This transcript has been auto generated
00;00;01;20 - 00;00;25;06
Jonathan Porter
Welcome to the inaugural episode of Husch Blackwell's newest podcast on the False Claims Act. I'm your host, Jonathan Porter. I'm a partner in Husch Blackwell's White Collar Group based in Georgia, and I'm a former federal prosecutor, having dealt with the False Claims Act from within the Justice Department. Now, I help guide clients through federal investigations, including investigations brought under the False Claims Act.
00;00;25;15 - 00;00;58;28
Jonathan Porter
I'm very excited to be hosting this new podcast. Why are we doing this new podcast? It's because the False Claims Act is a big challenge facing many clients. In several of the industry groups that Husch Blackwell serves health care, defense contractors, financial institutions receiving federal backing, companies importing goods, universities receiving grants, ag companies with federal insurance. Any industry doing business with the government should have an eye on the False Claims Act because the False Claims Act is serious business.
00;00;59;16 - 00;01;25;20
Jonathan Porter
Last month, the Justice Department released its annual report on its False Claims Act results. And that report shows how important this work is. There were $2.7 billion worth of FCA settlements and judgments last year. And perhaps more important. DOJ announced a record number of new FCA matters, new investigations. The False Claims Act is a serious and complex area of the law, and it's something that Hush.
00;01;25;20 - 00;01;47;18
Jonathan Porter
Blackwell strives to guide clients through. And so we have created this podcast, the first of its kind, to talk through some of the biggest issues in False Claims Act enforcement. Our goal here is to make this podcast informative, practical and also a little entertaining. We want to give you a glimpse into this complex world. This is our first episode.
00;01;47;19 - 00;02;13;22
Jonathan Porter
And today's topic is whistleblowers. Joining us to talk about whistleblowers is Jody Rudman, who chairs Hush Blackwell's White Collar Practice Group and spearheads the firm's False Claims Act Working Group. Jody is a former federal prosecutor in the Northern District of Texas and now at Hush Blackwell, she helps guide clients through federal investigations. Jody is a veteran trial lawyer, which is a bit of an endangered species in the legal world today.
00;02;14;02 - 00;02;27;16
Jonathan Porter
And Jody represents clients from investigation through appeals, including advocacy before the United States Supreme Court. Jody, thanks for being this podcast's very first guest and telling our listeners a little bit about whistleblower.
00;02;28;09 - 00;02;35;09
Jody Rudman
Thank you, Jonathan. I'm really thrilled to be here and thanks for that really great introduction and I kind of want to bottle that up.
00;02;35;19 - 00;03;06;20
Jonathan Porter
Thanks, Jody. So I think what Joni, a lot of people know that the False Claims Act is a law that deters fraud against the federal government and that there are really big penalties for defrauding the government. I think people know that. But what people may not realize is how central whistleblowers are. So the government's anti-fraud plan to Joe to give our our listeners a bit of an overview of the role that whistleblowers play in the False Claims Act and why people choose to become whistleblowers in the first place.
00;03;07;12 - 00;03;43;16
Jody Rudman
Yeah, sure. I think it would be difficult to to overstate the importance of whistleblowers in the government's mind in the in the False Claims Act world. So let's start here, which is that the government, specifically the Department of Justice, can, of course, initiate its very own investigations and litigation in the False Claims Act space. But even so, the majority of False Claims Act cases are actually brought to the Department of Justice by whistleblowers.
00;03;43;29 - 00;04;11;02
Jody Rudman
And in that context, whistleblowers have a special name. They're called Relator's, although it's perfectly okay to also refer to them as whistleblowers in litigation. They're called Relator's. And so if there are any lawyers out there or those who are familiar with case names, you might see United States X, rel, and then somebody whose last name. And that indicates that this is a relator driven controversy.
00;04;11;17 - 00;04;56;19
Jody Rudman
And Relator's whistleblowers in the False Claims Act world file lawsuits that are called qui tam lawsuits in different parts of the country will actually pronounce that differently. It's two letter words, so you might have heard of Kuwait, Tom or Tom. In any event, here, we call them Katyal. And those lawsuits are filed by these whistleblowers or Relator's under seal, and then copies are given to the Department of Justice and then the DOJ actually investigates them without knowledge of the companies or the individuals who are alleged in the lawsuit to have committed the fraud.
