Some call Joseph Piacentile a hero. Over the last 15 years, the New Jersey physician has been a whistle-blower in antifraud lawsuits that have returned more than $1 billion to the U.S. Treasury.

His weapon has been the False Claims Act, whose qui tam provisions allow private citizens to sue–on behalf of the government–companies, or individuals that falsely or fraudulently claim federal funds. Originally enacted during the Civil War, the FCA was amended in 1986 to give prospective plaintiffs and government prosecutors more powerful incentives to pursue fraud. Defendants became liable for treble damages (plus a civil penalty for each false claim), and plaintiffs, known as relators, would get 15 – 30 percent of the government’s recovery and full attorneys’ fees. Since the 1986 amendments, the United States has recovered more than $24 billion in False Claims Act cases, including $15.7 billion from lawsuits filed by private citizens.

Among the notches on Piacentile’s qui tam belt are a $155 million settlement with Medco Health Solutions, Inc., in 2006; a $515 million settlement with Bristol-Myers Squibb Company in 2007; and a $425 million settlement with Cephalon, Inc., in 2008. “Dr. Joe,” as he is known in the qui tam plaintiffs bar, has earned at least $17 million in whistle-blower awards, according to public records and an estimate of his share of the $46.5 million relator’s award in Cephalon. “A lot of whistle-blowers get a large settlement and you never hear from them again,” says one prominent Piacentile supporter who declined to speak on the record for fear of alienating the doctor’s critics. “They go retire and play golf. Dr. Piacentile continues to double down–uncovering fraud and going after [corporate wrongdoers].”

“[FCA cases] are a big gamble,” says Piacentile’s counsel, former Boies, Schiller & Flexner partner David Stone of Stone & Magnanini, who cites cost-benefit analyses and good relationships with prosecutors as essential to his qui tam practice. “That’s why you have to know what you’re doing. Otherwise you can be in a case for ten years and not get anything.”

But there is a darker perspective on Joseph Piacentile. Unlike most qui tam relators, he doesn’t blow the whistle as an employee or business partner of the companies he has sued. Instead he relies on secondhand information collected through his own investigations. (Piacentile declined to comment for this article.) Defense counsel call him a professional mudslinger; some qui tam lawyers and former government lawyers say that he’s a parasitic bully who files vague or questionable complaints and then pushes his way into settlements based on his qui tam savvy and his willingness to litigate. And Piacentile has a criminal history of his own–a 1991 conviction on fraud and tax charges–which some lawyers say can undercut his credibility as a plaintiff.

Few individuals–supporters or critics–would speak on the record, citing ongoing litigation, confidentiality agreements, or an unwillingness to take sides. But an examination of the unsealed portions of Piacentile’s many court dockets and conversations with 23 individuals who have worked closely on Piacentile cases show why the doctor has become one of the most divisive figures in the relatively small–but increasingly influential–qui tam world. “He’s a lightning rod within our family,” says one Piacentile supporter.

Today, FCA settlements can be in the billions, and the U.S. Department of Justice received 280 new health care-related qui tam cases just in fiscal year 2009. Justice currently has 500 pending, sealed qui tam cases against pharmaceutical companies alone, estimates Patrick Burns, the communications director for the qui tam industry group Taxpayers Against Fraud Education Fund. And the recently enacted health care reform bill includes amendments to the FCA that may ease litigation obstacles for whistle-blowers, especially individuals like Piacentile who use secondhand information.

Joseph Piacentile’s multiple whistle-blower suits make him an outlier among FCA plaintiffs. But his tactics and his success raise critical questions about the intention and incentives of the False Claims Act. Should the statute, and its potentially handsome monetary awards, embrace professional plaintiffs, alongside more traditional whistle-blowers who often risk careers and livelihoods to expose corporate fraud? Are the statute’s requirements–that a plaintiff file a claim first, with specificity, based on independent knowledge of alleged fraud that has not been publicly disclosed–sufficient in practice to prevent meritless suits or piggyback claims? Is the FCA an efficient means of empowering citizens to uncover fraud, or are the awards outsize relative to the plaintiff’s information, requiring the government to share substantial portions of settlements that prosecutors might win anyway?

