Judge Robert F. Kelly Sr. took the U.S. Department of Justice to task for minimizing a whistleblower’s contribution in building a fraud case that resulted in a $192 million settlement with Endo Pharmaceuticals and ended over a decade’s worth of fraud that ripped off Medicare and Medicaid for over $700 million dollars.
After considering the facts of the case, Judge Kelly weighed in with a memorandum which not only granted the whistleblower a 24% share, but also took the DoJ to task for making up a key reason to give her less.
Not said: DoJ first offered whistleblower Peggy Ryan barely more than the minimum 15% required by law. Only after Ms. Ryan’s lawyers at the James Hoyer law firm filed a motion to challenge the relator share did DoJ increased their offer to 19%, far short of the 24% asked for by the relator and her legal team. In the end, Judge Kelly awarded Ms. Ryan a 24% share.
In this Motion, Ryan argues for a 24% share of the total federal recovery. (Id.) In a Response in Opposition, filed on January 16, 2015, the Government disputes Ryan’s figure and contends that she should not receive more than a 19% share of the award.
…Congress has directed in the FCA that the amount received by the relator is to be apportioned according to a set of percentage ranges of the overall award. Id. Where the government intervenes and prosecutes the action, the relator shall receive “at least fifteen percent but not more than twenty five percent of the proceeds of the action or the settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action.” 31 U.S.C. § 3730(d) (1). Although Courts have used varying criteria to determine the appropriate percentage, the sole factor annunciated by Congress is “the extent to which the person substantially contributed to the prosecution of the action.” Id.
First, the Government contends that Ryan’s participation does not warrant the higher percentage. (Id. at 6.) Next, it is the Government’s position that since the settlement award is large, a smaller relator’s share is warranted. (Id. at 11.) In response, Ryan counter-argues that the Government’s “characterization of Ryan’s contributions to the Government’s investigation is largely inaccurate,” and that its position is “sorely lacking in legal support.” (Ryan Mot. for Relators Share Award, at 1.)
…An examination of the record exhibits that 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.
….Over the next three years, Ryan wore a wire to surreptitiously record over two hundred (200) hours of conversations. (Ryan Mot. for Relator’s Share Award, 16.) These recordings were aimed at uncovering the unlawful marketing of Lidoderm for off-label uses.
As evidenced by the following, Ryan was successful in procuring direct evidence of an organizational strategy to market Lidoderm for off-label uses. During eight hours of meetings with a District Manager in 2005, the Manager directed Ryan on how to use certain phrases to promote Lidoderm for off-label uses. (Id. at 13.) At another meeting in 2005 with members of Endo’s upper management and its sales force, Ryan captured managers instructing the sales representatives on how to engage physicians in order to promote Lidoderm for off-label uses. (Id.) Specifically, Ryan recorded a Specialty District Manager declaring that 90% of Lidoderm’s prescriptions were for off-label uses. (Id.)
In 2006, Ryan recorded a two day session with Endo’s Senior Director of Marketing at Endo’s corporate headquarters in Chadds Ford, Pennsylvania. (Id. at 14.) At this meeting, Ryan recorded valuable evidence including Endo’s Lidoderm Product Manager stating that 97-98% of Lidoderm’s prescriptions were off-label. (Id.) Furthermore, this session led to Ryan being invited to a situational analysis meeting with a Senior Market Research Analyst. (Id. at 15.)
….After the Government served the subpoena, Ryan continued to provide assistance to the investigation by reviewing the responsive documents submitted by Endo to help narrow the scope of the investigation and target the most relevant information. (Id. at 16.)
In addition to the hours of incriminating recordings, Ryan provided a bounty of documentary evidence including: Endo’s promotional sales materials; off-label studies; restricted materials logs which recorded the amount of off-label material provided physicians; and Endo created call plans requiring sales representatives to promote Lidoderm to physicians for off-label uses. (Id. at 12.)
Finally, as the investigation began to lag in 2010, Ryan and the James Hoyer firm, the law firm representing her in this action, produced an eighteen (18) minute documentary video summarizing the case, the evidence, and the damages caused by Endo’s ongoing conduct. (Id. at 19.) This video was then distributed to every agent and prosecutor known to be involved in the case. (Id.) After the case was unsealed, the documentary was given to Endo to provide visual evidence of the magnitude of the case against them. (Id.)
Overall, Ryan spent hundreds of hours supporting the Government’s investigation. Throughout the lengthy investigation, Ryan accumulated evidence from otherwise unobtainable sources at the senior management level of Endo. In light of the nature and abundance of her contributions, it is clear that Ryan was indispensable to the investigation. In fact, it is the view of the Court that without the assistance of Ryan, the probability of the Government recovering any funds for the FCA violations would have been slim at best.
The Government’s position minimizes the aforementioned contributions of Ryan in arguing that the relator’s share should be no more than 19% of the overall settlement award….. Finally, the Government’s position fails to take into account the resources it saved in not having to litigate the claims at trial. For these reasons, we find that the contributions of Peggy Ryan to the settlement of the FCA claims supports her argument for a share award of 24%.
… The Government next argues that the considerable size of the settlement award warrants that Ryan receive a smaller share.
We reject the Government’s argument for several reasons. First, the Government’s interpretation is contrary to the explicit language of the statute. 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.
Patrick Burns, co-Executive Director of Taxpayers Against Fraud Education Fund called the relator’s challenge to DoJ’s settlement terms “a great service to whistleblowers and the American people.”
“The False Claims Act works because it incentivizes integrity,” notes Burns.
“Peggy Ryan wore a wire, risked her career, and invested 9 years of her life in this fight. Her lawyers had millions of dollars tied up in this litigation. Nothing would have happened if a whistleblower had not stood up, spoken up, and lawyered up.
“What is ridiculous about DoJ’s parsimonious position when it comes to relator share is that while they are tight-fisted when it comes to rewarding integrity, they often pull their punches when it comes to fining fraudster companies.”
Burns notes that Endo Pharmaceuticals sold over $750 million worth of Lidoderm in 2010 and, according to Endo Pharmaceutical’s own employees, more than 90 percent of these sales were off-label.
“If DoJ wants to increase the amount of more money flowing back to the U.S. Treasury, the way to do that is to hit the companies with more substantive fines,” says Burns.
“Endo Pharmaceuticals made billions of dollars by systematically and illegally promoting this drug off-label to both private insurance and Medicare and Medicaid patients. Over 200 hours of taped conversation would have made for devastating evidence at trial. DoJ held all the cards thanks to Peggy Ryan and her legal team, but instead of rewarding them with a top-end relator share, they dived to a number only barely over the statutory minimum.”
“The good news is that not only did Judge Kelly award Ms. Ryan 24%, but he explicitly called out the Department of Justice for making up reasons to give whistleblowers less. That’s a win for whistleblowers, and America’s taxpayers, going forward, especially if it gets DoJ to properly assess damages and statutory penalties on fraudster companies and individuals.”