00;04;57;05 - 00;05;37;07
Jody Rudman
So that's kind of an overview of the process is the why of it was kind of the second part of your question. So let me get to that. Often whistleblowers, you know, come forward because they feel that it's a sense of civic duty, you know, to try to bring forward allegations of fraud against the government. But I see that a lot of the motivation is often monetary because as it turns out, whistleblowers get a percentage of the dollars that are recovered, and that is whether through settlement or whether it's through litigation, judgment, verdict, an award.
00;05;38;13 - 00;06;22;20
Jody Rudman
The victim, relator, will get anywhere from 15 to 30% of what the DOJ collects and attorney's fees and costs. And that percentage range will ultimately come down to an assessment of factors, including how helpful was this whistleblower to the DOJ? You might be asking why? Why did Congress, in creating the statute, give whistleblowers a share of recovery and that was essentially to incentivize them in in recognition that whistleblowers are really in the best position to identify fraud.
00;06;23;05 - 00;06;46;25
Jody Rudman
So, Jonathan, I can kind of go on and give you a sort of a very specific example of that, please. First, and for that, I'm you know what? I want to use any any name. So I'll just stay real general. But to give you a sense of kind of the inside view that the government wants to encourage in incentivizing whistleblowers financially.
00;06;48;00 - 00;07;29;14
Jody Rudman
Here's a matter not too long ago where in a university was alleged to have committed research fraud. And, you know, the question is, would the government have known about it? But for a whistleblower coming forward and the answer is maybe not, because in that particular instance, you have somebody who saw as far as he alleged, that a peer in his same position was faking test and result in a matter that was funded by federal grants and that no one within the employer had done anything about it.
00;07;29;22 - 00;08;05;16
Jody Rudman
And so he filed this detail, this whistleblower action, and ultimately the entity settled with the Department of Justice for a very, very significant sum of money, over $100 million. And in that instance, this peer, this whistleblower, got $33 million of that. So, yeah, the inside knowledge, the financial incentive kind of come sort of together in that in that very specific example to indicate why this is so important to Congress to write in that these folks get an incentive fee.
00;08;05;23 - 00;08;30;02
Jonathan Porter
Yeah, I think that's right, Jody. You know, I think what Congress had in mind was incentivizing someone who has unique insights, someone who, through their position within a company, knows that there's some fraud going on, especially with research fraud, you know, the way it works. There's not some naive staffer who's sitting in on these on this research who's able to tell if things are being fake.
00;08;30;09 - 00;08;48;29
Jonathan Porter
It's actually really hard to figure out if things are being faked. And so it makes sense to sort of reward people to come forward. And in that example, in that university sample, the whistleblower was an employee. It was an insider who went through the proper internal channels, you know, tried to go through the compliance program and and then was ignored.
00;08;49;12 - 00;09;10;20
Jonathan Porter
I think that's the fact pattern that most people expect when thinking of whistleblowers. But Jody, for those of us who defend false claims act investigations, a lot, you know, we're seeing more and more cases of other types of whistleblowers, non employee whistleblowers. Jody, who exactly can file these key items and become a whistleblower?
00;09;10;29 - 00;09;32;14
Jody Rudman
Yeah, that's exactly right. You kind of see it coming from all sides, Jonathan. And part of the reason for that is that the statute itself really does not contain any linguistic limit on who can serve as a whistleblower. So you don't have to have an insider. You don't have to have an employee who can serve as a as a key.
00;09;32;14 - 00;10;09;12
Jody Rudman
Tamara, later in the in the health care space, for example, sometimes we've seen whistleblowers who are actually patients or former patients of the entity that they're accusing out of some false claims act violations. We've seen competitors who file a lawsuit against companies that they believe are bending the rules. We've seen Ketchum and lawsuits that are brought by compliance consultants who were actually brought in by a company to examine areas of alleged noncompliance.