Even before his career as a whistle-blower, Piacentile knew something about health care fraud. In 1991 he pled guilty to one count of Medicare fraud and one count of tax evasion in connection with his role as president and part-owner of Electro Therapeutics, Inc., a Bronx-based medical equipment company that sold nerve-stimulating machines to elderly New Yorkers. Although Piacentile later tried to withdraw his guilty pleas, he served six months of weekends in prison, his medical licenses were suspended, and a $900,000 consent judgment was entered against him.

In later court filings, Piacentile described his conviction as “a life-altering experience.” Apparently it was. Even before his 1994 sentencing, Piacentile began to work on qui tam litigation. His brother Christopher–who described himself in court filings as a New Jersey resident “intimately involved with the health care industry”– was the name plaintiff in several early cases, but Joseph claims credit for at least three of these cases, too, according to filings in a later suit. The first of such matters, a qui tam case against medical supplier Advanced Care Associates, Inc., and its former owners, was resolved quickly by FCA standards: It was filed in 1993, the U.S. government elected to take over or “intervene” in the case six months later, and a $4 million settlement was announced in 1996. More Piacentile suits followed [see chart].

For his qui tam litigation, Piacentile has relied on a succession of lawyers from the specialized, relatively clubby FCA bar. Mary Louise Cohen, the famed cofounder of qui tam powerhouse Phillips & Cohen, represented Christopher and Joseph Piacentile in an early case against medical equipment and medication suppliers that resulted in a $10 million settlement and a $1.35 million relator’s award in 2000. (Cohen declined to comment on Piacentile.) By the late 1990s, Piacentile was working mostly with former Phillips & Cohen lawyer Mitchell Kreindler, who started his own qui tam boutique, Kreindler & Associates, in 2000. Piacentile has also teamed up with Kirk Chapman, a partner at Milberg. (Chapman did not respond to requests for comment.) Piacentile first turned to Stone, then a partner at Boies, Schiller, in 2004, when his suit against Medco Health Solutions, Inc., looked as though it were going to trial: Piacentile wanted a trial-ready firm like Boies, Schiller, Stone says. (Stone declined to comment more specifically on his relationship with Piacentile.)

The filings in the Medco suit–in which Piacentile was one of several relators–highlight the distinctive modus operandi that Piacentile has developed for his qui tam suits. The FCA requires that a relator pre­sent his allegations of fraud with sufficient particularity and that these allegations not be previously publicly disclosed, unless the relator is an “original source” of the information underlying the allegations. But unlike a classic whistle-blower, Piacentile has no business or employment relationship with the companies he sues, and so he doesn’t have firsthand knowledge of the fraud he alleges. Instead, he does his own independent investigations.

In a February 2004 filing in Medco, the doctor explained that he discovered potentially fraudulent conduct at Medco “during the course of considering a business opportunity in 1999.” His subsequent inquiry included “nine months conducting multiple interviews with a variety of Medco employees, including pharmacists and a vice president, and collecting internal company documents.” Piacentile “personally secured admissions on tape from Medco pharmacists and Medco officials who were engaged in the fraud,” according to his opposition to a motion to dismiss the case in January 2004. Posing as a prospective employer or business partner is standard practice for Piacentile in his efforts to glean information from inside sources, say more than six lawyers who have been involved in litigation involving Piacentile.

Piacentile–described by some as bearing a resemblance to the actor Danny DeVito–is charming and adept at getting others to talk about illicit behavior, say ten lawyers who have been involved in Piacentile cases, including James Sheehan, a former associate U.S. attorney for civil programs in the Eastern District of Pennsylvania. Sheehan helped lead the government’s case against Medco and was involved in an earlier Piacentile case against a medical equipment supplier. “He speaks the ‘It fell off the truck’ language of North Jersey,” Sheehan says–a significant advantage, combined with Piacentile’s medical knowledge.

But Piacentile’s recordings–often made surreptitiously–can create their own challenges, says Sheehan, now the New York State Medicaid inspector general. Not only is it difficult to get such freelance tapes admitted in court, but it’s hard to assess whether the taped conversations are reliable and whether they exclude mitigating evidence. Although Sheehan declined to comment on the specific challenges created by Piacentile in the Medco case, the court record suggests that Piacentile’s tactics did and can create headaches for the government. In January 2004, in a series of briefs and motions, Medco accused the plaintiffs–both the government and Piacentile–of making unsolicited ex parte calls to current Medco employees. In one brief, Medco suggested that Piacentile contacted a Medco employee while impersonating a female assistant U.S. attorney working on the case. And to support its claim, Medco cited Piacentile’s tactics in an earlier, unrelated suit in New Jersey state court.

