    [Senate Hearing 110-412]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 110-412

       THE FALSE CLAIMS ACT CORRECTION ACT (S. 2041): STRENGTHENING THE
      GOVERNMENT'S MOST EFFECTIVE TOOL AGAINST FRAUD FOR THE 21ST CENTURY

    =======================================================================

                                    HEARING

                                   before the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               FEBRUARY 27, 2008

                                   __________

                              Serial No. J-110-76

                                   __________

             Printed for the use of the Committee on the Judiciary

                                   ----------
                           U.S. GOVERNMENT PRINTING OFFICE

    42-809 PDF                     WASHINGTON : 2008

    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
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    Washington, DC 20402-0001

                           COMMITTEE ON THE JUDICIARY

                      PATRICK J. LEAHY, Vermont, Chairman
    EDWARD M. KENNEDY, Massachusetts     ARLEN SPECTER, Pennsylvania
    JOSEPH R. BIDEN, Jr., Delaware       ORRIN G. HATCH, Utah
    HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
    DIANNE FEINSTEIN, California         JON KYL, Arizona
    RUSSELL D. FEINGOLD, Wisconsin       JEFF SESSIONS, Alabama
    CHARLES E. SCHUMER, New York         LINDSEY O. GRAHAM, South Carolina
    RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
    BENJAMIN L. CARDIN, Maryland         SAM BROWNBACK, Kansas
    SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
                Bruce A. Cohen, Chief Counsel and Staff Director
               Stephanie A. Middleton, Republican Staff Director
                  Nicholas A. Rossi, Republican Chief Counsel

                                C O N T E N T S

                                  ----------

                        STATEMENTS OF COMMITTEE MEMBERS

                                                                       Page

    Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
        prepared statement...........................................   203
    Specter, Hon. Arlen, a U.S. Senator from the State of
      Pennsylvania...................................................     3

                                   WITNESSES

    Boese, John T., Partner, Fried, Frank, Harris, Shriver & Jacobson
      LLP, Washington, D.C...........................................    23
    Clark, John E., Of Counsel, Goode, Casseb, Jones, Riklin, Choate
      & Watson, P.C., San Antonio, Texas.............................    21
    Gonter, Tina M., Jacksonville, Florida...........................    19
    Hertz, Michael F., Deputy Assistant Attorney General, Civil
      Division, Department of Justice, Washington, D.C...............     6

                             QUESTIONS AND ANSWERS

    Responses of John Boese to questions submitted by Senator Specter    40
    Responses of John Clark to questions submitted by Senator Specter    52
    Responses of Michael Hertz to questions submitted by Senator
      Specter........................................................    54

                           SUBMISSIONS FOR THE RECORD

    Benczkowski, Brian A., Principal Deputy Assistant Attorney
      General, Department of Justice, Washington, D.C., statement and
      attachment.....................................................    57
    Boese, John T., Partner, Fried, Frank, Harris, Shriver & Jacobson
      LLP, Washington, D.C., statement...............................    75
    Brickman, Jim, Real Estate Developer and Investor, Texas,
      statement......................................................   115
    Bucy, Pamela H., Bainbridge Professor of Law, University of
      Alabama School of Law, Tuscaloosa, Alabama, statement..........   119
    Clark, John E., Of Counsel, Goode, Casseb, Jones, Riklin, Choate
      & Watson, P.C., San Antonio, Texas, statement..................   136
    Gonter, Tina M., Jacksonville, Florida, statement................   167
    Hertz, Michael F., Deputy Assistant Attorney General, Civil
      Division, Department of Justice, Washington, D.C., statement...   186
    Kohn, Stephen M., President, National Whistleblower Center,
      Washington, D.C., statement and attachment.....................   196

       THE FALSE CLAIMS ACT CORRECTION ACT (S. 2041): STRENGTHENING THE
      GOVERNMENT'S MOST EFFECTIVE TOOL AGAINST FRAUD FOR THE 21ST CENTURY

                                  ----------

                          WEDNESDAY, FEBRUARY 27, 2008

                                           U.S. Senate,
                                    Committee on the Judiciary,
                                                       Washington, D.C.
        The Committee met, Pursuant to notice, at 10:05 a.m., in
    room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
    Leahy, Chairman of the Committee, presiding.
        Present: Senators Leahy, Durbin, Specter, and Grassley.

    OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
                          THE STATE OF VERMONT

        Chairman Leahy. Nearly a century and a half ago, President
    Lincoln pushed through the False Claims Act. He wanted to stop
    the rampant fraud and war profiteering we saw during the Civil
    War. It is fitting that we hold this hearing on legislation to
    strengthen ``Lincoln's law'' the same month we celebrate
    President Lincoln's birth.
        We are in the midst of war, and we are facing reports of
    billions lost to fraud and waste in Iraq and Afghanistan. And
    so we are considering important new improvements to the False
    Claims Act--not only to punish and deter those who seek to
    defraud our Nation, but also, importantly, to recover billions
    in taxpayer dollars that were stolen from the public trust.
        In recent years, the False Claims Act has become the
    Government's most effective tool against fraud. Since 1986, it
    has been used to recover more than $20 billion lost to fraud,
    half of that just in the past 5 years. It has been used to
    punish contractors selling defective body armor to our police,
    to recover hundreds of millions from oil and gas companies
    bilking the Government on valuable leases on Federal land, to
    punish health care and drug companies for defrauding billions
    from Medicaid and Medicare, and to uncover massive fraud by
    insurance companies illegally shifting their losses from
    Hurricane Katrina to the Federal Government.
        But these recent successes do not tell the full story. The
    False Claims Act has yet to fulfill its true potential for
    combating fraud. In 1986, Senator Grassley led the effort to
    reinvigorate the False Claims Act by amending the law to
    encourage citizens to report fraud against the Government. I
    want to take this moment to publicly commend Senator Grassley
    for doing that.
        Senator Grassley. Thank you, Mr. Chairman.
        Chairman Leahy. It was one of the most important pieces of
    legislation passed during that time.
        Senator Grassley. Thank you.
        Chairman Leahy. Since then, citizen whistleblowers have
    become the greatest source for uncovering complex frauds
    against the Government. Their cases now account for about 70
    percent of all the money recovered under the False Claims Act.
    Yet opponents of the False Claims Act, those who defend the
    major defense contractors and big drug companies, have worked
    hard to undermine the original intent of these amendments. A
    series of recent court decisions have placed new, technical
    impediments on false claims cases, and these court cases
    threaten to weaken the law. Not only would they weaken the law,
    they would undo the successes of these past few years.
        So we are considering bipartisan legislation--the False
    Claims Act Correction Act of 2007--that is going to correct
    these judicial interpretation problems and strengthen the False
    Claims Act for the 21st century. In doing so, I will recognize
    the longstanding leadership of my friend Senator Chuck
    Grassley. He introduced this bill recently in order to restore
    the original intent of the 1986 amendments. He has worked
    tirelessly over the years in defense of the False Claims Act,
    and I am proud to join with him, as well as Senator Specter, of
    course, and Senator Durbin and Senator Whitehouse, in support
    of this bill. I look forward to working with these Senators and
    the Committee to make the False Claims Act even more effective
    and to provide important, new protections for the citizen
    whistleblowers, who are so vital to uncovering these frauds.
        So we will ask some important questions of the Justice
    Department about its failure to dedicate sufficient lawyers and
    investigators to pursue these fraud cases. The Justice
    Department has a backlog of more than 1,000 false claims cases.
    Now, assuming no new cases were brought, at the current pace
    that would take 10 years to resolve. That is assuming no new
    cases. Now, when one considers that a recent study found that
    for every dollar spent enforcing the law in health care cases,
    the Government recovered $15 on behalf of the American
    taxpayers, there is no excuse for failing to pursue these cases
    aggressively. That is a pretty good investment.
        In light of the politicization of the Justice Department,
    many wonder whether it has resisted pursuing certain false
    claims cases for political reasons--most notably those
    involving contracting fraud related to the war in Iraq and
    Afghanistan. Over the past 5 years, the Justice Department has
    participated in more than 600 false claims settlements
    nationwide and recovered more than $10 billion. And I commend
    them for that. But during that same time, the Justice
    Department participated in only five settlements involving
    contracting fraud in Iraq and Afghanistan, recovered a mere $16
    million--less than two tenths of 1 percent of the overall
    total. We certainly know from the press that there has been a
    lot more fraud than that. And since 2002, our Government has
    spent nearly $500 billion on the wars in Iraq and Afghanistan,
    and billions of taxpayers' dollars have been lost to fraud,
    waste, and abuse. They ought to be recovering that, not
    protecting favorite contractors or politically connected people
    who are bilking the taxpayers. The False Claims Act was
    designed to attack such rampant war profiteering. It was
    necessary during the Civil War, and it is necessary today.
        The administration has apparently decided that pursuing
    unscrupulous defense contractors would be embarrassing, and
    aggressively pursuing these frauds is not their priority.
        We will hear from a courageous citizen whistleblower, Tina
    Gonter, who will tell us how she used the False Claims Act not
    only to hold our Nation's largest defense contractors to
    account, but also to keep the Justice Department honest. She
    risked her job, she was retaliated against, but she took on the
    powerful and the moneyed defense contractors anyway. It is
    people like that who Senator Grassley and I and others want to
    protect when they raise these issues. The whistleblowers should
    be recognized as ``citizen soldiers,'' as President Lincoln
    called them when the False Claims Act was first passed so many
    years ago. Her story demonstrates how the False Claims Act
    works for all Americans and why the new protections for citizen
    whistleblowers in the bill we consider today are necessary to
    encourage them to come forward and tell their stories. So I
    hope all Senators will join us to honor the legacy of Lincoln's
    law and take action now to strengthen and improve the False
    Claims Act for the next century.
        Before I yield to Senator Specter, I should note that
    because of our duties on the Appropriations Committee, we both
    will have to leave, and I have asked Senator Grassley when we
    leave if he would chair this hearing, and he has graciously
    offered to do so, and I appreciate that.
        [The prepared statement of Senator Leahy appears as a
    submission for the record.]
        Senator Specter?

    STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE
                            OF PENNSYLVANIA

        Senator Specter. Thank you, Mr. Chairman.
        The subject of the False Claims Act is a very important
    one. I was fascinated by the subject in law school, and the
    criminal law textbook had the Supreme Court decision of ex rel.
    Marcus v. Hess, a 1942 decision, and it motivated me to do
    extensive research and write an article for the law review, law
    journal on private prosecutions. And over the years, I have
    followed this Act, and it has enormous potential to collect
    money for the Federal Government, but only if people are
    encouraged to follow that.
        I was disappointed to see the decision of the Supreme Court
    of the United States in the Rockwell International Corporation
    case, which said that if the factual basis for recovery or
    conviction was not what the whistleblower had started with,
    there could not be a recovery.
        Well, the texture of a case frequently changes during the
    course of discovery and litigation. And if the whistleblower is
    going to find that his claim can be dislodged that easily, he
    is not going to be inclined to follow it. Also, the Totten
    case, where the relator whistleblower was denied recovery
    because it was Amtrak, not the Government but a grantee. And
    grantees get most of the money or a great deal of the money
    from the Government.
        And then in the Custer Battles case, to deny a claim
    because it was the Coalition Provisional Authority in Iraq, an
    international entity that got so much of the money from the
    United States, those are really Federal dollars, and there
    really ought to be a way to encourage this kind of action. But
    private action and citizen action is really the cornerstone of
    initiative, and it has been very successful on treble damage
    cases and many, many other lines.
        I am sorry that my schedule precludes my staying. It is a
    very distinguished list of witness. Mr. Hertz has a phenomenal
    record, 30 years in the Federal Government. As I see him
    sitting at the witness table with packs of materials on each
    side, I am going to be fascinated to see how he can handle it
    in 5 minutes.
        Chairman Leahy. Trust me, Mr. Hertz knows what is in--I
    know Mr. Hertz. He knows what is in every bit of that material,
    too.
        Senator Specter. That is a lot of material, but that is an
    occupational hazard, which Senator Grassley does not have.
    Senator Grassley brings to this Committee a fresh view. He is
    not encumbered with a law degree.
        [Laughter.]
        Senator Specter. He is a very, very practical man. And as I
    said on the floor 1 day, when I got carried away, Senator
    Grassley is in the mold of Harry Truman. I hope President
    Truman did not mind my making that reference. But Senator
    Grassley brings a unique practicality to his work here. And I
    have a special fondness for Senator Grassley. I have still got
    a little time, so I am going to use it to reminisce a bit.
        Senator Grassley and I were elected in 1980 together. We
    came with a total of 16 Republican Senators, and two Senators
    were elected as Democrats. One was Senator Chris Dodd of
    Connecticut. I saw Chris this morning. We were reminiscing
    about how 50 percent of his class has remained and only 12.5
    percent of the Republican class, 2 out of 16. And the only
    thing that has really befallen Senator Grassley of a
    problemsome nature during his distinguished career is that with
    some frequency he has been mistaken for me.
        [Laughter.]
        Senator Specter. And that is grounds for a defamation suit.
    But Senator Grassley does not like dealing with lawyers, so he
    has never brought the suit. But he was after Attorney General
    William French Smith, so, Mr. Hertz, if he is tough on you
    today, he goes after Attorneys General as well.
        One day I was at the White House, in 1984, and Attorney
    General Smith said, ``Why are you after me?'' And I finally
    realized that he thought I was Chuck Grassley.
        [Laughter.]
        Senator Specter. Senator Grassley tells a story--well, you
    tell the story about what happened, people remonstrated you for
    your terrible questioning of Professor Anita Hill.
        Senator Grassley. Yes, and, you know, the practice then
    when we had Anita Hill and other people before the Committee at
    the Thomas hearing, there were two Republicans and two
    Democrats that were scheduled to ask questions. None of the
    rest of us asked questions. That was a bipartisan agreement at
    that time. And so he was asking the questions for the
    Republicans. We each made a statement for maybe 2 or 3 minutes,
    is all our participation. But for the next 6 months, because he
    asked such tough questions of the witnesses, everybody would
    come up to me and say, ``I don't see how you could have been so
    mean to those witnesses.''
        [Laughter.]
        Senator Grassley. And I was innocent. I did not ask a
    single question, nor did most of the other Republicans.
        Senator Specter. One addendum to that. In 1999, 8 years
    after those hearings were over, Senator Grassley and Justice
    Thomas were having breakfast in the Senate dining room. And I
    walked over to the two of them sitting there, and I said,
    ``Justice Thomas, I want to tell you two things. I want to tell
    you how hard it was for me to get Grassley to vote for you.''
    They both about fell off their chairs, this diehard Republican.
    ``And one other thing I want to tell you, Justice Thomas. You
    know all those questions I asked Professor Hill? Grassley fed
    them to me.''
        [Laughter.]
        Senator Specter. But on the subject, this is--
        Chairman Leahy. And what was his answer?
        Senator Specter. He laughed. Justice Thomas has a laugh
    which originates in the lower part of his abdomen. He really
    explodes with his laugh. But those were complex hearings,
    really historic hearings.
        Senator Leahy and I have been around, as has Senator
    Grassley, to participate in a lot of historic hearings, and
    this is a very important one. And I will work hard with Senator
    Grassley and Senator Leahy to see if we cannot get this
    legislation. And we are amenable to your suggestions, Mr.
    Hertz, as to where you think it ought to go, as long as we can
    get the bill passed.
        Senator Grassley. Senator Leahy, if I could delay my
    opening statement, because I would like to make sure as
    Chairman of the Committee, I think it is very important to the
    legitimacy of my legislation if you would ask your questions
    before you go?
        Chairman Leahy. I will, and I appreciate that.
        Mr. Hertz, if you would stand, please, to be sworn. Do you
    solemnly swear that the testimony you will give in this matter
    will be the truth, the whole truth, and nothing but the truth,
    so help you God?
        Mr. Hertz. I do.
        Chairman Leahy. Thank you.
        Michael Hertz is the Deputy Assistant Attorney General for
    the Commercial Litigation Branch of the Civil Division at the
    Department of Justice. He served continuously with the
    Department for over 30 years. Beginning in 1975 when he joined
    the Civil Division's appellate staff, he supervised and
    litigated False Claims Act cases extensively during his long
    and distinguished career. And I might note that through the
    years, in both Republican and Democratic administrations, I
    have noted that it is the career people in the Department of
    Justice that are the most important aspect of that Department.
    I remember how appealing I found them when I was a young law
    student--I actually did value getting my law degree--when the
    then-Attorney General was basically asking me if I would come
    out of law school and join the Department of Justice. I
    remember that Attorney General. I was very impressed with my
    meeting with him, and telling me how in the professional
    division they did not allow politics to influence them. I had
    some interest in the Criminal Division. He said even the
    President of the United States--he told the President of the
    United States he could not interfere with a criminal
    investigation. And I thanked Attorney General Robert Kennedy
    for telling me that, and it turned out, as history showed, that
    when a strong supporter of his brother was involved with a
    criminal matter, they prosecuted him. And that is, of course,
    the way it should be.
        Mr. Hertz during his service with the Department has
    received numerous awards, including the Stanley D. Rose
    Memorial Award. That is the Civil Division's highest ranking
    award. He received that in 2002. He has his bachelor's degree
    from Rensselaer, a law degree from Northwestern University
    School of Law. Please, Mr. Hertz, go ahead.