00;10;09;12 - 00;10;36;20
Jody Rudman
And then these compliance consultants turn around and file lawsuits after their advice was ignored or flouted or not taken. And then this one is really interesting and I think very sort of, you know, 2024 and and forward and that is that recently the Department of Justice announced a settlement in a kitchen matter that was initiated by Are You Ready, a data mining company.
00;10;36;28 - 00;11;11;14
Jody Rudman
So this data mining company actually had no affiliation or relationship with the company that it's accusing of the false claims, that violation. It just took publicly available data that you'd find. And then it used that to allege fraud against a roofing company. But it said that a federal loan through improper means. So they're coming from all sides. And as the False Claims Act and False Claims Act, litigation space really gets bigger and bigger.
00;11;12;08 - 00;11;37;11
Jody Rudman
We are seeing more creative. Keeps him Relator's often in ways I think John McCain that Congress may not have anticipated so long ago statute was written all the years that it's been you know it's been revised. You know, I do want to say, because that sounds a little doomy and gloomy maybe, but I do want to say there are constraints, right?
00;11;37;12 - 00;12;06;18
Jody Rudman
There are. It may not be necessarily embedded within the words of the statute, but there are case law created constraints on people just coming forward, right, left and center, alleging key towns out of nowhere. Right. And these case constraints really do attempt to cabin the misuse of the False Claims Act by people who really don't know what they're alleging or really don't have a good faith basis or people who take public information.
00;12;06;18 - 00;12;23;27
Jody Rudman
And it just kind of cook it up into a fraud theory. And I think if I'm sort of looking in a crystal ball that those restraint happening, the sort of runaway aspect of key leadership, is probably going to be something we're to see more of in the next few years.
00;12;24;05 - 00;12;50;10
Jonathan Porter
Yeah, I think that's I think that's exactly right, Jody. You know, not not only are there protections on the contempt side, you're actually starting to see some companies that are being accused of fraud pushing back against realtors who have bad intentions through other actions. You know, our group wrote last year about a case in West Virginia where this health system was sued in a key town alleged, you know, alleged to have committed fraud.
00;12;50;22 - 00;13;28;15
Jonathan Porter
But then when you peek behind how that qui tam got filed, he found out that it was actually sort of instigated by a competing health systems general counsel. And then that general counsel ended up spreading rumors of the federal investigation that he caused through getting his friends filed. She used that to malign the health system where physicians and other people who could have been referral sources, what ended up happening was the maligned health system, the health system that got investigated, sued the general counsel and a few other of the relator and were successful, as I understand, they were successful in suing for malicious prosecution.
00;13;28;15 - 00;13;52;10
Jonathan Porter
So there are these checks that I think those of us who practice in this space have to be thinking about and sort of getting aggressive because there are more and more unique ways, creative ways that people are filing these items. There's got to be some sort of a pushback. And so it's important for for us to figure out on the defense side how to push back when there's a a wrongful use of one of these qui tam vehicles.
00;13;52;10 - 00;14;01;23
Jonathan Porter
So, you know, Jody, I think those situations aside, is it safe to say that employees, though, are the most likely whistleblowers? And if so, why is that?
00;14;02;15 - 00;14;43;13
Jody Rudman
The short answer is yes. And and for a lot of the reasons we stated earlier, which is that employees really are in the best position to visualize, to assess, to view not only the facts of what's going on, but the very, very important element of the company knowledge. Because a false claims act case, in order to be proven in order to be successful, must have, as a constituent element, what we call center or the company's knowledge about what was going on in the and the alleged fraudulent nature of what was going on.
00;14;43;13 - 00;15;06;00
Jody Rudman
And so employees are really in the best position to say, this is what my employer knew or this is what they said or this is how I communicated it and nobody did anything about it, or they blew me off or whatever. You know, for the False Claims Act itself, the remedies would have really been breach of contract type of remedies.
00;15;06;15 - 00;15;42;07
Jody Rudman
We we contracted with you, this federal contractor, to perform these duties. And you didn't them and you breached your contract. And that's how companies would deal with the government or would deal with one another when they when they don't do things that are expected of them both. But the government's ability to go from a simple breach of contract into the False Claims Act space with all of the attendant penalties and the significant trebling of damages and all of the very hard hammers of consequence takes more than that.
