Patrick Burns on the False Claims Act and Too Privileged to Jail

Corporations are too big to fail.

And CEOs are too privileged to jail.

burns

What is a government by the people to do?

Try exclusion.

Exclude top executives who engage in health care fraud, for example, from ever doing business with the U.S. government.

That will deter crime where fines won’t.

That’s the take of Patrick Burns of Taxpayers Against Fraud.

“The line we hear these days is that companies are too big to fail,” Patrick Burns of Taxpayers Against Fraud told Corporate Crime Reporter in an interview last week. “That’s true. We are not going to get rid of Pfizer, or Glaxo or HCA. We are not going to get rid of Northrop.”

“And we are not going to put most of the top executives in jail. Companies are too big to fail. And the CEOs are too privileged to jail. There is a third way. And we use this third way all the time. It’s called exclusion of individuals. The big federal agencies exclude about 4,000 to 5,000 people a year. The Department of Defense does it. Health and Human Services does it. General Services Administration does it. Exclusion means that you as a manager cannot do business with the U.S government. That’s personal exclusion. People design frauds.”

But those aren’t top executives at big companies. They are owners of small business.

“With big corporations, the people who pay the price are stockholders — nameless, faceless stockholders. Inside the company, the executives get to keep their bonuses, their jobs, their beach houses. They get to keep their stock options. So, inside the company we fully incentivize fraud. I refer to all of this as ‘the big wink.’ Privileged people in government and the courts are creating a special kind of soft penalty for people who lie, steal and cheat in companies. It is essentially Don Corleone who comes to the government and says — it’s just business.”

“Lying, stealing and cheating is treated with a big wink. We need to stop that. As long as we keep the people who lie, steal and cheat inside the companies, and don’t make the pain personal, we are not going to change the equation.”

“Taxpayers Against Fraud wasn’t started to secure monetary penalties,” Burns said. “It was started in order to change corporate culture. Fines help do that. We need to recover our stolen billions. But we need to go beyond that and change corporate conduct. For that to happen, the penalty has to be personal.”

“The perversion we have in the criminal justice system now is that if you are a dentist in Waco, Texas operating without a license, the government will hit you with a million dollar fine, put you in jail, sell your house and personally exclude you,” Burns says. “They will hit you with a hammer.”

“But if you are a company in Texas that is poisoning children for profit, not only will you not go to jail, you will not lose your job, you will keep your stocks and keep your beach house and your promotion.”

“That’s the perversion. We take penalties off the table for big frauds.”

Is HHS doing anything to address that?

“No,” Burns says. “HHS has the ability to do something now. Personal exclusion. It’s called permissive exclusion. It’s not a failure of law. It’s a failure of will. These are deeply rooted cultural biases.”

HHS does exclude thousands a year. But these are powerless people. Powerful people are not excluded.

Why not?

“They say — it’s hard to show that the person at the top of these big companies knew about it. We come back and say — we are not talking about excluding people at the top. We are not talking about excluding necessarily the CEO of GlaxoSmithKline. But we can exclude the middle managers who operationalized this. You get back an unending line of — yeah but. Yeah but they will just replace that person. Yeah but they were just following orders.”

“The failure is a failure of will. They don’t take action.”

“We talk about white-collar crime. I don’t know what white-collar crime is. It’s just crime. We have essentially framed an exception for privileged people. We have whole law firms that deal with white collar defense and prosecution. They are referencing the bias for the privileged. We are talking about ‘the big wink.’ These are not victimless crimes. These are crimes that harm people. But it is a situation where we have decided culturally as a nation that for the little stealing you go to jail. But for the big stealing you go to the country club. That’s just paraphrasing Eugene O’Neill writing in The Emperor Jones eighty years ago.”

“This is not something new. This is a deep cultural bias. The failure to exclude the big players by HHS OIG and DOD OIG is simply a reflection of that cultural bias. I can understand how they can be blind to the cultural bias. That’s just the frame of their entire lives.”