    STATEMENT OF MICHAEL HERTZ, DEPUTY ASSISTANT ATTORNEY GENERAL,
        CIVIL DIVISION, DEPARTMENT OF JUSTICE, WASHINGTON, D.C.

        Mr. Hertz. Mr. Chairman, Senator Grassley, I want to thank
    the Committee for inviting me to testify and present the views
    of the Department of Justice on Senate bill 2041. I also
    appreciate having this opportunity to review with you the
    Department's experience with qui tam actions since the 1986
    amendments.
        The Department of Justice is committed to the vigorous
    enforcement of the laws against those who perpetrate fraud to
    obtain money from the Government. Since the False Claims Act
    was amended and liberalized in 1986, over $20 billion has been
    recovered on behalf of taxpayers by the Department with more
    than $5 billion of that amount in just the past 2 years. The
    qui tam provisions of the False Claims Act statute, which the
    Department continues to vigorously support, have augmented our
    resources to address fraud in connection with Government
    programs and to recover some losses to the Federal fisc that
    would not have otherwise been identified. Since the qui tam
    provisions of the False Claims Act were amended, there have
    been more than 5,800 suits filed with the Department through
    fiscal year 2007. It is significant to note that of the $20
    billion recovered under the False Claims Act since 1986, $12.6
    billion has been the result of qui tam actions, and the
    Department has paid awards to qui tam relators of $2 billion.
        We believe that the success of the Act's qui tam provisions
    are in large part due to the efforts of both whistleblowers,
    whom we acknowledge bring these cases often at great personal
    sacrifice, and the highly professional, skilled and dedicated
    Government attorneys, agents, auditors, who, with the
    encouragement of the Department, work with relators and their
    attorneys to fully implement the public-private partnership
    contemplated by the 1986 amendments.
        As I have said, the Department is of the view that the
    False Claims Act is effective and working very well.
    Accordingly, we have not independently urged or seen a pressing
    need for major amendments at this time. As our views letter and
    appendix reflect, however, the Department has considered the
    bill carefully and is sympathetic and can support many of the
    proposed changes to the False Claims Act, although in a number
    of instances we proposed alternative language to accomplish
    essentially the same purpose.
        For example, we have argued that the presentment and
    Federal funds limitations imposed by the courts in the Totten
    decision and the Custer Battles decision were incorrectly
    imposed, and we have filed amicus briefs arguing that both
    cases were wrongly decided. To the extent that S. 2041 proposes
    to redress those holdings, we have provided comments for an
    effective and simple way to do so.
        Similarly, we support the goals embodied by the provisions
    of S. 2041 that: one, clarify the conspiracy provisions apply
    to all substantive bases of liability; two, make actionable
    under the False Claims Act the requirement to return
    overpayments; three, prohibit the unwitting waiver of claims by
    relators; four, provide a single 10-year statute of limitations
    under the False Claims Act; five, make clear that under the
    False Claims Act amended allegations filed by the United States
    relate back to the date of the original complaint by the
    relator; and, six, streamline and make effective the False
    Claims Act civil investigative demands.
        Notwithstanding these areas of mutual agreement, and
    principally because of S. 2041's specific proposals with
    respect to the right of Government employees to serve as
    relators, and the public disclosure bar, as well as the
    preference for the alternative language we have proposed, the
    Department cannot support the bill as currently drafted.
        The Department is opposed to an explicit legislative
    recognition of the right of Government employees to serve as
    relators and obtain qui tam awards. Each Federal employee has
    an existing duty to report fraud, waste, and abuse. Adding a
    financial incentive to file qui tam suits conflicts with this
    duty and has the potential to undermine both the employee's
    loyalty to the Government and the public's confidence in the
    fairness and impartiality of the Government's decisions. This
    is particularly true for those Government employees such as
    auditors, investigators, contracting officials, and attorneys
    who are paid salaries by the taxpayers to identify and root out
    fraud and who, under S. 2041, would not be barred from filing
    suits using information they learned in carrying out those
    duties.
        We are also concerned that in an effort to correct the
    current public disclosure bar, the proposed legislation will
    unduly narrow it. One of the guiding principles of the False
    Claims Act was that it was intended to provide the Government
    with information about fraud it otherwise would not have
    discovered. As currently drafted, the proposed narrowing
    restrictions would enable rewards to be claimed by plaintiffs
    with no firsthand knowledge of fraud and who do not add
    information beyond what is in the public domain, as well as
    plaintiffs in a broad range of cases where the Government is
    already taking action.
        While the Department could support aspects of the bill's
    proposal that eliminate the jurisdictional nature of the public
    disclosure bar and that permit only the Attorney General, and
    not defendants, to seek dismissal of relators on this ground,
    it could only do so if the bar reflects the concerns we have
    outlined. In our view, the public disclosure bar would have to
    be revised to permit dismissal of a qui tam action by the
    Government if it is already pursuing the matter unless the
    relator provides new information that would enhance the
    Government's recovery or the Government's investigation is
    based on information voluntarily provided by the relator.
        The Department wishes to acknowledge the efforts of
    Senators Grassley, Leahy, Specter, and Durbin and their staffs
    for the thoughtful work that has gone into S. 2041. Although as
    currently proposed the Department cannot support the bill, we
    remain willing to work with the Committee to address our
    concerns and ensure that the False Claims Act remains the vital
    anti-fraud weapon that it is today.
        I look forward to your questions. Thank you.
        Chairman Leahy. Well, thank you, Mr. Hertz. You know, I am
    somewhat concerned on the part that you do disagree with, and I
    appreciate the fact that the Department agrees with a number of
    the sections. And I take it you feel the Rockwell decision was
    wrongly decided. Is that correct?
        Mr. Hertz. That is correct. The Government filed an amicus
    urging that the relator in that case be allowed to retain the
    award.
        Chairman Leahy. I agree with that. But you understand that
    under our bill--and I understand what you said about employees
    already have--Government employees have a duty to report fraud
    or abuse, and we will all agree on that. The concern I have
    had--and I know Senator Grassley and others have had--is that
    many times when that is reported, it is reported to the
    detriment of the career of the person doing the reporting. And
    our bill says that if they discover a fraud, they have to
    report it to their superiors or to the Inspector General of the
    Department. And they are not allowed to sue if action is taken.
    But the only time they can sue is if a year goes by and no
    action has been taken. Then they can sue.
        Do you really find that unreasonable?
        Mr. Hertz. Mr. Chairman, we appreciate the efforts that the
    provisions of the bill attempt to put restrictions on
    Government employees, and we recognize that there are some
    policy choices to be made here. But at the end of the day, we
    are left with a couple of factors that cause us to say that
    Government employees should not be allowed to file suit even in
    the circumstances you outline.
        First and foremost is, at the end of the day, after the
    Government employee follows all the procedures in the bill and
    files a lawsuit, you will still have the situation where the
    Government employee has a personal financial interest in the
