WHISTLEBLOWER NEWS QUOTE OF THE DAY:

"The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders. We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations."

— Andrew Ceresney, Director of the SEC’s Enforcement Division

DAILY WHISTLEBLOWER HEADLINES:

US Agency charges Dr. Reddy’s Labs for packaging lapses; company disagrees

The US Consumer Product Safety Commission , a federal regulatory body, has pleaded to the US Department of Justice , seeking civil penalty against Hyderabad-headquartered drug maker Dr Reddy's Labs, charging that the drug maker had violated provisions related to child resistant packaging in at least five prescription drugs.

The US CPSC, which is tasked with protecting children and families from risks of injuries or death associated with consumer products, had taken issue with the company's compliance norms that required special packaging for child resistant blister packs for products sold in the US over several years.

As part of its review on June 6, the commission voted 4­-1 against Dr. Reddy's for not reporting the risks as per provisions of Consumer Product Safety Act and the Poison Prevention Packaging Act (PPPA), an expert in legal and compliance issues said.

As part of its probe that kick-­started in 2012, the CPSC asserted that from 2008 to 2012, Dr. Reddy's sold prescription drugs having unit dose packaging that failed to comply with the CPSC's special child resistant packaging regulations and also failed to issue general certificates of conformance.

Of the global sales of $2.33 billion for 2016 financial year, Dr. Reddy's drew $1.16 billion from its North American operations, of which the US accounted for the lion's share.

In response to ET's specific questions about the US CPSC recommendations to the Department of Justice, Dr. Reddy's said it firmly disagrees with the (US) government's allegations, adding that the US subsidiary of Dr. Reddy's has reaffirmed its commitment to full cooperation with the US government as it defends itself against allegations that the company failed to comply with applicable special packaging and reporting requirements.

In an investigation conducted by the Department of Justice and concluded in 2015, the company further added that it declined to pursue related allegations made under the Federal False Claims Act. The company informed that the products have not been distributed in the packaging at issue since June 2012. Further, the company added it has taken the investigation seriously, fully cooperating with the government since the case began in 2011, and will continue to do so. read more »

Valeant to pay $54 million to settle government probe into Salix drugs

For all its woes, Valeant Pharmaceuticals was not responsible for every act of bad behavior. Some problems were inherited, and the drug maker will pay $54 million to make one of those disappear.

The company reached a settlement stemming from a probe by the US Attorney in New York into marketing practices for several drugs that were sold by Salix Pharmaceuticals, a company that Valeant bought last year for $11 billion. The agreement, which must still be finalized, was reached this month, according to a filing Valeant made on Tuesday with the US Securities and Exchange Commission (see page 39).

The drugs that were the focus of the investigation, which began in February 2013, are Xifaxan, Relistor, and Apriso, which are used to treat various stomach disorders. It is not clear whether the investigation  involved off-label marketing, which is promoting medicines for unapproved uses, or kickbacks that are made to induce doctors to write prescriptions.

We asked Valeant and the US Attorney in New York for comment and will update you accordingly.

The settlement is only one of several government probes that new Valeant Chief Executive Joe Papa must resolve. The US Federal Trade Commission, the US Department of Justice, and several US Attorneys are investigating acquisitions, patient assistance programs, a relationship with a mail-order pharmacy, accounting practices, and payments to physicians. read more »

Ocwen Investigation Docs Admissible In FCA Row, Judge Says

A Texas federal judge on Tuesday determined that banking documents related to a state government investigation into Ocwen Loan Servicing LLC's financial practices, which the company claims to have “inadvertently disclosed” to relators bringing a pair of False Claims Act suits, are not privileged and can be used at trial.

Ocwen Loan Servicing, and subsidiaries Ocwen Financial Corp. and Homeward Residential Inc. are facing a pair of lawsuits brought by relators Michael J. Fisher and Brian Bullock alleging the companies provided false information to a federal loan program. U.S. District Judge Amos L. Mazzant on Tuesday rejected an argument from Ocwen that the reports produced by the West Virginia Division of Financial Institutions, according to West Virginia law, “shall be confidential,” because the documents discuss the financial condition of the loan servicing company.

