Fifth Circuit: Whistleblowers didn't blow whistle properly, entitled to nothing from criminal penalty

By John O'Brien | Feb 24, 2014

NEW ORLEANS (Legal Newsline) - Two whistleblowers won't share in a once-$43 million penalty against a husband and wife who have been sentenced to federal prison for defrauding the federal government by submitting false claims at their pain clinics.

The U.S. Court of Appeals for the Fifth Circuit on Feb. 14 ruled against Samuel Babalola and Kayode Samuel Adetunmbi, two former employees of the Allergy, Asthma, Arthritis Pain Center in Harris County, Texas.

Arun and Kiran Sharma ran the facility and were sentenced to 15 and eight years in prison, respectively, in February 2011. They were also ordered to forfeit $43 million in assets, but the Fifth Circuit overruled that decision in 2012. A new amount has not yet been determined.

Babalola and Adetunmbi tipped prosecutors off with an anonymous letter and did not file their civil False Claims Act lawsuit until after the federal government obtained criminal indictments of the Sharmas.

Attorneys for Babalola and Adetunmbi argued that not letting them share in the award "would completely eviscerate the FCA by allowing the government to sidestep putative relators by racing to beat them to the courthouse through initiating related criminal or other actions as soon as a putative relator voluntarily discloses fraud to the government before filing suit."

Whistleblowers are entitled to a portion of recovery from False Claims Act lawsuits. The Fifth Circuit ruled the two whistleblowers did not properly provide the government with the information through a qui tam lawsuit.

"Accordingly, the FCA's procedures require the relator to disclose his information to the Government at the time the qui tam complaint is filed," Fifth Circuit Judge Fortunato P. Benavides wrote.

"At that point, there would be an existing qui tam action and therefore, if the Government elects to pursue the case in another proceeding, it would be an alternate remedy. No rush to the courthouse would ensue."

The decision affirmed the one issued in February 2013 by U.S. District Judge Sim Lake.

The whistleblowers first suspected the Sharmas were filing fraudulent billing reports for reimbursement from federal programs like Medicare and Medicaid in 2005. Two years later, they sent an anonymous letter detailing the results of their own investigation to the Texas Medical Board, Medicare, Medicaid and various private insurance companies.

In 2009, federal agents contacted both whistleblowers during the course of the government investigation. At this point, the whistleblowers admitted they were behind the anonymous letter.

Indictments were handed down against the Sharmas in July 2009 and each pleaded guilty to one count of conspiracy to commit health care fraud and mail fraud and one count of health care fraud.

The whistleblowers did not file their FCA lawsuit until Nov. 17, 2011, and the United States filed a motion for summary judgment against them in June 2012 that argued they were not entitled to a share of the criminal recovery.

Earlier in 2012, Texas Attorney General Greg Abbott declined to intervene in the whistleblowers' lawsuit.

The alleged scheme took place in the Sharmas' facilities in Baytown and Webster. The government alleges Arun Sharma was known to prescribe the "pain cocktail" of hydrocodone, Xanax and Soma, and that he eventually began prescribing stronger narcotics such as Oxycontin, morphine, methadone and fentanyl patches.

During the period of the alleged scheme, Kiran Sharma went from seeing 50-60 patients a day in 1998 to more than 100 per day. She saw 279 patients on Jan. 6, 2005.

The government alleged nearly every patient was prescribed one or more controlled substances and put on a regimen of shots every two weeks. However, the government says it was billed for medical procedures that were never performed when patients declined to have the shots every two weeks.

Arun Sharma made the patients sign progress and procedure notes even though they did not receive the injections, the government alleged.

Among the assets ordered forfeited were the couple's $700,000 home in Kemah, numerous parcels of real property, more than $700,000 cash found during a search of their home, more than $800,000 cash found in two safe deposit boxes and a number of investment accounts.

Deciding the case for the Fifth Circuit were Benavides and judges James Dennis and Carolyn Dineen King.

Dennis filed a concurring opinion. It said the decision, though correct under the False Claims Act, could lead to results that are arguably at odds with its purpose. Consideration of the issue by Congress is warranted, he says.

"Babalola and Adetunmbi could have withheld their information and allowed the fraud to continue while they searched for an attorney to represent their interests in a qui tam suit," Dennis wrote.

"But they did not - they took the path of the Good Samaritan and without delay provided the government with the evidence needed to pursue the defrauders.

"For all their efforts, Babalola and Adetunmbi received nothing... Did Congress really intend that, merely because Babalola and Adetunmbi lost to the government in the race to the courthouse, their substantial assistance is no longer worth 15 to 30 percent, but zero?"

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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