This is a story we don’t often see. A federal judge says the Justice Department undervalued a whistleblower’s contribution. That finding was recently made in a massive False Claims Act case involving Endo Pharmaceuticals.
Typically the Justice Department champions the rights of whistleblowers. The government wants more concerned workers and insiders to come forward and report fraud. Congress passed the False Claims Act during the Civil War and specifically included a provision that allows whistleblowers to receive between 15% and 30% of whatever the government recovers.
If the government intervenes in the case, the award typically is on the lower end of the scale. If the government fails to intervene and the whistleblower’s counsel prosecutes the case, the awards are generally higher. Judges can weigh the whistleblower’s contribution in the case, although typically judges follow the recommendation of the Department of Justice.
Don’t tell that to Peggy Ryan, however. Ryan was the whistleblower (called a “relator”) in a False Claims Act case against Endo Pharmaceuticals.
Ryan’s story begins exactly one decade ago in July 2005. That is the date that Ryan first filed her complaint against Endo. She claimed the company was marketing its prescription drug Lidoderm for off label uses. Federal law prohibits “off-labeling.” Drug companies can’t recommend a drug for a particular use or disease without FDA approval.
Ultimately in 2014 Endo settled and agreed to pay the government $171,900,000. Prosecutors had claimed that Medicaid and Medicare had wrongfully paid out over $700 million in claims for off label uses of Lidoderm.
Normally, this where the story ends, the Justice Department makes an award recommendation and the judge approves. Unfortunately, Ryan would have to wait another year and a half before getting paid but the wait was well worth it.
Her first hurdle were two other whistleblowers that filed similar claims, Max Weathersby and Gursheel Dhillon. After an extensive review, the court concluded that Ryan was first to file.
Because False Claims Act cases are filed under seal, it is usually impossible to know who got to the courthouse first. The sealing order keeps the case secret. That allows prosecutors to better investigate the claims. The secret process also helps protect whistleblowers from retaliation.
There is a downside, however. Whistleblowers have no idea if someone already filed a similar claim. For False Claims Act lawyers, that means a delicate balancing act between getting something quickly filed versus doing a thorough investigation.
Ultimately Ryan won that challenge. Although now assured of an award, her lawyers could not agree with the Justice Department as to the size of the award. Prosecutors offered her 19%, an award percentage already above the norm. Ryan balked, however, and asked for 24%.
On July 15th, U.S. District Court Judge Robert Kelly sided with Ryan an awarded her $33,600,000.
In arguing against a high reward, the Justice Department argued that Ryan’s contributions were not that valuable. They also argued that larger recoveries should receive lower percentage awards. Nonsense said Judge Kelly,
“The Court reads the statute to hold that the only measuring stick is the contribution of the relator. If Congress had intended limitations, like in the case of large awards, it would have explicitly included them within the statutory framework of the FCA. Congress’ silence on this issue compels rejection of the Government’s argument. Second, the Government has failed to include any legal precedent affirming this argument, and thorough research by this Court has failed to unearth any such support.”
Judge Kelly was also not impressed with the government’s attempts to minimize Ryan’s contributions. In his words,
“Ryan provided not only the spark for the investigation, but that she nurtured the flame at the darkest times when the possibility of a favorable outcome seemed most remote. Throughout the nine year period from her first qui tam Complaint in 2005 to the settlement in 2014, Ryan continually provided access behind the corporate walls of Endo. Ryan’s insider status, conferred by her employment with Endo, enabled the Government investigatory team to recover evidence which would have otherwise been unobtainable.”
According to court records, Ryan went well above and beyond the call of duty.
For three years, Ryan wore a wire to surreptitiously record over two hundred (200) hours of conversations. Her audiotapes included 8 hours of meetings with an Endo district manager. (The manager instructed Ryan on how to push Lidoderm for off-label uses.) She also taped another manager saying that 90% of Lidoderm’s sales were for off label use. A senior product manager was later recorded bragging that 97% of Lidoderm’s sales were for off label use.
Ryan was also able to obtain PowerPoint slides and sales scripts documenting how the drug was being marketed.
As noted above, cases like this are rare. Usually whistleblowers and the government are able to agree on a reward. We have seen, however, the government seeks lower awards in large cases.
In Ryan’s case, prosecutors argued that multimillion dollar awards were not necessary to encourage would-be whistleblowers to step forward. Thankfully, the judge rejected that notion and said there was absolutely no support for such a position in the law.
Whistleblowers like Peggy Ryan are true American heroes. For over 150 years, the False Claims Act has empowered otherwise ordinary workers to stop fraud and waste. Like David versus Goliath, we love stories in which factory workers, sales reps, billing clerks and other corporate insiders take on big corporations and win.
From this case, it appears that one prosecutor forgot just how important whistleblowers have become. The Justice Department says they save taxpayers billions of dollars annually.
Interested in becoming a whistleblower? Give us a call. Our False Claims Act whistleblower clients have collected over $100 million in awards just in the last 12 months.
MahanyLaw – America’s Whistleblower Lawyers