The court found that the state's laws actually explicitly say that in the context of a civil enforcement brought by a state or regulatory authority, that information can be disclosed. In this case, the relators “stand in the shoes of the state,” he wrote, which permits disclosure. read more »

Northrop Gets Short Reprieve From State Court Trial

A Virginia federal judge on Tuesday gave Northrop Grumman just over a week before its case against DynCorp, alleging inflated invoices related to a 2007 Afghanistan counternarcotics contract, must return to state court, ruling a brief pause is called for under federal rules.

U.S. District Judge James C. Cacheris stayed the case from returning to Fairfax County Circuit Court in Virginia, where it was first filed, until June 17 because Federal Rule of Civil Procedure 62(a) requires remand orders like the one he issued June 2 — which Northrop Grumman is appealing to the Fourth Circuit — be stayed for 14 days.

Judge Cacheris rejected DynCorp's arguments that such 14-day stays are only appropriate in monetary judgments. He noted instead that federal rules have been updated since the precedent on which DynCorp International LLC relies was ruled on.

According to the decision, those rules now specifically allow parties like Northrop Grumman Technical Services Inc. to appeal orders sending back to state court those cases yanked into federal jurisdiction because they purportedly involve federal officers or agencies. Northrop wants a forthcoming U.S. Army contract interpretation to nullify DynCorp's $40 million in counterclaims, which DynCorp says won't happen. read more »

KBR Whistleblower Asks DC Circ. To Revive FCA Suit

KBR Co. whistleblower accusing the defense contractor of overbilling the government told the D.C. Circuit on Monday that a lower court wrongly ended her False Claims Act case by failing to consider whether information KBR allegedly withheld could have changed the government’s payment decisions.

Former KBR employee Julie McBride had alleged that KBR failed to disclose it was not keeping sufficient records of staffing levels at a U.S. Marine Corps facility in Iraq. She told the appeals court Monday that U.S. District Judge Frederick J. Scullin Jr. failed to recognize that KBR’s claims for payment were false by omission, and that her suit should be revived.

According to McBride, the judge did not apply a two-prong test, laid out in U.S. v. Science Applications International Corp., in which a court weighs whether adherence to contractual requirements was either a precondition for payment or material to payment. Under that precedent, if either prong holds true — if complying with a contract is a precondition for, or material to, payment — a contractor can be found to have defrauded the government by not disclosing contractual violations, she said.

“These are simple questions mandated by SAIC, but the lower court simply failed to ask them,” she argued. read more »

WHISTLEBLOWER SETTLEMENT NEWS:

SAP To Pay Calif. $59M Over Botched Payroll System Contract

SAP Public Services Inc. will pay the state of California $59 million to settle state court allegations over the allegedly botched modernization of a payroll system for state employees, California's controller announced on Monday.

According to the announcement from State Controller Betty T. Yee, the settlement — which comes with no admission of liability — resolves the breach of contract lawsuit first filed against SAP in November 2013 after the controller's office called off a $90 million contract under the 21st Century Project.

“I am pleased that we have settled this important litigation on beneficial terms that advance the objectives and protect the interests of the state and its taxpayers,” Yee said in an accompanying statement on Monday. “I look forward to delivering on the original promise of the 21st Century Project — an accurate, stable and reliable new payroll and human capital management system.”

The SAP SE unit was brought on in 2010 to take over from BearingPoint, itself hired in 2006, to develop and implement the system promised under the 21st Century Project, according to the controller's office. Monday's announcement called the project the nation's largest payroll modernization effort, one aimed at replacing 30-year-old systems and improving how the benefits, payroll and timekeeping of 240,000 state civil service employees are managed. read more »