Jon Mohatt’s whistleblower case – the one that resulted in Montana’s largest False Claims Act recovery ever - was kept a secret from defendant Kalispell Regional Healthcare System for five months. On September 25, 2018, the government opted to intervene in Mohatt’s case and unsealed the case.
As part of his qui tam claim, the former Chief Financial Officer for Kalispell Regional alleged that the hospital system violated the federal Stark Law and Anti-Kickback Statute by paying physicians to refer patients.
In all, Mohatt’s whistleblower claims resulted in a $24 million settlement. Mohatt collected a $5.4 million cash whistleblower award for his efforts in pursuing the claim.
But why keep the case against Kalispell Regional under seal for five months? Shouldn’t the government inform defendants when whistleblowers file cases against them? And is five months under seal the norm?
FCA Defendants Kept in The Dark
More than one out of three False Claims Act whistleblowers experience some level of retaliation from the individual or company they’ve reported for wrongdoing.
Because of this high risk of retaliation, along with the risk that a company will catch wind of a whistleblower investigation and try to conceal, alter, or destroy evidence of misconduct, the False Claims Act requires whistleblower cases to be filed “under seal” and kept secret for at least 60 days.
When employees, physicians, auditors, consultants, and other whistleblowers file an FCA claim, the U.S. Department of Justice gets a copy, but the defendant doesn’t.
This 60-day period gives the Justice Department time to decide whether they want to investigate the allegations before the defendant hears anything about it. It also provides the whistleblower a two-month window to seek other employment or make any necessary arrangements to prepare for the defendant’s reaction to their lawsuit.
Once the Justice Department reviews the whistleblower’s claim, they can either (1) dismiss the case entirely, (2) intervene in the case, take over the investigation, and pursue a settlement or verdict against the alleged FCA violator, or (3) sit on their decision a while longer, let the whistleblower pursue the case alone, and reserve the right to jump in later if things look promising.
Upon making any one of these three decisions, the Justice Department unseals the case. Are all cases unsealed within 60 days? No. The FCA guarantees whistleblowers 60 days by law, but most cases remain under seal longer.
2018 Unsealed Healthcare FCA Cases Averaged Two Years Under Seal
Data from a recent report on 49 healthcare-related whistleblower cases unsealed in September and October 2018 reveals that the DOJ unsealed 24% of those cases within a year of the filing date. In total, the 49 cases remained under seal anywhere from four months and four days to six years and four months, the average time under seal being two years and 43 days.
The government kept Vicki Swartzell and Jim Vandermeer’s whistleblower case against an Alameda, California-based clinical laboratory under seal for one year and three months. On August 22, 2018, upon its decision to intervene in the case, the government lifted the seal.
The Singulex Inc. sales representatives filed their FCA claim after suspecting Singulex of trying to defraud Medicare by pressuring physicians to order medically unnecessary diagnostic tests. Swartzell and Vandermeer claimed the scheme was boosting Singulex’s Medicare reimbursements by 6,000% to 13,000%. This whistleblower case resulted in a $1.25 million settlement. Singulex denies any wrongdoing.
Ultimately, it’s the government’s decision on when a False Claims Act case is unsealed. They can extend the seal for a reasonable length of time to complete their inquiry into the case – and whistleblowers are thankful for this window of prep time.