In that case, Allstate Insurance Company sued Piacentile, his wife, and more than 50 others in a civil insurance fraud action in 2000. The claims against the Piacentiles centered on an alleged scheme to circumvent the rules against referral fees between physicians. Judge Charles Villanueva asserted in a 2002 opinion that Piacentile had used “illegal” tactics to gather information to support another defendant’s counterclaim of racial profiling, bad faith claims adjustments, and other regulatory violations. In one example cited by the judge, Piacentile had contacted an Allstate employee, identified himself as “Joseph Falcone,” a human resources executive at Pfizer Pharmaceuticals, and set up a purported job interview at a New Jersey diner, where he questioned her about Allstate’s claims practices and policies. Counsel for Piacentile and his codefendants denied Piacentile’s tape recordings and impersonation attempts to the court, but Allstate employees identified him in a photograph, said Judge Villanueva. The judge, obviously irked, wrote: “Dr. Piacentile and those associated with him have debased our civil litigation system through their repeated misrepresentations.” (Allstate and Piacentile resolved the matter on confidential terms in 2005, according to counsel for Allstate.)

In the Medco case, the defense complaints about Piacentile’s alleged investigations gained no traction. The assistant U.S. attorney whom Piacentile was accused of impersonating admitted to accidentally calling one current Medco employee, and Judge Clarence Newcomer concluded in March 2004 that “no wrongdoing has taken place” in the matter of unsolicited contacts.

Supporters say there is nothing wrong or illegal about Piacentile’s aggressive approach in gathering secondhand information. “The False Claims Act empowers people to find fraud and go chase it down,” says former Piacentile lawyer Kreindler. “The [Federal Bureau of Investigation] is not an insider [either]. We want to empower citizens just like law enforcement,” he says.

But Piacentile has a more colorful past than many law enforcement officers. And defendants in Piacentile’s qui tam cases don’t hesitate to point to the doctor’s criminal and litigation history, say more than a dozen lawyers who have worked on Piacentile cases. Medco was particularly vocal about publicizing Piacentile’s fraud conviction. Medco general counsel David Machlowitz referred to Piacentile’s criminal past in a 2003 press release and conference call, and Medco defense counsel William McDaniels of Williams & Connolly spent most of Piacentile’s seven-hour deposition on the doctor’s criminal and litigation history, according to individuals familiar with the meeting. (McDaniels and Williams & Connolly declined to comment.) “Piacentile was the best thing that ever happened to the defense,” says one plaintiffs lawyer involved.

“As a tactical matter, I was unhappy about having him sit at the government’s table or having to explain his absence,” says Sheehan. As Medco neared a potential trial, it became clear to Sheehan that one of the defense’s themes would be ” ‘the convicted [criminal] is going to benefit from this,’ “as Sheehan puts it.

The case ultimately settled before a full trial: In October 2006, the U.S. attorney’s office in Philadelphia announced a $155 million settlement with Medco, although the company did not admit wrongdoing. The first qui tam filers, two former Medco pharmacists, split a relator’s award of $20.1 million. Piacentile received approximately $3 million as his share of the recovery.

Despite Medco’s successful outcome, some government lawyers are leery of Piacentile. “I would have some hesitations before taking another case where he was a whistle-blower,” says Sheehan.

Today Stone and his partner Robert Magnanini are the only active lawyers of record representing Piacentile in his ongoing unsealed cases against Novartis AG, Forest Laboratories, Inc., and the U.S. affiliates of Sanofi-Aventis Group SA. The two attorneys left Boies, Schiller in March 2009 and launched Stone & Magnanini in order to focus on qui tam and complex litigation without conflicts involving Boies, Schiller’s growing list of institutional clients, Stone says. Piacentile’s largest successes–his participation in the settlements with Medco, Bristol-Myers, Cephalon, and a $4 million settlement with Otsuka American Pharmaceutical Inc., in 2008–have taken place on Stone’s watch. (Stone will not comment on his fee arrangements, but qui tam lawyers typically collect as much as 30–40 percent of the relator’s award.)