00;15;42;07 - 00;16;19;19
Jody Rudman
Right. And it takes this by inter this level of knowledge about the alleged wrongdoing. So I'll give you an example of that, of of why it is that employees are really in the best place to know that and to get over the hope that science or that knowledge. And in this example comes to us from Louisiana, where we have a recent actually turn into a criminal prosecution, but it was a the hospital owner in Louisiana and an employee had filed a false claims act lawsuit.
00;16;19;25 - 00;16;50;00
Jody Rudman
Let me just take a minute here and say the False Claims Act is a civil statute. And so this matter that I'm talking about turned into a criminal prosecution. But people should just understand that in the case, in and of itself, all by itself, is a civil matter. In any event, in that situation, this employee did file a civil lawsuit alleging fraud in that lawsuit state under seal.
00;16;50;00 - 00;17;15;25
Jody Rudman
We'll talk about the SEAL, I think maybe in just a couple of minutes. That's an important part of all of this. And then the whistleblower, the employees stayed on as an employee with this office. And here's why. Because the employer didn't know that he or she had blown the whistle because of the False Claims Act lawsuit was under seal.
00;17;15;25 - 00;17;41;06
Jody Rudman
And while employed this employee had access to documents, the conversations and other matters that it could alert the Department of Justice to and in the hospice known or only found out about stuff. All of this when the FBI showed up and came knocking. And at that point this matter turned into a criminal matter. The hospital owner was indicted.
00;17;41;06 - 00;17;54;25
Jody Rudman
Ultimately, he or she was convicted. And all of this begins with the employee and the access and the knowledge that this employee has that creates this, you know, very significant result.
00;17;55;05 - 00;18;15;01
Jonathan Porter
Yeah. And Jerry, I think in a future episode, we're going to talk about ways to manage whistleblower risk among federal employees. I think in a future episode, we might boom. I also want to talk about how these False Claims Act investigations can turn into criminal investigations. Those are called parallel proceedings. I think that's a pretty critical component. That's a little teaser for for the listeners.
00;18;15;01 - 00;18;34;06
Jonathan Porter
Keep listening and we'll keep bringing you interesting content, you know, on how to manage whistleblower risk among your current employees. I think the short answer is have a robust compliance program. So because I think a lot of people, they think about fixing it internally before they file these key terms. And so a robust compliance program is one piece.
00;18;34;24 - 00;18;53;26
Jonathan Porter
The other key piece. Let me just make sure we're making this. If you think an employee is a whistleblower, do not retaliate against him or her. There's independence problems that that creates. And so, again, we're going to talk about that in a future episode. But Jody, I'm interested when DOJ is investigating a key item, you talked about the SEAL.
00;18;53;26 - 00;19;07;12
Jonathan Porter
Why don't you tell people about the seal? Does that seal prevent DOJ from just coming out and telling the target of their investigation that there's a sealed qui tam? Do they tell the target who the whistleblower is? How does all this work?
00;19;07;12 - 00;19;40;24
Jody Rudman
Yeah, I know the DOJ nobody and can reveal the contents of a sealed ketone lawsuit. Including who the the relator or players plural is or are. So the seal is a is a court ordered seal. And when the key to a lawsuit is file, the it is placed under seal and it remains under seal for a long time during which the DOJ is conducting its own and investigation to decide whether to intervene and get involved in the lawsuit.
00;19;41;05 - 00;20;11;15
Jody Rudman
A violation of the seal is actually contempt of court because you are violating the court ordered seal. So that's a big no no. That said, Jonathan, you know, those of us in the defense space are well positioned to recognize when we kind of know that this investigation is being driven by a relator lawsuit. The DOJ, of course, will not confirm, nor should we put them in the position of even asking.
