I attended the Senate Judiciary Committee hearing this morning on the False Claims Act Correction Act of 2007.  Senators Leahy, Specter, Grassley and Durbin all attended intermittently, with Senator Grassley being the only member to attend the entire hearing. The witnesses were :

•    Michael Herz, a Deputy Assistant Attorney General representing  the Justice Department ;
•    Tina Gonter, a Qui Tam whistleblower;
•    John Clark, a former federal judge, now a Qui Tam attorney;
•    John Boese, a corporate attorney, representing the views of the U.S.  Chamber of Commerce.

Although each of the panelists had a distinctly different viewpoint on the False Claims Act, they did agree on one thing: that the FCA – having rooted out $20 billion in fraud since 1986, including $5 billion since 2005 — is a highly effective fraud-fighting tool and it should be kept that way.  But what should be done to upgrade the law, if anything?

Mr. Herz and the Department of Justice expressed agreement with some of the reforms in S.2041 (such as increasing the statute of limitations to ten years), …

…but also said that DOJ has deep reservations about the provision in the bill which would allow government employees to become Qui Tam relators if the government did not take any action on their issue for 1 year after it was reported. Their view is that it would give an appearance of impropriety for a government employee to receive a whistleblower reward for reporting something that they learned in their official capacity.
Senator Leahy also questioned Mr. Herz on the Justice Department’s FCA statistics that were recently submitted by the AG  (and reported by our blog here>>). Specifically Sen. Leahy was concerned about the number of Iraq/Afghanistan cases that had not been intervened upon, and why.

Ms. Gonter’s was a moving testimony by a whistleblower who risked everything to stop her employer, in this case a Northrup Grummond subsidiary who was making defective ship valves for Navy submarines, from putting people’s lives at risk. Ms. Gonter went to great lengths to prove their guilt, even wearing a wire to work for a time. Although the Justice Department did not intervene in her case against Northrup Grummond, she did eventually hold them accountable and obtain a settlement

Judge Clark offered the point of view of a relator’s attorney (not Ms. Gonter’s, but he has represented many Qui Tam whistleblowers).  He deftly made the point that the Rockwell, Totten, and Custer Battles cases had been wrongly decided, and that the public disclosure bar was routinely, and incorrectly, being used as a defense by contractors.

Most notably, Judge Clark said (to paraphrase him): That although he must counsel his prospective clients as to the personal and professional hardships of being a whistleblower, it is even more important and difficult to tell them that the legal landscape of the FCA offers just as many, if not more obstacles. Meritorious cases often don’t proceed because of the previous bad court decisions that have eroded the intent of the law.

…Then it was Mr. Boese’s turn to represent the views of corporate defendants (he disclosed that his firm had defended Northrup Grummond in Ms. Gonter’s case).

Mr. Boese (which, as he said to Senator Durbin, “rhymes with crazy”) said that his concern was not with protecting the guilty contractors, but the ones that were falsely accused — as if FCA relators and attorneys are routinely risking their careers to pursue frivolous claims. Later, in response to a question from Sen. Durbin, Mr. Boese suggested that if the scope of the False Claims Act were expanded, the plaintiffs’ attorneys would be filing suits every time a federal worker or Social Security recipient bought a defective product (because the money came from the government). Senator Durbin was not amused with the alarmist tactic, and had the quote of the day when he responded that Mr. Boese had “some of the most tortured logic he had ever heard on this committee.”

The debate was a spirited one, and it was evident that the FCA is in need of real repair.