More than a dozen lawyers interviewed, on both the defense and the plaintiffs side, expressed frustration that Piacentile has earned any money as a professional litigant. To these critics, Piacentile’s allegations are simply too vague to justify the legal bills he generates for the defense or his participation in potential recovery. The False Claims Act requires that a relator’s qui tam complaint must describe the alleged fraud with sufficient detail or “particularity.” If it doesn’t, the government, the defendants or even corelators can move to dismiss the relator’s case.

But in reality, the rules on required specificity are “one of the most heavily litigated issues [in qui tam] these days,” says Hogan & Hartson partner Jonathan Diesenhaus, so the threshold for dismissal presents a moving target for defendants. The statute requires the government to investigate each qui tam claim, which means that questionable complaints can drain significant resources. “The government can’t know the merits just by looking at the [whistle-blower] complaint,” says John Boese, a Fried, Frank, Harris, Shriver & Jacobson partner and the author of Civil False Claims and Qui Tam Actions. “The government will [often] only know the allegations don’t have merit after it’s issued subpoenas–and cost the defense a couple hundred thousand in legal fees,” adds Boese, who has not worked on any Piacentile cases. (The government intervenes in only a minority of filed qui tam cases–15-20 percent, according to Burns of Taxpayers Against Fraud.)

There’s also little to prevent Piacentile from piggybacking on the more detailed claims of other whistle-blowers, say some lawyers on the defense and plaintiffs side. If the government joins a qui tam action and negotiates a successful settlement with the defendants, prosecutors must allocate 15-25 percent of the recovery to the relators as a group. (That share increases to a maximum of 30 percent if the government did not join the case–but where the government does not intervene, a successful settlement is much less likely.) Though the FCA’s first-to-file rule technically bars multiple relators who are making the same allegations, the reality is often more complex. As Stone points out, “The government embraces multiple relators where they bring something to the table, and then they [generally] persuade the relators to work [the division of the award] out.” Other relators, who may have filed their initial complaints under seal five or even ten years before a settlement, are often reluctant to risk additional litigation to push one plaintiff out, say qui tam lawyers. Most prefer to negotiate a split agreement rather than hold up a long-awaited settlement.

The upshot of such dynamics is that Piacentile has participated in some qui tam actions while contributing seemingly little initial information. Some of the complaints he filed before 2004 seem particularly threadbare. Take his first amended complaint against Forest Laboratories, filed under seal in August 2001. Like many of Piacentile’s cases, the doctor alleges that the pharmaceutical company engaged in various illegal marketing schemes, including kickbacks. But his 35-page complaint shows that Forest was only one of at least ten defendants named in the suit. One bulleted, ten-line paragraph details the only specific allegations against the New York-based company, including short descriptions of four marketing events held to promote a Forest antidepressant drug. These events range from taking physicians and guests to a George Carlin concert to “host[ing] a conference in Atlanta.” (Forest declined to comment on the case.)

These allegations wilt in comparison to the March 2003 initial complaint filed by Christopher Gobble, a former Forest sales representative. Gobble’s 28-page complaint details quarterly entertainment budgets given to Forest salespeople, discusses unearned speakers’ fees and gifts to various named doctors, and describes systems tracking physicians’ prescriptions to measure the “Return on Investment” from kickbacks and illegal marketing.

Piacentile’s status as the first-to-file relator in Forest gives him an advantage in claiming all or most of any settlement. But would Piacentile’s complaint, on its own, have been dismissed? “From most courts’ perspectives, you’re not meeting the [pleading] standards to say you believe that taking someone to a … concert must have resulted in an improper influence on physicians, and those physicians must have written Medicare and Medicaid prescriptions,” says Diesenhaus, speaking generally about qui tam standards and not specifically about Piacentile.

“Most complaints are flawed,” retorts Stone, with the disclaimer that he isn’t speaking about or on behalf of Piacentile. “Ninety percent are [submitted] by drug reps who don’t know much. So a criticism that somehow one relator doesn’t have all the knowledge of what’s going on at a company is an invalid criticism: 95 percent of the complaints don’t have that,” he says. Allegations brought to the government, even general ones, can be helpful in uncovering and prosecuting fraud, he says. And Piacentile supporters note that painting FCA whistle-blowers as undeserving bounty hunters is a well-worn tactic of corporate defendants accused of wrongdoing. “This is how twisted our society has become,” Stone says. “We have senior law firm partners making millions, but whistle-blowers who have devoted their lives to exposing fraud get questioned.”

