Blowing whistle yields rewards
WASHINGTON (AP) – Crime may not pay, but blowing the whistle on companies that swindle the government sure can. Jim Alderson got $20 million in one settlement and split $100 million with another whistleblower in a related case, both involving Medicare fraud by the nation’s largest for-profit hospital chain and a company it acquired.
Once facing a wrecked career and no pension, Alderson, 58, now owns houses in Plano, Texas, and Whitefish, Mont., drives a new car and has established a charitable foundation with the money he received. While his pastures became greener after long legal battles, blowing the whistle was no easy ride into the sunset.
“You risk everything when you do it,” he said.
Alderson is among the beneficiaries of a law passed nearly two decades ago that encourages whistleblowers to come forward by promising them up to a quarter of the money recovered by the government.
Since its inception, the False Claims Act has generated $12 billion for the federal treasury and more than $1 billion for hundreds of whistleblowers.
Whistleblowers have been at the root of federal fraud cases against many companies, including Tenet Hospital, Lockheed-Martin, TAP Pharmaceutical Products Inc., Boeing and KPMG-Peat Marwick.
Companies have been caught for many things, from selling defective parts for U.S. military aircraft to paying kickbacks to doctors for prescribing unneeded medicines and services and then overbilling Medicare and Medicaid.
“It’s a very powerful law,” said Patrick Burns, spokesman for Taxpayers Against Fraud, a consumer advocacy group. “You start pulling on a thread and a whole circus tent comes unraveled.”
Another whistleblower protection law – the Sarbanes-Oxley Act – covers fraud against publicly traded companies and targets those that destroy records, commit securities fraud or fail to report fraud to investors. The law emerged after the corporate financial and accounting scandals of 2002.
Both laws protect whistleblowers from being fired, but the False Claims Act has triple damages and gives whistleblowers a reward.
Established during President Lincoln’s time, the law was later gutted. But it was strengthened in 1986 to help identify contractors guilty of defrauding the government.
Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, took the lead in modernizing the law and credits whistleblowers for the success of the amendments.
“They are some of the greatest champions of the public’s right to know,” Grassley said. “Whistleblowers shed light on why something is wrong, and their insights can help hold the bad actors responsible, fix problems and achieve reforms.”
Justice Department spokesman Charles Miller said the False Claims Act has been “highly effective in ferreting out individuals and companies that commit fraud.”
For example, Joe Gerstein and others blew the whistle on TAP Pharmaceutical Products Inc., which agreed to pay $875 million in 2001 to resolve criminal and civil charges in connection with its pricing and marketing of the cancer drug Lupron.
TAP offered Gerstein, of Weston, Mass., a former medical director of the Tuft’s University health plan, a $20,000 unrestricted research grant to keep Lupron on the HMO’s list of preferred drugs. Instead, he wore a wire for the FBI to tape the bribe. Gerstein eventually filed a False Claims Act suit which resulted in a $17 million reward to him and Tufts.
Alderson became a whistleblower after he was fired from his accounting job. His wrongful termination lawsuit grew into False Claims lawsuits against Columbia/HCA and Quorum Health Group Inc. Columbia/HCA eventually paid $1.7 billion in fines and damages for overbilling the government.