Posts Tagged ‘whistleblowers’

Banking and finance roundup

  • “State-run retirement plans are the wrong way to protect the poor” [Andrew G. Biggs, AEI]
  • Fifth Circuit panel: Federal Housing Finance Agency (FHFA) “is unconstitutionally structured and violates the separation of powers” [Jonathan Adler] Unconstitutional structure afflicts Consumer Finance Protection Bureau too [Ilya Shapiro on Cato amicus brief in Fifth Circuit case of CFPB v. All American Check Cashing, earlier here, etc.]
  • Study: financial advisers in Canada who are not subject to fiduciary duty have personal investments similar to their clients [Peter Van Doren]
  • Regulation can have a lulling effect. Might it even breed financial illiteracy? [Diego Zuluaga, Cato]
  • “As I predicted, the ratchet effect is going to save Dodd-Frank. Sigh.” [Bainbridge]
  • “SEC proposes to limit whistleblower awards” [Francine McKenna, MarketWatch]

Banking and finance roundup

February 28 roundup

Judge excoriates DoJ in False Claims Act case

Problems with applying the whistleblower law that has been described as a “cash cow” for the U.S. Department of Justice [C. Ryan Barber, NLJ]:

A federal magistrate judge has struck a key witness and ordered the U.S. Justice Department to pay legal fees to HCR ManorCare Inc., one of the country’s largest providers of skilled nursing facilities, for alleged missteps in a case the government touted in the crackdown on fraud in the health care industry. “I don’t think this case should have ever been brought,” a federal magistrate judge in Virginia said at a recent hearing. “I have looked at this stuff, and I’m appalled, I’m embarrassed, I’m ashamed that the Department of Justice would rely on this kind of nonsense.”

Earlier on qui tam and the False Claims Act here. [& followup, Toledo Blade: feds drop case]

Michigan, D.C. consider bounties for turning in those who underpay taxes

While expanding year by year, the complex of federal and state False Claims Act/whistleblowing laws often has exempted tax filings from the broad incentive provided to denounce others for “false claims” made to the government, often in a contract or program administration context. But new bills sponsored in the District of Columbia by Councilwoman Mary Cheh and in Michigan by Senator Steven Bieda would apply the bounty system to the tax area, starting, at least, with larger taxpayers. [Stephen P. Kranz, Diann Smith, and Eric Carstens, McDermott, Will, & Emery] We’ve covered some of the problems with laws rewarding tax tipsters in states like New York and Illinois here and here. On the latter story, note an update: a court has denied fees to attorney Stephen Diamond in a case in which he was both the relator and relator’s attorney. “Diamond has served as relator in about 1,000 qui tam actions over the last 15 years. A recent investigation by Bloomberg BNA revealed Diamond has collected almost $12 million through this pattern of litigation.” [Michael Bologna, BNA Daily Tax Report]

False Claims Act jumps the guardrails in E.D. Tex.

A $680 million award in the plaintiff-friendly Eastern District of Texas illustrates some of the problems with the federal False Claims Act, the whistleblower law enabling bounty-hunting suits against government vendors and contractors [Ilya Shapiro, earlier here, here, and here]:

Trinity contends — and the alleged federal-agency victim agrees! — that the re-designed device, which passed all diagnostic tests, met all the safety criteria required by the FHWA, and therefore that the omission of the redesign failed to qualify as the sort of “false statement” required for liability under the FCA. Despite a warning from the U.S. Court of Appeals for the Fifth Circuit regarding the weakness of the FCA claims, a trial court in the eastern district of Texas—known for being a “judicial hellhole”—moved the case forward, to an eventual jury verdict for Harman.

The jury found Trinity liable for more than $680 million in damages, which is the largest damage award in FCA history. Out of the millions in damages and penalties, the court awarded Harman a 30% share of the recovery, plus almost $19 million in attorneys’ fees and expenses.

Cato has submitted a Fifth Circuit amicus brief “arguing that the jury’s finding of liability and damages were unsustainable under the law.”

Bounty-hunting lawyer collects Illinois taxes nationwide

Wineries that ship to customers nationwide are among the latest targets of a Chicago attorney who has developed a lucrative freelance enforcement niche. Steven Diamond and his firm of Schad, Diamond and Shedden “have filed hundreds of suits against various companies in industries such as cookware, flowers and motorsports” and more recently beverage makers under “an Illinois law that requires businesses to collect sales taxes for the state, not only on what they sell, but on shipping-and-handling charges. A whistleblower rule allows anyone within the state to sue in the name of Illinois and collect any recovered funds.” [Wine Spectator] While a number of other states also tax shipping charges, Illinois authorities, unable to agree on how to interpret a relevant decision by their state’s high court, have given conflicting guidance on when taxes are owed. [Wines and Vines, Tom Wark, Schiff Hardin, WTAX]

P.S. Related on the practice of tax farming in the Roman Empire and pre-Revolutionary France, and latter-day parallels, here, here, and here.

“No, Your Medical Records Are Not Private”

HIPAA or no HIPAA, a variety of government agencies might get a look at your personal medical records. “HIPAA allows federal bureaucrats to get patient records merely by issuing administrative subpoenas, or civil investigative demands.” The records may also find their way into the hands of private lawyers, such as those representing qui tam relators under the False Claims Act. “‘Everybody’s got horror stories for what happens when the relators get into their stuff,’ said Jonathan Diesenhaus, a former DOJ senior trial lawyer who now represents health care companies as a partner with the Hogan Lovells law firm, to TheDCNF. ‘It becomes an avenue for abuse.'” [Kathryn Watson, Daily Caller]