00;20;11;23 - 00;20;44;04
Jody Rudman
And a lot of times clients who believe that there's still Kitamura will kind of try to figure out. They wonder if the relator is, but you'll never have any confirmation of that until such time as the seal is lifted in the lawsuit becomes public record. And and there is a when that that happens often once the DOJ makes its decision on intervention whether that's we are going to intervene or whether we're not going to intervene, and then there's a court order lifting the seal and suddenly the thing becomes public.
00;20;44;06 - 00;21;00;29
Jody Rudman
Or if DOJ decides to get involved in order to try to negotiate a settlement, then those discussions will often lead to a revelation of the existence of a lawsuit and ultimately the existence of the relator and his or her counsel.
00;21;01;03 - 00;21;18;04
Jonathan Porter
Exactly. So yet, Jody, I think what's interesting is it gets really complex there towards the end, if there's going to be a settlement, there are exactly what you said. There are steps to be taken where you can loop in. All of a sudden, the defendant gets notice of it because there's a lot of things to be settled with that budget.
00;21;18;04 - 00;21;36;18
Jonathan Porter
You know, our group is fortunate to represent a lot of, you know, good clients who convince the Justice Department that they have not violated the False Claims Act for clients where DOJ wants to close their investigation, not settle anything. They don't want to take the key term forward. What exactly happens to the whistleblower's key down.
00;21;37;04 - 00;22;19;22
Jody Rudman
Here when the when the DOJ makes the decision not to intervene? Of course, the matter is unsealed and very often you see Relator's, you just decide, I don't want to I don't want to do this on my own. I'm just going to go ahead and exit stage left in and that's kind of the end of that. But there are Relator's and their counsel who are in it for the long haul, and we all elect to go ahead and litigate the case standing in the shoes of the government and actually a lot of declination by the Department of Justice, not to intervene come with the caveat that the DOJ may go ahead and intervene sometime at
00;22;19;22 - 00;22;55;14
Jody Rudman
a future date. So there isn't resolution of that right. And the DOJ actually can step in a while later and seek to dismiss the case. This was really an interesting litigation event. There was a decision by the United States Supreme Court in the last term all about the government's dismissal. Right. So if the relate or standing in the shoes of the government decides to go ahead and proceed, notwithstanding DOJ not intervening, there's still ways the government babysits the case.
00;22;55;19 - 00;23;31;06
Jody Rudman
You know, it is still the government's claim, so to speak, and the government can still remain involved even from the sidelines. But a relator driven PTM lawsuit certainly is an option for a whistleblower. It's a long, long slog, but most of the time these cases are take a long time to litigate. They're very expensive to litigate. So, you know, you have to have a relator and a lawyer who are really in it for the long haul for that to happen.
00;23;31;24 - 00;23;52;13
Jonathan Porter
Yeah, Jody, I think what's interesting and you mentioned the case last, the Supreme Court case last term that spoke to the government's dismissal power, that was the Polanski case. Sort of a side note that maybe we'll bring up in a future episode was Justice Thomas is dissent that said that he's unsure that these key items are constitutional in the first place.
00;23;52;13 - 00;24;14;18
Jonathan Porter
I think that's a I think that is an underdeveloped theory. And I think he's on to he's on to something there that would certainly rock this entire industry. But one of the things that's interesting, in addition to the DOJ having the power to affirmatively dismiss, which Polanski made clear, there's also the possibility of the Justice Department settling. They can say exactly what you said.
00;24;14;18 - 00;24;37;08
Jonathan Porter
It's always going to be the government's claim at core. And so the Justice Department can jump in later and and settle a case over the Relator's objection. I think you see that every now and then when the government realizes, okay, this whistleblowers has a little kernel that is potentially true and the rest of it is less true. And so they'll jump in.
00;24;37;08 - 00;24;59;29
Jonathan Porter
They'll settle they'll settle on that little, you know, kernel of truth and the whole thing goes away. That's something that that I think experienced false claims act attorneys know sort of when to ask for that and how to go about obtaining that because that's a big win for a client. If they can avoid a trial, settle on that little tiny bit and make the hockey team go away.