To be sure, it is impossible to assess Piacentile’s contribution on every filed case. Many original complaints remain under seal, and in cases such as Medco, Piacentile and his lawyers have helped the government interview witnesses, take depositions, and review documents. Some of Piacentile’s later complaints, particularly those written with Stone and Magnanini, contain more specificity than his complaint against Forest. His April 2008 amended complaint against Cephalon, for instance, contains direct quotes from physicians admitting they earned high lecture fees from defendants because they were “high prescribers.” His September 2008 amended complaint against Novartis AG has detailed accounts of sales representatives marketing the “spread” that doctors could earn between the price they paid for a defendant’s drugs and their Medicare reimbursement rate. Piacentile’s most recent salvo, an amended 62-page complaint filed in January against the U.S. affiliates of Sanofi-Aventis, contains allegations about specific market-share discounts given to various health care providers, names of doctors who allegedly aided defendants in off-label marketing, and details on the budgets (up to $36,000) given to Aventis sales representatives to allegedly “induce physicians to prescribe the company’s drugs.” (Nevertheless, Sanofi’s motion to dismiss argues that Piacentile’s complaint lacks sufficient particularity and fails to allege a cause of action under the FCA, and that his claims are barred because they’re related to another relator’s earlier complaint.)

Not all of Piacentile’s suits have produced results, though. Out of 14 unsealed cases in which Piacentile has been a named relator, just four have successfully settled, seven have been dismissed (some without prejudice), and three are ongoing. In two of the three ongoing cases, those filed against Novartis and Sanofi-Aventis, the government has declined to intervene, a negative sign. And Piacentile’s share in at least two of the four successful settlements has been relatively small. Two of the three corelators in Medco earned a combined award that was seven times greater than Piacentile’s. Of the approximately $52 million in relators’ awards in the 2007 Bristol-Myers settlement, Piacentile earned $7.3 million.

“Even if he’s hit a couple, his batting average is terrible,” asserts onetime opposing counsel Andrew Hurst, a Reed Smith partner who represented defendant HealthSouth in a 1999 qui tam suit initiated by Christopher and Joseph Piacentile. (The case was dismissed with prejudice in 2002.)

Since serial relators are relatively rare, it’s hard to find a good benchmark for Piacentile’s record. But at least one other plaintiff has reaped large rewards in a series of qui tam actions. Over the past 15 years, the four partners behind pharmacy Ven-A-Care of the Florida Keys, Inc., have filed suits against a host of drug manufacturers, including Bayer Corp., Schering-Plough, Bristol-Myers, and others. Many plaintiffs and defense lawyers say the group has been particularly active in getting regulators to pay attention to the once-novel allegation that drug manufacturers were marketing a spread between reimbursement rates and drug prices. The group’s relator awards total at least $85 million, far more than Piacentile’s earnings (although divided among four participants).

Still, Piacentile’s whistle-blowing career isn’t over. At press time Forest Laboratories appeared to be close to settling: A notice of prospective settlement appeared on the District of Massachusetts docket last August, and the company disclosed in SEC filings that it set aside a $170 million reserve for the matter in 2009.

At the same time, the enforcement and political winds are blowing in favor of relators, particularly in the health care realm. The landmark health care bill signed into law in late March amended FCA public disclosure and original source requirements, largely in favor of whistle-blowers: One revision prevents the dismissal of a relator on public disclosure grounds if the government opposes that dismissal. Another restricts the definition of “publicly disclosed” to only federal (as opposed to state) proceedings, investigations, or reports. And the bill expands the “original source” exception to the public disclosure bar. The act now eliminates the requirement of “direct” knowledge if the relator has knowledge that is “independent of” and “materially add[s]” to any publicly disclosed allegations.

The real test for Piacentile will be his ongoing cases against Sanofi and Novartis, which Piacentile and his lawyers at Stone & Magnanini are litigating alone, without government intervention. And the defendants won’t make it easy for them. Sanofi’s March motion to dismiss was filed with a copy of a 1995 letter from the New York Department of Health suspending Piacentile’s medical license and a 2006 order finding a separate Piacentile FCA case lacked sufficient specificity to meet pleading requirements. Meanwhile, in March Novartis’s U.S. subsidiary won a leave to file up to 40 pages in memorandum in support of its anticipated motion to dismiss. But the lawyers for Novartis and Sanofi better watch out: They’re dealing with a professional.


Illustration by Alex Nabaum

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