    matter that he worked on as a Government employee. This is
    something that is contrary to ethics regs and ethics statutes.
        Chairman Leahy. I understand that, but we have a certain
    amount of frustration. If somebody finds something and they
    report it to the Inspector General, they report it to the
    Secretary or whoever it might be, and nothing happens--and that
    has been a situation--what do you do? I mean, you read all
    these cases about Iraq and Afghanistan. We have spent $500
    billion there. You read in the press there seem to be well--
    documented cases of fraud and waste. There has been, if I am
    correct by my notes here, five False Claims Act settlements
    through the Justice Department, $16 million in cases involving
    fraud in Iraq and Afghanistan. The AG says there are 230 false
    claim cases involving defense procurement fraud under seal at
    the Justice Department.
        My concern is that political decisions can be made to stop
    these claims from going forward or that if you have a
    Government employee--usually, the first one who can see fraud
    and waste, you know, the trucks get a flat tire, and they just
    leave the trucks behind, the huge amounts of money that
    Halliburton was spending on hotels and things like this. They
    are the ones who are going to see it. And if nothing is done on
    it, does it just get covered up?
        Mr. Hertz. I think we are talking about potentially two
    different issues. One--
        Chairman Leahy. Tell me why.
        Mr. Hertz. Well, we are talking about, one, cases in Iraq.
    If you look at the qui tam cases that have come out from under
    seal involving Iraq, they have not involved Government employee
    relators. And we are working the cases that have been filed in
    connection with the war in Iraq.
        Chairman Leahy. Well, you mentioned those under seal. How
    many have been under seal for more than 2 years?
        Mr. Hertz. In Iraq?
        Chairman Leahy. In Iraq and Afghanistan.
        Mr. Hertz. Well, I do not know. There have been a total of
    approximately 45 cases involving Iraq and Afghanistan, and
    about 15 of them are out from under seal. Some we have
    declined, some we have intervened, some we have settled. One of
    the things that we have done, we did--you know, unfortunately,
    these cases are complicated, and they take time.
        Chairman Leahy. Well, let me ask it another way: Defense
    procurement cases--and this involves everywhere, not
    necessarily just Iraq and Afghanistan--the AG says there are
    230 under seal. How many of those under seal involve either
    Iraq or Afghanistan?
        Mr. Hertz. It should be about 30 of those.
        Chairman Leahy. OK. That is what I wanted to make sure I
    understood. And how many of those have been under seal for more
    than 2 years?
        Mr. Hertz. Well, you know, I do not know the answer to
    that, but most of the cases that have come in regarding Iraq
    have come in in the last 3 years. If you look at the total
    number of cases that are still under seal, most of those have
    come in in the last 3 years.
        We know that it takes a long time to work these cases.
    There doesn't seem to be any significant difference in the
    period of time before the Government makes an intervention
    decision in the cases involving Iraq and the other cases, the
    pharmaceutical cases that we have, other areas.
        Chairman Leahy. If I might just ask one last question--I
    have gone over my time, but you have about 1,000 backlogged
    now. Have you ever seen a backlog this--you have got
    institutional memory that most people do not have. Have you
    ever seen a backlog this big?
        Mr. Hertz. You know, I have not really looked at the
    numbers that way. We are trying--they come in at the rate of
    about 350 a year. Whether the--
        Chairman Leahy. And the Justice Department is settling
    about 100 a year.
        Mr. Hertz. The qui tam--right, but we decline an awful lot
    of cases. You know, we decline and do not proceed with 75 to 80
    percent of the cases.
        Chairman Leahy. I understand.
        Mr. Hertz. Most of those cases actually end up not
    producing any recovery for the Government. Whether we are
    disposing more than the 350 that come in per year, I would have
    to go back and look at that. So I do not know whether the
    backlog has built over the last few years or has started going
    down.
        Chairman Leahy. I tell you what. My time is up. I am going
    to ask my staff--I have got a number of questions, and they are
    aware of them--to sit down and work with you on questions of
    whether we need more staffing. And if you could be good enough
    to respond to those, please.
        Mr. Hertz. I would be happy to respond to the questions.
        Chairman Leahy. Thank you. And Senator Durbin has come in,
    but as before, I am going to be leaving for this other
    Committee meeting, and I am going to turn it over to Senator
    Grassley to chair this.
        Senator Grassley. [Presiding.] Thank you. I would like to
    defer to Senator Durbin because I know a Leader has limited
    time. No, please go ahead. Please go ahead.
        Senator Durbin. Thank you very much.
        Senator Grassley. Because I may have the whole meeting to
    myself. So you go ahead.
        [Laughter.]
        Senator Durbin. Thank you, Senator Grassley and Senator
    Leahy. Senator Leahy, thank you for this hearing. And Senator
    Grassley has been an extraordinary champion of this issue for
    as long as I have served in the Senate, probably before. I
    think it is an extraordinary opportunity to try to ferret out
    fraud and waste of taxpayers' dollars, and I am a little bit
    honored and taken by the fact that it started under a President
    from the State of Illinois.
        Let me just ask you this, if I might, basic questions, Mr.
    Hertz. I take it that the Department does not agree with the
    fundamental goal of this legislation, which is to try to make
    certain that taxpayers' funds are not wasted, that we do not
    defraud people who are supposedly serving in good faith, trying
    to serve their Government. Is that true?
        Mr. Hertz. No, I do not think that it is true that we
    disagree with the fundamental purposes of the legislation. I
    think our--as I have said, we are actually sympathetic with
    many of the provisions that they are trying to accomplish. I
    have also said that some of the issues, for example, like
    Totten and Custer Battles, are actually still in the courts. We
    do not have final judicial resolution--
        Senator Durbin. Well, we try to resolve the Totten issue.
    Do you have any problem with our resolution of that?
        Mr. Hertz. I think we propose a different way to fix it. We
    have said that Totten was wrongly decided.
        Senator Durbin. OK.
        Mr. Hertz. And we disagree with, you know, the ruling and
    think the principle should be otherwise.
        Senator Durbin. So let's go to the next question. The
    question is: What about rank-and-file Government employees who
    see fraud, report it to the supervisor, the Inspector General,
    and nothing happens? What if the employee's supervisors do
    nothing to correct or even investigate the fraud? Should we do
    something to incentivize those employees to keep working to
    bring that fraud to light?
        Mr. Hertz. I think we already have incentivized those
    employees. I think if they run into resistance within their
    chain of command, they should have the right and go to the
    Inspector General of that agency, or even come directly to the
    Department of Justice. The Department of Justice, I would
    suggest, has actually a fairly good record when it gets cases
    that come to us in the qui tam context. As I said, we intervene
    in about 20 to 25 percent of the cases. Virtually all of those
    end up in a recovery for the Government. And the 75 to 80
    percent of the cases that we decide not to go forward with,
    there are much more limited recoveries. That is what history
    shows us.
        So I think that these employees have a place to go. Given
    that and given what we would say are the potential conflicts of
    that employee using information that comes to him in his
    Government capacity for a personal financial gain, which could
    essentially cause the public to really distrust people who are
    doing regulating--people in the Government who are regulating
