Whistle-blowing yields rewards - East Valley Tribune: Business

Whistle-blowing yields rewards

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Posted: Monday, November 29, 2004 5:42 am | Updated: 5:59 pm, Thu Oct 6, 2011.

WASHINGTON - Crime may not pay, but blowing the whistle on companies that swindle the government sure can.

Jim Alderson got $20 million in one settlement and split $100 million with another whistle-blower in a related case, both involving Medicare fraud by the nation’s largest for-profit hospital chain and a company it acquired.

Once facing a wrecked career and no pension, Alderson, 58, now owns houses in Plano, Texas, and Whitefish, Mont., drives a new car and has established a charitable foundation with the money he received. But blowing the whistle was not easy.

‘‘You risk everything when you do it,’’ he said.

Alderson is among the beneficiaries of a law passed nearly two decades ago that encourages whistle-blowers to come forward by promising them up to a quarter of the money recovered by the government.

Since its inception, the False Claims Act has generated $12 billion for the federal treasury and more than $1 billion for hundreds of whistle-blowers.

Whistle-blowers have been at the root of federal fraud cases against many highprofile companies, including Tenet Hospital, Lockheed-Martin, TAP Pharmaceutical Products, Boeing and KPMGPeat Marwick.

Companies have been caught for many things, from selling defective parts for U.S. military aircraft to paying kickbacks to doctors for prescribing unneeded medicines and then overbilling Medicare and Medicaid.

‘‘It’s a very powerful law,’’ said Patrick Burns, spokesman for Taxpayers Against Fraud, a consumer advocacy group.

Another whistle-blower protection law — the Sarbanes-Oxley Act — covers fraud against publicly traded companies and targets those who destroy records, commit securities fraud or fail to report fraud to investors. The law emerged after the corporate financial scandals of 2002.

Both laws protect whistleblowers from being fired, but the False Claims Act has triple damages and gives whistle-blowers a reward.

Established during President Abraham Lincoln’s time, the law was later gutted. But it was strengthened in 1986 to help identify contractors guilty of defrauding the government.

Sen. Charles Grassley, RIowa, chairman of the Senate Finance Committee, took the lead in modernizing the law and credits whistle-blowers for the success of the amendments.

‘‘They are some of the greatest champions of the public’s right to know,’’ Grassley said. ‘‘Whistleblowers shed light on why something is wrong, and their insights can help hold the bad actors responsible, fix problems and achieve reforms.’’

Justice Department spokesman Charles Miller said the False Claims Act has been ‘‘highly effective in ferreting out individuals and companies that commit fraud.’’

Joe Gerstein and others blew the whistle on TAP Pharmaceutical Products, which agreed to pay $875 million in 2001 to resolve criminal and civil charges in connection with its pricing and marketing of the cancer drug Lupron.

Gerstein, of Weston, Mass., a former medical director of the Tufts University health plan, wore a wire for the FBI and filed a False Claims Act suit which resulted in a $17 million reward to him and Tufts.

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