In a price-fixing case originating in 2004, two whistleblowers have finally reaped their reward under the False Claims Act and its qui tam provisions. In Rille, ex rel. United States v. PricewaterhouseCoopers, LLC, et al., two relators successfully defeated the DOJ’s motion to preclude recovery of the whistleblower reward citing violations of the “original source” rule. However, in a 2-1 ruling by the Eighth Circuit, the government is required to share its $48 million recovery with the plaintiffs responsible for ultimately uncovering the unlawful fraud, which involved alleged kickbacks and other price-fixing issues between the government and distributor Cisco, Inc.
Background of the Case
Nearly ten years ago, whistleblower Norman Rille (former employee of consulting firm Accenture, PLC) and Neal Roberts (former partner of PricewaterhouseCoopers, LLC) filed several lawsuits under the False Claims Act alleging deceptive price tactics and price-fixing schemes by several computer and technology contractors. Specifically, the original complaint alleged that systems integration consultants (SIC’s) – who play a pivotal role in the performance of the government contract work – were given sizable kickbacks for promising to only recommend the contractor’s computer and technology components despite the fact that competitors’ components and parts may have been less expensive.
Approximately one year later, the relators uncovered similar misconduct on the part of contractor Cisco, Inc. The government, which had already intervened in most of the above-described cases, did not opt to intervene in the particular action against Cisco. The relators continued their investigation, eventually uncovering systemic involvement in the fraudulent activity by additional entities. In April 2008, the government finally opted to intervene, explaining in its motion that its decision to intervene was premised on information from the relators.
In August, 2010, the government settled the matter with Cisco, Inc. for a reported $44 million. It thereafter refused to provide relators with their percentage of the recovery and asserted that the settlement was reached pursuant to a routine audit of Cisco, Inc. and had nothing to do with the relators’ investigation. Interestingly, the government conditioned its settlement upon a full dismissal (with prejudice) of any action commenced by the relator for a portion of the recovery amount.
“Public Disclosure” Rule & Statutory Share
The conflict occurring in this case is premised on the FCA’s “original source” doctrine, which permits a relator to collect a portion of the recovery only if his pleadings are not based on a public disclosure or based on information previously revealed by the media, public court documents, or other public investigations. If there has been a public disclosure, a relator may recover a relator’s share only if they are an “original source.” To be an original source, the relator must add unknown information that materially adds to case or have reported the fraud prior to the public disclosure. The Public Disclosure Rule came into play in this case after defendant Verizon Wireless asserted that the facts relied upon by the whistleblower in his first action were essentially the same as the facts in the subsequent action and, therefore, the second action was not premised upon original and unique information.
In a separate issue, the government attempted to avoid paying the whistleblower his percentage recovery by asserting that the whistleblower’s lawsuit was not related to and did not induce the ultimate recovery.
After considering the government’s arguments against awarding the relators any portion of the $44 million recovery, the Eighth Circuit soundly ruled in favor of the whistleblowers, holding that the government’s attempt to have the relators’ case dismissed so it could proceed with the settlement without interruption was unlawful and in contravention of well-settled case law. Relying on a prior whistleblower victory, the Court held that once the government opts to intervene on a case it cannot thereafter attempt to avoid paying the whistleblower reward by citing problems with the whistleblower’s complaint. In other words, if there are issues with the initial complaint, those issues are to be addressed at the outset of the litigation – not when it comes times to reward the relator. (See, Roberts v. Accenture, LLP, 707 F.3d 1011 (8th Cir. 2013).
The Court also rejected the government’s claim that a relator is not mandatorily entitled to a statutory share of the recovery proceeds. Specifically, the Court addressed the government’s attempt to avoid paying the reward by having the case dismissed with prejudice. The Court found “no support in the law” for this type of maneuver and held “[t]he government cannot compromise a relator’s action by having it dismissed with prejudice and then claim the funds it received as a direct consequence are not ‘proceeds of the action.’” (See, United States ex rel. Bledsoe v. Cmty. Health Systems Inc., 342 F.2d 634 (6th Cir. 2003). Section 3730(d)(1) of the False Claims Act states that the government shall award relators between 15 and 25 percent of the “proceeds of the action or settlement of the claim.” This reward is considered mandatory, assuming relators have otherwise met pleading requirements and the tenets of the original source rule.
This case represents a stunning victory for relentless relators who, thanks to their perseverance, deserve the full amount of their recovery. If you are aware of fraud occurring pursuant to a government contract, defense contract fraud, or fraud in the healthcare industry, contact Berger Montague today.