    or contracting with or investigating or auditing third parties.
    If they can use that information to file their own qui tam
    lawsuit, even accepting the fact that their supervisors have
    rejected going forward with a fraud case, I think that calls--
    the public could have a perception problem that the Government
    is acting fairly in those circumstances.
        Senator Durbin. I just wanted to check my notes here and
    try to--I have some information here, and I do not know if
    Senator Grassley has it, that since 1986 the Federal Government
    and qui tam relators have worked together to recover $20
    billion in Government money. So, clearly, there is some value
    to the current system.
        Mr. Hertz. Oh, absolutely.
        Senator Durbin. And my question to you is: If the ordinary
    process, the due process of Government does not result in an
    investigation, your position is it should end at that point.
        Mr. Hertz. No. We accept and we have long accepted that
    when a relator who is not a Government employee files a case,
    even if the Government decides not to go forward, that relator
    should be allowed to go forward.
        Senator Durbin. Why restrict it to just non-Government
    employees?
        Mr. Hertz. Because the non-Government employee does not
    have the restrictions on them not to use public information for
    their own personal gain.
        Senator Durbin. And the non-Government employee is less
    likely to have the information to pursue a claim.
        Mr. Hertz. Actually, we would suggest otherwise. The non-
    Government employee who is in the corporation is likely to have
    firsthand knowledge of the fraud. The Government employee is
    likely to only have secondhand or derivative knowledge, things
    that were reported to him.
        Senator Durbin. Well, I do not know how we can generalize
    in this situation and say that you would exclude Government
    employees. But I take it that just as a fundamental principle,
    you are opposed to the idea of a Government employee recovering
    any money personally as a result of a fraud on our Government
        Mr. Hertz. As a result of using information they learned as
    a Government employee, and using information they learned
    performing their Government duties as a regulator,
    investigator, auditor, using that information for their
    personal gain, correct.
        Senator Durbin. Having served on the Intelligence Committee
    where they classify everything that is not moving, including
    the coffee pot, I am concerned here, because I know that if you
    want to break out and get something done significantly, there
    are many ways within Government to stop you. And these people
    who have pursued regular governmental due process without good
    results have as last recourse the option as a Government
    employee of taking these to court and getting it resolved. And
    my fear is that at the end of the day, if we follow your lead
    and follow your suggestion, we are going to close off a lot of
    opportunities to stop the fraud on the taxpayers. That seems to
    me like a greater public good than the possible notion that a
    Federal employee who does the right thing, blows the whistle,
    and gets the right result may end up with some money in their
    pocket.
        Mr. Hertz. As I said, these are policy questions that we
    come down on a different side. Our experience shows that those
    Government employees that have filed qui tam suits for the most
    part have not gone to the Inspector General first, have not
    come to the Department of Justice. And as I said, when we get
    cases, when we in the Civil Division, the career employees who
    work these cases, who have dedicated their professional lives
    to bringing these cases, we have a pretty good track record of
    bringing the meritorious ones, and the ones that do not get
    brought--although there have been exceptions, there have been
    recoveries in cases where the Government has declined. I do not
    want to suggest otherwise. We think that is a relatively small
    price to pay, to give up those potential suits, considering the
    harm to public perception of allowing a Government employee to
    use information they learn in their official capacity.
        Senator Durbin. I would just conclude by saying I think the
    American public would be less scandalized by the notion that a
    Federal employee might end up with 10 percent or 20 percent of
    the outcome and find millions, if not billions of dollars being
    saved from being defrauded.
        Mr. Hertz. Well, as I said, you know, if there is millions
    or billions of dollars being defrauded and it is reported to
    the Department of Justice, the Department of Justice is going
    to bring that case on behalf of--
        Senator Durbin. It should bring this case, but it does not
    always bring the case.
        Mr. Hertz. Well, again, we do not really have any
    experience of cases being brought by Federal employees to the
    Department of Justice that were not brought.
        Senator Durbin. Never.
        Mr. Hertz. In terms of meritorious cases?
        Senator Durbin. Never.
        Mr. Hertz. Well, because what I am suggesting is the
    Government employee cases that have been brought have not
    previously been brought to the Department of Justice before
    those cases were filed.
        Senator Durbin. Never. So there has never been a
    meritorious case brought to the Department for investigation
    that you have not followed through?
        Mr. Hertz. No. I am saying Government employees--the
    experience that exists today with Government employees filing
    qui tam suits, none of those, to my recollection, were brought
    to the Department of Justice before the Government employee
    filed that suit.
        Senator Durbin. Senator Grassley, back to you.
        Senator Grassley. Senator Durbin, we do have some circuit
    courts that say a Government employee ought to be able to do
    it. We have other circuits that say they could not. And we
    ought to solve this, and that is the purpose of having the
    issue you raise in the legislation, so we can--and then I could
    also--later on I will bring up that in 1990, 4 years after the
    law was passed, I gave several testimonies to different
    committees of Congress that the intent of the original
    legislation was that Government employees ought to be relators.
        Mr. Hertz, I am going to ask--I cannot ask you all the
    questions I would like to ask you, so you will have to answer a
    lot of them in writing that we will submit to you and to the
    Department. So I will go with just a few of the questions.
        I have a longstanding belief that the 1986 amendments did
    not preclude Federal Government employees from acting as qui
    tam relators. For instances, in 1990, I testified in the House
    that Government employees should be allowed to file qui tam
    suits if they first make a good-faith effort to report the
    fraud within proper channels. My rationale is that if a
    Government employee reports the fraud and supervisors sit on it
    because they do not want egg on their face, there needs to be a
    way to address the loss to the American taxpayers. Allowing
    Government employees to act as relators is yet another check
    that we can have on bureaucracy that may be too big and too
    unenthusiastic about stopping fraud.
        However, we should put reasonable steps in place to ensure
    that these employees are not just sitting on the job building a
    qui tam case. Section 3 of the bill includes requirements that
    a Government employee must overcome, such as reporting to
    supervisors, the Inspector General, and then to the Attorney
    General. Then after that, there has to be a whole year that has
    to elapse, inaction on the part of the Government. It would
    seem to me that 1 year is long enough for the Government to
    make a decision if they are going to get involved or not be
    involved, and if they decide not to get involved, then the qui
    tam ought to proceed. These are procedural hurdles that are not
    even required now under the case in the Eleventh Circuit.
        I understand the Department strongly opposes this section,
    but what should a Government employee who uncovers fraud do if
    he reports it up the chain and then there is nothing to stop
    it?
        Mr. Hertz. Senator Grassley, as I said, we appreciate the
    efforts that the bill makes to put some restrictions on this.