00;25;00;10 - 00;25;16;25
Jonathan Porter
And so, Jody, I guess what sort of final question for you, for companies that are doing business with government, if they're concerned about federal investigations, if they're concerned about whistleblowers, compliance programs, what should those companies look for in selecting attorneys to help them with all of these very complex issues?
00;25;17;08 - 00;25;53;03
Jody Rudman
Yeah, that's that's a great question is an extraordinarily complex area of the law and always emerging, you know, almost every time the Supreme Court either grant cert and decides a false claims act issue or is given the opportunity to it and is faced with a circuit split on important and thorny false claims act issues. So I think it's important to work with counsel, understand the space really, and to keep abreast of developments in the space because they are always happening.
00;25;53;03 - 00;26;21;18
Jody Rudman
It's a very dynamic environment and not at all a static one. The other thing I would say is that also a false claims act defendant isn't as adverse to the government. I think good working relationships with the government which you often see in firms that that have lawyers who used to be with DOJ or who used to work in the space for the government.
00;26;21;18 - 00;26;52;11
Jody Rudman
I think those relationships are really important. That's not to say that anybody has any undue or improper influence at all. Not not at all. But a deep understanding of how this works and how to get all of the constituent conversation people at the same conversation table. I think it's a really good thing to have and there are plenty of fantastic law firms intact and experienced lawyers.
00;26;52;21 - 00;27;11;13
Jody Rudman
You know, I'm fortunate that that I think that you are and that and that we are at Blackwell but but lots of really excellent lawyers and firms in this space and I think it's a really good idea to align with really qualified counsel. This is not like stuff.
00;27;11;13 - 00;27;33;13
Jonathan Porter
That's exactly right, Jody. And I think that's an important point is the nature of key items, the nature of the False Claims Act. It's not totally adversarial. You know, usually if you're doing this right, you've got a good working relationship with the government. I mean, I still believe that the Justice Department wants to get right answers. They're not trying, you know, in normal litigation, you want to win.
00;27;33;22 - 00;27;51;10
Jonathan Porter
You know, if you think about your standard plaintiff versus defendant cases, the players just want to win. They don't care what the what the law is. They don't really care a whole lot, you know, whether justice is being done. They they, you know, they want to win their case. And that's totally normal. That's why we have zealous advocates here.
00;27;51;17 - 00;28;19;16
Jonathan Porter
You know, the government has a vested interest in seeking justice. And that doesn't always mean that they win. That doesn't always mean that they're going to get the maximum value out of every case. And so the working relationship with a good False claims Act defense lawyer and the government is not adversarial. You know, I remember when I was an AUSA, some people who were defending False Claims Act investigations that I was handling were coming in and treating it like it was adversarial.
00;28;19;19 - 00;28;39;27
Jonathan Porter
And that's not the way. I'll just tell you. That's not the way to go about it. You know, there's not always going to be things that you agree on, but you have to always maintain that good relationship because you never know when at the end of this, you're going to ask them to to affirmatively dismiss. If you want to settle on that little kernel of truth and get rid of the rest, there are things that you're you're going to want from the government.
00;28;39;27 - 00;29;03;15
Jonathan Porter
And so maintaining good relationships, having that credibility, that's super important in these cases. And I think a lot of people don't realize that that is so important, especially in these whistleblower driven kidnaps. So, Jody, this is the first of hopefully what will be many episodes about the False Claims Act. Like we said at the top, this is a really important, really growing area of the law.
00;29;03;27 - 00;29;29;26
Jonathan Porter
You know, that report the DOJ just came out with reporting a record number of new investigations. Those are going to be happening in the coming months, in coming years. And I'm excited to continue working with with you and our great group here at that, Husch Blackwell, that you lead in helping clients through these issues. So this is the first of many really looking forward to do two more discussions on these important False Claims Act issues.
00;29;29;26 - 00;29;34;01
Jonathan Porter
But Jody, thanks for being our our very first guest, and I hope you'll join us again soon.
00;29;34;09 - 00;29;36;24
Jody Rudman
Oh, it was my pleasure and honor. Thanks, Jonathan.
00;29;37;05 - 00;29;47;07
Jonathan Porter
All right. Thanks, everyone, for joining us. We'll see you next time.