only be done by officers of the United States.

I don't think that's a particularly difficult question, but I suspect that what we're going to see is a wave of defendants attempting to challenge that question and claim the False Claims Act is unconstitutional. I will say it's very interesting to operate almost exclusively in a law that is both 150 years old and people newly say, “oh, we just realized it might be unconstitutional.” So if you find legal puzzles really interesting, you have these almost constantly in this era.

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