Under the False Claims Act (“FCA”), private persons known as relators may file a lawsuit against those individuals, businesses, and other entities that have directly or indirectly defrauded the federal government. The Federal Bar Association’s Qui Tam Conference February 27-28, 2018 in Washington, D.C. will feature experienced FCA litigators from a variety of perspectives who will discuss the latest cases and settlements. Take this opportunity to interact with leading practitioners in the field while earning CLE credit and enjoying multiple networking events. Sign up on or before February 2, 2018 for the Qui Tam Conference at www.fedbar.org/quitam18 to save on registration rates.

As discussed in Part I of “Case Law Roundup: Whistleblower Edition,” the scope of the FCA can be quite broad and complex. The government cannot review every claim for fraud; hence it depends on whistleblowers to bring unlawful conduct to the government’s attention. The following cases and their subsequent settlements in the FCA milieu are worthy of note.

Kmart: Kmart Corp. has agreed to pay more than $30 million to the federal government and a number of states to settle a whistleblower lawsuit jointly litigated by Phillips & Cohen LLP and Korein Tillery on behalf of former Kmart pharmacist James Garbe.  The big box department store chain, which is owned by Sears Holdings Corp., withheld certain information from Medicare Part D, Medicaid, and TRICARE, the health insurance provider for members of the military and their families, the Department of Justice said. Kmart allegedly overcharged government healthcare programs and private insurers for generic prescription drugs.

The settlement resolves allegations arising from a lawsuit brought under the qui tam provisions of the FCA, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery.

Notations: In late 2017, federal prosecutors in the Southern District of New York settled a case against Notations, Inc., a womenswear garment wholesaler. Notations agreed to pay $1 million in fees because of an importer’s undervaluation of apparel to pay less duties than were really owed.

In a case originally brought by a qui tam relator, Notations admitted to ignoring repeated warning signs that its Chinese importer was dishonest about the value of its imported goods to avoid paying customs fees. Notations also consented to a court order requiring it to implement a broad range of compliance measures designed to prevent it from doing business with customs cheats in the future.

Prosecutors brought the case for fraud under the FCA, an anti-fraud statute that imposes substantial potential liability – three times damages, plus penalties – on parties that knowingly overcharge (or underpay) federal agencies. As illustrated by the Notations settlement, parties can be held liable for violations even if they only indirectly participated in, or somehow aided or helped to conceal, a scheme to defraud a federal agency.

 Register now for the Qui Tam Conference at www.fedbar.org/quitam18.

Stacy Slotnick, Esq. holds a J.D., cum laude, from Touro Law Center and a B.A., summa cum laude, from the University of Massachusetts Amherst. She performs a broad range of duties as an entertainment lawyer, including drafting and negotiating contracts; addressing and litigating trademark, copyright, patent, and other IP issues; and directing the strategy and implementation of public relations, blogging, and social media campaigns.