U.S. Supreme Court Upholds Verdict Against State Farm in Hurricane Katrina Case

Jury found insurer defrauded federal flood insurance program to avoid paying homeowner claim

The Supreme Court Tuesday unanimously upheld a jury verdict that found State Farm General Insurance Co. Inc. defrauded a federal flood insurance program to avoid paying a homeowner claim stemming from Hurricane Katrina.

Two former insurance adjusters filed suit under the False Claims Act alleging they were told to misclassify wind damage—for which State Farm was liable—as flood damage, which was insured under a federal program.

State Farm argued the case should have been dismissed, because an attorney for the adjusters, Dickie Scruggs, emailed copies of legal papers to several news organizations, contrary to False Claims Act provisions requiring that such suits be filed under seal. The Bloomington, Ill., company said disclosure of the lawsuit by Mr. Scruggs—a prominent trial lawyer who later served time in an unrelated case—damaged its reputation.

Writing for the court, Justice Anthony Kennedy said State Farm got the confidentiality provision wrong. Congress enacted it not to safeguard the reputation of alleged wrongdoers, but principally to avoid alerting them to the possible existence of a federal criminal investigation, he wrote.

The False Claims Act is an 1863 statute Congress adopted to expose fraud among read more »

 

Citigroup Loses on Venue in New York Whistle-Blower Tax Case

The lawsuit was filed under the New York False Claims Act by Eric Rasmusen, an Indiana University economics professor who argued that Citigroup improperly took some $800 million in state net operating loss deductions in connection with the sale of stock to the U.S. Treasury Department under the Troubled Asset Relief Program (TARP). 

 

Whistleblower case against provider can proceed despite 'scant' evidence, court rules

A False Claims Act lawsuit filed against the owners of 53 Florida nursing homes can continue despite some “dubious” assessments by a whistleblower, a judge ruled last week.

Former employee Angela Ruckh first filed a lawsuit against La Vie Health Care Centers, now Consulate Health Care, in 2011. Ruckh claimed that she experienced a “years long corporate scheme to bilk Medicare and Medicaid” related to therapy upcoding. She sought to back up her case with four million documents, depositions of other employees, and five expert witnesses.

The companies named in Ruckh's case filed for summary judgment, arguing that her evidence does not support her allegations, “much less a genuine issue of material fact for trial.” The defendants said Ruckh's expert witnesses were not valid, plus her time at two facilities meant she would have no knowledge of the other 51 locations. read more »

 

It’s been a big year for bribery cases against drug makers

This has been a blockbuster year for federal regulators investigating bribery in the pharmaceutical industry.

Three of the world’s biggest drug companies, along with two smaller companies, agreed to pay a collective $63 million this year to settle allegations that they violated the US Foreign Corrupt Practices Act by bribing doctors and government officials to promote their medicines overseas. read more »

Pentagon buries evidence of $125 billion in bureaucratic waste

The Pentagon has buried an internal study that exposed $125 billion in administrative waste in its business operations amid fears Congress would use the findings as an excuse to slash the defense budget, according to interviews and confidential memos obtained by The Washington Post.

Pentagon leaders had requested the study to help make their enormous back-office bureaucracy more efficient and reinvest any savings in combat power. But after the project documented far more wasteful spending than expected, senior defense officials moved swiftly to kill it by discrediting and suppressing the results.

The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years. The plan would not have required layoffs of civil servants or reductions in military personnel. Instead, it would have streamlined the bureaucracy through attrition and early retirements, curtailed high-priced contractors and made better use of information technology. read more »

 

Supreme Court Sides With Prosecutors in Insider Trading Case

The Supreme Court on Tuesday unanimously ruled in favor of prosecutors in a major insider trading case, saying that gifts of confidential information from business executives to relatives violate securities laws.

Federal appeals courts had disagreed about whether people making unauthorized disclosures of material and nonpublic information must receive a tangible benefit in return for their conduct to violate insider trading laws. Justice Samuel A. Alito Jr., writing for the court, said that giving a gift to a friend or relative, whether in the form of cash or in the form of a tip, benefited the insider.

The case, Salman v. United States, concerned trading by Bassam Salman based on information from his future brother-in-law, then a member of Citigroup’s health care investment banking group. Prosecutors claimed that the brother-in-law, Maher Kara, passed information to his brother, Mounir Kara, known as Michael, who then passed the information to Mr. Salman.

The question was whether prosecutors had to prove that Maher Kara disclosed the information in exchange for a personal benefit. read more »

 

Vanguard Whistleblower Sues Mutual Fund Giant for Wrongful Termination, Distress

A whistleblower who was fired last year after publicly criticizing customer security measures at The Vanguard Group has sued the mutual fund giant in federal court in Philadelphia, citing violations of whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In a complaint filed on Dec. 2, former stockbroker Karen Brock, who detailed deficiencies in Vanguard's customer security to TheStreet in an article published Aug. 10, 2015, accused the firm of infliction of emotional distress and wrongful termination of a whistleblower.

The suit says that Malvern, Pennsylvania-based Vanguard filed false information with securities regulators that has effectively barred Brock from getting a job in the securities industry. It asks for unspecified compensatory and punitive damages and non-economic losses, counsel fees and costs with interest. read more »