Here’s what the government and judiciary think of serial whistleblowers

By Alison Frankel
October 4, 2013

In a post earlier this week, I wrote about whistleblower lawyers’ concerns that unsuspecting tipsters will be misled into signing up with one of the many non-lawyer groups advertising on the Internet for Dodd-Frank whistleblowers. Unlike lawyers’ websites, ads by non-lawyers aren’t subject to state bar regulations. Nor are fee agreements between whistleblowers and non-lawyer agents. Lawyers who regularly represent tipsters told me that a proliferation of supposedly deceptive ads after the Securities and Exchange Commission implemented its whistleblower bounty program is one of the biggest problems in their business.

Repeat False Claims Act plaintiff Joseph Piacentile’s group, Whistleblowers Against Fraud, long predates the SEC program and is certainly not deceptive in representing its legal expertise online. WAF’s website says very clearly that the organization is composed not of lawyers but of former whistleblowers who want to “partner with our clients to develop the strongest case possible, recommend the right attorney for their case, and guide them through each phase of their case.” (As for fees, WAF says it takes a percentage of the whistleblower’s recovery but makes individual arrangements with each client.) Instead of legal advice, WAF sells its “experience and relationships,” which it says “are invaluable in developing large, successful whistleblower actions.” Government lawyers, the website says, have come to know and trust the (unidentified) principals of WAF, who have assisted the federal government and state authorities in recovering billions of dollars.

But relations between Piacentile and at least some of those government lawyers are decidedly frayed. On Sept. 30, U.S. District Judge Sterling Johnson of Brooklyn dismissed a False Claims Act case that Piacentile and a former Amgen sales representative brought against the pharma company, granting a motion by the U.S. Attorney’s office that claimed the whistleblowers’ information added little or nothing to the government’s $780 million settlement in 2011 of civil and criminal allegations against Amgen. Johnson’s opinion picked up the skeptical undertones of the government’s motion to dismiss. Like government lawyers in the U.S. Attorney’s dismissal brief, the judge cited Piacentile’s 1991 conviction for income tax evasion and conspiracy to make false Medicare claims, and said that after his conviction the former physician “gained notoriety as a repeat whistleblower.” Johnson’s dismissal of the suit effectively shuts Piacentile and his fellow Amgen whistleblower, Kevin Kilcoyne, out of any recovery because they previously rejected the government’s offer of a $1.8 million bounty from its 2011 settlement with Amgen.

Piacentile’s lawyers at Berger & Montague and Kilcoyne’s at Stone & Magnanini decried what they called the government’s unwarranted hostility toward Piacentile, who, according to a 2010 American Lawyer profile that dubbed him “The Professional,” has received at least $17 million in FCA bounties from his many forays into whistleblowing. Their response to prosecutors’ motion to dismiss Piacentile’s case complained of “unseemly ad hominem attacks,” “a personal animus” and “unfair and arbitrary treatment.” None of that makes sense, they argued, because Piacentile has helped the government considerably. According to the brief, his own qui tam actions have resulted in more than $1.4 billion in recoveries for the United States.

In the Amgen matter, they said, Piacentile was the second whistleblower to file an FCA suit, way back in 2004, and his initial complaint raised allegations of kickbacks and inflated Medicare pricing that no other Amgen tipsters previously asserted. Yet instead of appropriately rewarding Piacentile and Kilcoyne (who joined the complaint in 2007), the whistleblower lawyers said, the government insulted them by offering a mere $1.8 million bounty. When Piacentile and Kilcoyne refused to accept, according to their brief, they were cut out of the $780 million Amgen deal – “arbitrarily and unfairly excluded from any relator share arising out of the agreement,” in the words of their lawyers.

But according to the government’s dismissal brief, that’s because the Justice Department apparently regarded Piacentile as an overreaching FCA opportunist. “Since (his 1991 conviction) he has become a serial filer of qui tam complaints, filing at least 13 qui tam actions against various companies in numerous federal district courts in addition to the instant action,” Brooklyn prosecutors wrote. “Not only is Piacentile a serial relator, but he also maintains a business ‘partnering’ with other relators in the filing of qui tam complaints.”

Piacentile had never worked at Amgen at the time he filed a complaint that, in the government’s view, pleaded unsupported allegations of practices similar to those at other pharma companies. (Piacentile’s lawyers said he actually interviewed nine Amgen insiders before bringing his FCA action, which they claim provided specific allegations of previously undisclosed practices.) By the time Piacentile amended his complaint, according to the government, several Amgen insiders had filed their own FCA complaints containing first-hand information. Piacentile’s allegations had only a minimal impact on the government’s subsequent Amgen investigation, the brief said.

When he and Kilcoyne refused to accept the government’s $1.8 million bounty offer, their case was carved out of Amgen’s global settlement and left dangling in Brooklyn federal court. Piacentile’s counsel insisted that because his claims had actually been resolved in the global deal, which was reached over his objection, he and Kilcoyne were entitled to a fairness hearing on their exclusion from the deal. The government said that the case should be dismissed, not only because the purported whistleblowers’ last amended complaint didn’t meet pleading standards but also because the case was a waste of resources, given the weakness of the allegations and the recovery the government has already obtained from Amgen.

After a hearing last month, Judge Johnson said he didn’t even need to consider the allegations in the complaint filed by Piacentile and Kilcoyne because the government has the right to decide how to use its scarce resources. “The government is correct in asserting that, with few exceptions not present here, it has the right to put an end to litigation it deems expensive and needless or futile,” he wrote. “An eight-year investigation of several claims brought by different relators culminated in a $780 million settlement, only $1.8 million of which the government felt could justifiably be offered to relators, in light of the weakness of their claims. When relators rejected that sum, the government was within its right to determine that further litigation was unlikely to lead to fraud prevention or additional recovery.” (The judge also seemed offended at the notion that $1.8 million can be described as “a de minimus amount.”)

Johnson noted that Kilcoyne’s counsel (who have represented Piacentile in past FCA cases) argued at the hearing in September that the government was being arbitrary and capricious in its treatment of Piacentile and Kilcoyne. He said he considered that argument to be conclusory and unsupported with evidence or case law. “It warrants little attention,” he said.

I called Kilcoyne counsel David Stone of Stone & Magninini, who referred me to Piacentile counsel Eric Kramer of Berger & Montague. Kramer didn’t return my call. I also left a message for Piacentile with a phone operator at Whistleblowers Against Fraud but didn’t hear back.

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