    It deals with some of the concerns that we have with regard to
    Government employees. But in the end, it does not deal and we
    do not see how it can deal with what we see as the fundamental
    problem of a Government employee who, after he has followed all
    these procedures, files a lawsuit using information that came
    to him in his governmental capacity for his personal gain. That
    is just a principle that comes out of congressional statutes.
    It comes out of regulations. It is something we drill all
    executive branch employees in terms of training every year. For
    us, that is just a principle that really allowing these
    lawsuits would violate.
        In addition, as I said--I might read something. In 1943,
    the Supreme Court decided Marcus v. Hess--Senator Specter
    referred to it--and this was the case that led to the
    amendments in 1943 when the Supreme Court had decided that a
    relator who had actually just copied public information could
    bring a lawsuit, Congress wanted to change that. Justice
    Jackson dissented from that decision. The dissent eventually
    became the law, and although that case did not involve a
    Government employee, the issue apparently came up. He pointed
    out and he said to permit law enforcement officials to ``use
    information gleaned in their investigation to sue as informers
    for their own profit would make the law a downright vicious and
    corrupting one.'' He went on to say, ``If we were to add
    motives of personal avarice to other prompters of official
    zeal, the time might come when the scandals of law enforcement
    would exceed the scandals of its violation.''
        It was clear under the 1943 amendments--and it was actually
    debated on the floor, at least in one of the Houses--that
    Government employees would not be able to file qui tam cases.
    In 1986, there appears not to have been any public discussion
    of it in the legislative history. The change of the legislative
    bar had, we think, the unintended effect of potentially
    allowing Government employees, and as I have said, we think
    that that is really a policy that should not stand.
        Senator Grassley. Well, my next question was going to be if
    there was any sort of suggestions you could make, but I think I
    have just heard from you that there is really no middle ground
    between the position that Senator Durbin and I have in our bill
    and what you have just stated as the position of the
    Department. Or do you think there might be some middle ground?
        Mr. Hertz. I have not been able to think of any. We
    certainly would be willing to try to think of it. But as I
    said, at the end of the day, when all those procedures you put
    in the bill are followed, you still have the situation of the
    Government employee using Government information to file a
    lawsuit from which he personally can potentially benefit.
        Senator Grassley. Well, you know, the questions raised by
    you and then by the quotes that you gave that it might promote
    corruption on the part of Government employees to personally
    profit, but do not forget we are trying to stop other people
    from corrupting the public process and the public purse. And it
    seems to me if we have a heck of a lot more people doing
    business with the Government than we have Government employees,
    there is greater possibility for corruption on the outside that
    a Government employee might know something about than there is
    corruption from a few whistleblowers.
        Mr. Hertz. Right, and as we said, we would encourage
    Government employees who run into a stone wall within their
    agency to go to the Inspector General, come directly to the
    Department of Justice.
        Senator Grassley. That is what we do, and we just ask the
    Department of Justice to make a decision in 1 year. Otherwise,
    they can proceed.
        Would you oppose future Government relators if the Eleventh
    Circuit allowed them to proceed?
        Mr. Hertz. You are quite correct, there are at least two
    courts of appeals that have suggested that Government employees
    under the existing law, where there is not otherwise a public
    disclosure, can proceed--the Eleventh Circuit and the Tenth
    Circuit. We do not think that really all the courts have spoken
    on that. Even the Tenth Circuit has suggested that there may be
    arguments that the Government could make that a Government
    employee would hold any recovery that they had in constructive
    trust for the United States.
        So I think in terms of where we are sort of in terms of
    judicial decisions, we would like the opportunity to keep
    litigating the Government's positions prior to having an
    explicit legislative recognition of the right of a Government
    employee to file a qui tam lawsuit.
        Senator Grassley. OK. Now, I know you mentioned that there
    was no legislative history on this issue, but I want to assure
    you, even though you disagree with me, I was there, and I want
    to make it very clear to you. And I think I made this clear in
    some of my testimony that I gave to Congress later on after
    1986 that we intentionally meant to overturn the 1943
    amendments to the False Claims Act when we changed it in 1986.
    That was our intent. Now, you might disagree with that intent.
        Mr. Hertz. Oh, I agree that the intent was to overturn the
    1943 amendments in certain regards. Obviously, the bar on the
    Government having knowledge about information barring a qui tam
    relator, what I suggested was we did not see anything in the
    legislative history dealing with the specific question of
    Government employee relators.
        Senator Grassley. OK. Let me go on to the Totten decision.
    There the D.C. Circuit raised the notion that Section
    3729(a)(1) included a requirement that claims be presented
    directly to a Government employee. While this may be a
    legitimate reading, the court further added that in reading
    Section 3729(a) implies that the presentment requirement be
    read into subsections (a)(2) and (a)(3).
        This was not the intent of Congress in 1986. The D.C.
    Circuit even concluded that subsection (a)(2) has ``no express
    requirements of presentment.'' However, just yesterday, the
    Supreme Court heard oral arguments in a case where the
    petitioners seek this result. I wrote a brief opposing this
    view, and I know the Department did as well. I have learned not
    to hold my breath when it comes to the False Claims Act cases
    before the Court, so Section 1 of S. 2041 would correct this
    problem.
        Looking at the Department of Justice views letter, the
    Department, in a fairly convoluted way, seems to support fixing
    the presentment requirement, but not the way that Section 1 is
    drafted. What is the problem with trying to have the False
    Claims Act liability to all Government money and property, as
    Section 1 currently does?
        Mr. Hertz. Well, what we suggested in our appendix to our
    views letters is we thought there was a simpler way to
    accomplish that. We were concerned that uses of phrases in
    2041, such as an ``administrative beneficiary,'' which is a
    brand new phrase incorporated into the False Claims Act, would
    give the courts an opportunity to interpret terms and we are
    not exactly sure how they would interpret it.
        We also thought that the simplest fix with regard to the
    decision with regard to Totten is to remove the word
    ``presentment'' from (a)(1) because that word in (a)(1) allowed
    then-Judge Roberts to say that (a)(2) should be parallel to it.
    So we think we have a more simplified way to do this using
    terms that are less likely to be ambiguous or where people
    could argue that they are ambiguous and have an unintended
    interpretation by the Court.
        Senator Grassley. Can I at least say that even though there
    are different ways to approach it, you do not disagree with
    what we are trying to accomplish?
        Mr. Hertz. I mean, we agree that Totten is wrongly decided.
    We agree that the principle in Totten should not be a principle
    under the False Claims Act. I think the only thing I would
    suggest is at this point in time, since we do not know what the
    Supreme Court is going to do in Allison Engine, and we could
    get some language that might--it is hard to--as you say, hard
    to predict. We might actually want to see what that decision
    looks like before we had, you know, a final fix on the Totten
