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For Some Whistle-Blowers, Big Risk Pays Off

Nov 29, 2004 | AP

After refusing to go along with his employer's phony bookkeeping, Jim Alderson was out of a job. Mr. Alderson sued for wrongful termination, but did not stop there. He also told the government it was being cheated.

Mr. Alderson got the government's thanks for helping it recover $1.7 billion in Medicare fraud by the nation's largest commercial hospital chain and a company it acquired. His share was in the tens of millions of dollars.

Mr. Alderson, 58, now owns houses in Plano, Tex., and Whitefish, Mont., drives a new Thunderbird and has established a charitable foundation with some of the money he received. But, blowing the whistle was no easy ride into the sunset.

"You risk everything when you do it," he said.

Mr. Alderson is among the beneficiaries of a law passed nearly two decades ago that encourages whistleblowers 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 well-known companies, including Tenet Healthcare, Lockheed Martin, TAP Pharmaceutical Products Inc. and Boeing.

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

"It's a very powerful law," said Patrick Burns, spokesman for Taxpayers Against Fraud, a consumer advocacy group. "You start pulling on a thread and a whole circus tent comes unraveled."

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

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

Established in 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.

Senator Charles E. Grassley, an Iowa Republican who is chairman of the Senate Finance Committee, took the lead in modernizing the law.

"They are some of the greatest champions of the public's right to know," Mr. Grassley said of those who report fraud.

"Whistle-blowers shed light on why something is wrong, and their insights can help hold the bad actors responsible, fix problems and achieve reforms."

Charles Miller, a Justice Department spokesman, said the False Claims Act had been "highly effective in ferreting out individuals and companies that commit fraud."

Joe Gerstein and others blew the whistle on TAP Pharmaceutical Products Inc., 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.

TAP offered Mr. Gerstein, of Weston, Mass., a former medical director of the Tufts University health plan, a $20,000 unrestricted research grant in return for keeping Lupron on the plan's list of preferred drugs.

Instead, Mr. Gerstein wore a wire so that the Federal Bureau of Investigation could tape record the bribe. Mr. Gerstein eventually filed a False Claims Act suit, which resulted in a $17 million reward to him and Tufts.

"I was scandalized," Mr. Gerstein said of the bribe. "I had a strong motivation to expose these inducements."

Mr. Alderson became a whistleblower after he was fired from his accounting job. His wrongful termination lawsuit grew into False Claims lawsuits against Columbia/HCA and Quorum Health Group Inc.

His legal fight began shortly after Quorum got a management contract with a hospital in Whitefish, Mont., where he was the chief financial officer. A higher-up told Mr. Alderson that Quorum kept two sets of records for Medicare reimbursements.

Unwilling to adapt to such an accounting practice, Mr. Alderson was fired by the hospital in 1990. But he kept pursuing his termination claim and discovered widespread fraud. The Justice Department got involved in 1998, and in two settlements since December 2000, the government has recovered $1.7 billion from HCA, formerly Columbia/HCA.

Mr. Alderson and John Schilling, a former reimbursement specialist for Columbia/HCA, split $100 million in one settlement. Mr. Alderson received about $20 million in another.


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