As for the False Claims Act itself, the biggest recoveries are still in the healthcare arena.

“The biggest cases — but not all of them — tend to deal with prescription drugs,” Burns said. “Over $2 billion for GlaxoSmithKline. Johnson & Johnson was $2.2 billion. Pfizer was $1.3 billion. There have been five or six cases over a billion dollars.”

“Tenet was $900 million for just one case — but there have been multiple cases against Tenet. DaVita will pay about $1 billion in two cases this year. Columbia HCA has settled cases with penalties totaling about $1.2 billion on two cases. But there have been five or six cases against Columbia HCA.”

And the vast majority of those hundred million dollar cases result from cases where the government joins with the relator.

“The big cases tend to be cases that the government has joined, but not always,” Burns said. “Many of the cases that the government has joined for large amounts of money have been cases which the whistleblower filed, the Department of Justice declined or didn’t do anything and the judge kicked it out — or took it out from under seal. The whistleblower and lawyer move forward, sometimes for as long as a decade or more, before the Department of Justice joins the case. The Department of Justice will count those as joined cases. But on our side of the stick, the Department of Justice was a day late and should be a dollar short.”

“There is no way that the law was designed for the government to allow the whistleblower and his or her lawyer to initiate discovery and start to litigate a case before the Department of Justice pops up and says — we are going to be in it now and cut back on the relator’s share.”

How many False Claims Act cases are filed every year?

“The numbers have changed,” Burns said. “They have moved up from 400 a year to about 600 a year right now.”

How many law firms are set up specifically to bring False Claims Act cases?

“Not many,” Burns said. “Maybe ten or twelve. Most firms are doing another kind of law as well. Most False Claims Act lawyers are employment lawyers. They are doing a good business as employment lawyers. They are waiting for somebody with the right set of facts in a False Claims Act case to walk through the door. There are a few firms that are heavily or exclusively centered on False Claims Act litigation. And then there are firms which do False Claims Act litigation and two or three other kinds of litigation and are specialists in all three of them. And they very selectively take cases.”

Those ten or twelve False Claims Act only law firms bring in a big chunk of the big cases, right?

“They do,” Burns said. “They have a better filter against folly. Because they have settled big False Claims Act cases in the past, whistleblowers with big cases tend to go with them. And they also tend to be more selective. They are less likely to take a small case or a case which is defective.”

“Total False Claims Act recoveries are now about $50 billion,” Burns said. “Of that about $3 billion are in cases where the government declined to join. Of the $3 billion, many of them are the average wholesale price cases brought by Ven-A-Care in the Florida Keys. There are other cases as well. Cases against Omnicare. Cases against DaVita. There are not a huge number of them.”

Of the 600 cases that are filed every year, how many does the government join?

“About 150,” Burns said.

Of the 450 that aren’t joined, the vast majority of them just are dropped, correct?

“Yes,” he says. “In only a handful — 20 or 30 a year — proceed.”

“A significant percentage of the 450 cases are filed pro se, without a lawyer. Another very significant number of cases are filed by lawyers who are not False Claims Act lawyers. They are lawyers who do drunk driving or divorce cases. And they generally don’t understand what they are getting into.”

“Another chunk are cases that are fatally defective, for a number of reasons. It can be a statute of limitations problem. It can be a safe harbor provision — it’s not fraud because of some loophole buried in the rules and regulations. The case may be dropped because the whistleblower wasn’t first to file — he or she was seventh or eighth to file. At a certain point, if you are not even close to being first or second to file, you have no dog in the fight.”

“Occasionally, the whistleblower decides to drop the case because they realize that the harm to them for pursuing the case outweighs any benefit they might get financially.”

(For the complete q/a format transcript of the Interview with Patrick Burns, see 29 Corporate Crime Reporter 20(12), May 18, 2015, print edition only.)

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