    problem.
        Senator Grassley. Senator Durbin, I am glad to go back to
    you since I went over my time.
        [No response.]
        Senator Grassley. OK. Then to followup, in the views
    letters, the Department states, ``It does not advocate and
    would not support application of the False Claims Act to all
    acts of fraud directed at an entity that receives money from
    the United States.'' Do you believe that my bill would apply
    the False Claims Act to all acts of fraud directed at any
    entity that receives money from the United States? And if so,
    why?
        Mr. Hertz. No, I do not believe that your bill does that. I
    think we just wanted to make clear that we do think there are
    limits, and we think there are limits in your bill as well.
        Senator Grassley. OK. I appreciate your testimony. I wanted
    to ask your views on the view letter. In the cover letter, the
    Department states that, ``There is no pressing need for major
    amendments'' to the False Claims Act. Further, the letter
    states that the administration cannot support the bill ``as
    currently drafted.'' However, after reading the appendix filing
    and the amicus brief alongside the Department of Justice in the
    Supreme Court, and after hearing from the line attorneys in the
    Department of Justice, I believe that there is a lot in this
    bill that the Department of Justice does support. Further, I
    think there are provisions that the Department of Justice needs
    to effectively enforce the False Claims Act.
        If you had to name one legislative fix that is needed, what
    would be the top choice and why?
        Mr. Hertz. If there was only going to be one, I think I
    would opt for a relatively simple fix involving the CID
    provisions, because it is relatively straightforward, it would
    probably have the most effect on a day-to-day basis for our
    line attorneys who are actually investigating these cases, the
    ability to essentially subpoena witnesses and compel
    depositions without having to go through the cumbersome
    procedure of having to get approval from the Attorney General.
    We would think that this particular change would be relatively
    straightforward and should not engender a lot of controversy.
    And as I said, I think it would probably have the most
    immediate effect.
        Senator Grassley. OK. Another question along the same line.
    How far apart do you think that my bill is from the suggestions
    for edit that you have made for presentment and public
    disclosure? And do you think that we could reach an agreement
    on that section?
        Mr. Hertz. Well, again, I think we--you know, as I said, we
    appreciate the work that you and your staff have done. It
    obviously represents a lot of work. It is currently a
    complicated statute with lots of court interpretations. You
    know, it takes some careful thought to think about how language
    should be structured to get the results that we intend. We
    tried to come up with our best shot at trying to fix what we
    think are the same problems and achieve the same goals that you
    were going for, and I think really we would be at the stage
    where we would sit down and talk with your staff, because I am
    sure they probably may have noticed things in our proposals
    that they might think do not work as well as we might think.
        Senator Grassley. If we were to make the changes to the
    public disclosure bar of presentment, do you think it would
    increase the chances of Government fraud recovery?
        Mr. Hertz. I am not sure which changes you are referring
    to.
        Senator Grassley. Let me repeat and then I will have my
    staff--if it is not clear, I will have my staff clarify. If we
    were to make the changes to the public disclosure bar or
    presentment, do you think it will increase the chances of
    Government fraud recoveries?
        Mr. Hertz. There are two questions: presentment and public
    disclosure. You know, to be candid, we have had pretty good
    luck since the Totten decision in essentially limiting that
    decision and finding other avenues under the existing language
    of the False Claims Act to go after frauds. So I am not sure at
    this point in time I could say that there are a lot of cases
    that could not be brought because of the Totten decision. That
    would be something that would probably play out over time.
        With regard to the public disclosure bar, as I think we
    have outlined, we do have some disagreements with the proposal
    in S. 2041. And so I think under our version, you know, I do
    not know the answer whether it would increase or decrease the
    number of qui tam cases.
        Senator Grassley. OK. Mr. Hertz, I think the rest of my
    questions will have to be submitted in writing. Does Senator
    Durbin have any more questions?
        [No response.]
        Senator Grassley. OK. Thank you very much.
        Mr. Hertz. Thank you, Senator.
        [The prepared statement of Mr. Hertz appears as a
    submission for the record.]
        Senator Grassley. Could I have the next panel come, every
    one of you come at the same time? And maybe before you sit
    down, each of you, it is a tradition in this Committee to swear
    people, so I would ask you to hold your--well, I will wait
    until you get to the table.
        Thank you all. Would you--this is what I am not customarily
    doing because we do not do this in the Finance Committee. Do
    you affirm that the testimony you are about to give before the
    Committee will be the truth, the whole truth, and nothing but
    the truth, so help you God?
        Ms. Gonter. I do.
        Judge Clark. I do.
        Mr. Boese. I do.
        Senator Grassley. Thank you. I want to introduce each of
    you before you testify. We have Tina Gonter. From 1982 to 1996,
    she worked as a nuclear mechanical systems inspector for the
    Department of Defense and was assigned to the Quality Assurance
    Department, Norfolk Navy Shipyard, Plymouth, Virginia. In 1999,
    she moved to Ohio and began work for Hunt Valve Company as
    military quality assurance manager. She filed a qui tam case
    under the False Claims Act along with her husband against the
    Hunt Valve Company in April 2001. The case settled in 2005.
    Their investigation exposed serious fraud perpetrated against
    the U.S. Navy. She now lives with her husband in Jacksonville,
    Florida. I think her story is a truly amazing example of how
    the False Claims Act works.
        Judge Clark focuses his current practice on representation
    of relators in qui tam litigation under Federal false claims
    and corresponding State laws. Judge Clark is of counsel, San
    Antonio law firm of Goode, Casseb, Jones, Riklin, Choate &
    Watson. From 1969 to 1977, he worked for the Department of
    Justice; served as U.S. Attorney, Western District of Texas,
    1975 to 1977. Judge Clark was appointed and served as Justice,
    Texas Court of Appeals, Fourth Circuit, 1981 to 1982. Judge
    Clark served as a member and Chairman of several commissions,
    advisory boards, including Texas Ethics Commission, received a
    bachelor degree from Lamar University, and his law degree,
    University of Texas.
        John Boese is a partner at the Washington law firm Fried,
    Frank, Harris, Shriver & Jacobson. Mr. Boese has represented
    defendants in numerous false claims cases brought by qui tam
    relators and Department of Justice over 25 years now. Prior to
    joining Fried, Frank in 1977, he was a trial attorney with the
    Civil Division, U.S. Department of Justice. He is an author of
    a book called ``Civil False Claims and Qui Tam Actions,'' a
    two-volume discussion of civil False Claims Act and qui tam
    enforcement at the Federal and State level. He lectures
    frequently, private and public groups, on civil fraud issues
    and co-chairs the Biennial American Bar Association National
    Institute of Civil False Claims Act and Qui Tam Enforcement.
    Mr. Boese received a bachelor's degree, Washington University,
    and law degree, St. Louis University.
        And then we had another witness that is sick and could not
    come, and that was Professor Pamela Bucy.
        I am going to start in the order we gave, and we will have
    each of you testify for your 10 minutes--am I right, 10 minutes
    that was allotted? Or 5 minutes. Yes, 5 minutes. Your whole
    testimony that would be obviously longer will be printed in the
    record, so we will start with you, Ms. Gonter.

           STATEMENT OF TINA M. GONTER, JACKSONVILLE, FLORIDA

        Ms. Gonter. It is an honor to be here. Just to correct just
    a little note in the introduction.
        Senator Grassley. Maybe pull your--whatever sort of
    correction you want to make, you can make.
        Ms. Gonter. OK.
        Senator Grassley. Go ahead.
        Ms. Gonter. I was not a nuclear mechanical systems
    inspector from 1982 to 1996. I started off as a metals
    inspector in radiography. So I just wanted to make sure that
    that was clear.
        Senator Grassley. Sure. We stand corrected. And don't be
    nervous. This may be your first time before the U.S. Congress.
    We put our pants on a leg at a time just like everybody else.
        [Laughter.]
        Senator Grassley. Just feel comfortable.
        Ms. Gonter. Mr. Chairman and members of the Committee, my
    name is Tina Gonter, and I was a relator in a False Claims Act
    suit from 2001 to 2006. I reported fraud committed by military
    defense contractors Northrop Grumman and EB, who delivered
    nuclear submarines to the Navy. I worked for their
    subcontractor, Hunt Valve, who supplied valves for submarines.
    My background as a quality assurance specialist prepared me for
    my position at Hunt.
        For many years, I worked for Norfolk Naval Shipyard as a
    nuclear mechanical ship systems inspector. During my time at
    the shipyard, I received extensive and comprehensive training
    in quality control requirements.
        In November of 2000, I was hired on as quality manager at
    Hunt Valve in Salem, Ohio, where my husband had already
    recently started working. Hunt was the major supplier of valves
    and valve parts to the U.S. Navy and its shipbuilding prime
    contractors, including Level I/SUBSAFE valves. These valves
    have critical applications on the submarines and surface ships
    and, thus, have extremely high standards and requirements for
    all aspects of their development.
        Within a few days of starting at Hunt, I began to suspect
    that they were committing fraud. I witnessed the complete
    disregard for quality control standards. My first course of
    action was to initiate cause and corrective action and try to
    resolve the violations. This, however, quickly resulted in
    upper management directing me to only concern myself with my
    office and the paperwork I was required to review.
        After many, many confrontations, and being ignored by my
    boss and others, I decided I needed outside help. After lots of
    calls to try to find someone to help me, I connected with qui
    tam lawyers Rich Morgan and Jennifer Verkamp. They quickly
    involved DCIS agents Jay Strauch and Mike Hampp. During our
    first meeting with the agents, they expressed concern that if
    my allegations could be proved, the impact to the Department of
    Defense was serious. They brought a tape recorder to the first
    meeting, and they asked if I would start taping what was
    transpiring at Hunt. I agreed, and I wore a tape recorder under
    my clothes for many months as I gathered information for the
    Government.
        This lasted until August of 2001. It resulted in 8,000
    pages of transcripts. I was scared and anxious every day, but
    honestly, I was more scared of not taping because of the
    seriousness of what was taking place. I knew that I had to do
    everything I could to prove that what I was telling them was
    really happening.
        The tape backed up what I had been reporting and revealed
    the unthinkable extent of fraud and violations. The people
    involved were completely aware of what they were doing, and
    this included not just the people at Hunt but the prime
    contractors as well. The tapes showed that EB source inspectors
    and upper management were fully aware of what was going on at
    Hunt. I assisted the Government as much as I could from the
    inside until I was fired in August of 2001. I believe that
    Hunt's employees suspected that I was recording conversations,
    and they certainly knew that I believed their conduct violated
    the law and their contract requirements. I was told that I was
    costing too much to correct the deficiencies, and they said
    that they were making an extreme personnel cutback. However, I
    was the only one that was fired.
        On September the 17th of 2001, 6 days after 9/11, the
    Defense Department, with the help of the NRC and NCIS and DOE,
    swarmed Hunt Valve with a search warrant and more than 40
    agents. They seized over a million pages of evidence and all
    computer files. Fearing for our safety, my husband resigned
    from Hunt, and we made plans to move. We went from a combined
    income of $106,000 a year to nothing overnight. We sold our
    property at a substantial loss in order to have money to live
    on. We moved to Columbus, Ohio, where the DCIS agents were
    based in order to assist them in making sense of the huge
    volume of records seized.
        After some time, my husband obtained work, and I spent the
    next 2 years reviewing files and transcripts with the
    assistance of my lawyers' paralegal, Mary Jones. We reviewed
    the documents seized from Hunt in tandem with John Carruthers
    and Bob Hardin from DCAA. They showed, among other things, that
    more than half of Hunt's certifications were falsified and that
    Hunt's welding personnel were improperly and illegally
    qualified and that material control was not properly documented
    or maintained.
        The Justice Department decided not to intervene in our case
    against General Dynamics and Northrop Grumman. This decision
    was never explained to us. However, much later, we were present
    when the judge was told that if the Navy recovered moneys from
    General Dynamics and Northrop Grumman, they would add more
    money to future contract bids and the Navy would just end up
    paying them back.
        Because of the qui tam provisions of the False Claims Act,
    we were able to go forward on our own. The shipyards were
    represented by Mr. Boese's firm, I believe, and other huge
    Washington firms--I am sorry, that is, Boese. The civil case
    eventually settled, with the help of Honorable Daniel Polster,
    who held multiple sessions with all parties. There was also a
    criminal case, which resulted in Hunt's quality manager and the
    vice president both pleading guilty to fraud and going to
    Federal prison for more than 2 years each.
        Senator Grassley, I realize I have gone over my time, but I
    would like to request just another couple minutes.
        Senator Grassley. Please go ahead, and I will give each of
    the other witnesses equal time.
        Ms. Gonter. Thank you.
        My most sincere goal in all of this was to enhance the
    safety of our Navy men and women aboard the submarine and
    surface ships. I believe this happened. I pray that Hunt Valve
    under new management is doing better at supplying conforming
    valves. Sadly, I know the reality is that there are many other
    Hunts out there, and there are many other men and women who
    have found themselves in situations like this, like ours.
        I am so grateful for the False Claims Act, which gives
    ordinary people like me a voice to try to correct these crimes.
    I also hope that you do everything you can to make it better,
    to help people like me not just come forward but to see it
    through to the end. I think it is critically important that
    this corrections act covers subcontractors like Hunt, not just
    direct Government contractors. Hunt's fraud was not known to
    the Government, and there is no reason the statute of
    limitations should be a defense in a situation like this. And
    while there should never be an issue of whether someone like me
    is an original source of information, the law should be clear
    that relators can use what they learn in the course of the
    Government investigation without putting their lawsuit at risk.
    Finally, I cannot overstate the importance of comprehensive
    retaliation protections.
        It is a great honor to be here today. But it does not
    compare to the honor of using the False Claims Act to stop Hunt
    Valve in its tracks. I urge you to do everything you can to
    help.
        Thank you.
        [The prepared statement of Ms. Gonter appears as a
    submission for the record.]
        Senator Grassley. And thank you very much.
        Proceed, Judge Clark.

      STATEMENT OF HON. JOHN E. CLARK, OF COUNSEL, GOODE, CASSEB,
        JONES, RIKLIN, CHOATE & WATSON, P.C., SAN ANTONIO, TEXAS

        Judge Clark. Mr. Chairman, Senator Durbin, thank you for
    allowing me to comment on this bill.
        Relators' counsel are glad to see that this bill addresses
    a lot of the concerns that we have had for improving the False
    Claims Act and making it work the way Congress intended. We
    have also read the comments of the Department of Justice, and
    we think a lot of their suggestions will strengthen and improve
    the bill. We look forward to working with the Department to
    help Congress make the Government's primary remedy against
    fraud even more effective.
        I have been a lawyer for nearly 47 years. For the last 15
    years I have represented whistleblowers under the False Claims
    Act and some State counterparts. Earlier in my career, like
    many attorneys who represent whistleblowers today, I was a
    Federal prosecutor, first at the Department of Justice and then
    in Texas. I prosecuted white-collar crime, and I continued to
    do that when President Ford appointed me United States Attorney
    for the Western District of Texas.
        I am not a plaintiff's lawyer. I do not represent
    plaintiffs in negligence cases. I am not what the press refers
    to as a ``trial lawyer.'' These cases are not about negligence
    or good-faith mistakes or confusion about regulations. These
    cases are about knowingly defrauding the United States. And
    these cases allow me to feel that I am still making at least a
    small contribution to law enforcement, because that is what
    this is.
        Now, hearing Ms. Gonter's story reminds me once again that
    it is because of courageous persons like her that I am still
    representing whistleblowers long past the time when the
    calendar suggests I should have retired. What she did and what
    she endured points up why whistleblowers are so important to
    the Government.
        Now, her story is more dramatic than most, but every
    whistleblower has to understand that his or her life may get
    turned upside down, and the stress can last for years while the
    case is under seal. And they will not be able to explain why
    they had to make a mid-life career change or what is happening
    to them and why they are having financial problems.
        The personal stresses of being a whistleblower drive some
    qui tam plaintiffs into bankruptcy, psychological counseling,
    and divorce courts, and I have seen it happen. I have to
    explain those disincentives to prospective whistleblowers when
    they come to see me so that they and I can decide if they have
    the courage and the strength and the staying power to even
    start down that road. But I also have to explain some legal
    disincentives to them. Some are obstacles that courts have
    created by misinterpreting the statute, and others have to do
    with some unforeseen consequences of some of the 1986
    amendments. And those obstacles trump all the others because
    they can kill even the most meritorious case for
    inconsequential or misguided reasons.
        It is disappointing how often I have to explain those legal
    road blocks to prospective whistleblowers in the context of
    telling them why their claim will not succeed and I will not
    pursue it for them.
        This bill addresses a lot of those judicial
    misinterpretations and unforeseen consequences, and I am glad
    to see the changes. I have given my written comments explaining
    the reasons. I would like to comment briefly, though, on two
    particularly important issues:
        First, the presentment issue, the Totten case and Custer
    Battles decisions. We know from the Department of Justice's
    testimony they share our concern about the Totten decision, and
    they have suggested some alternative language to improve the
    way the bill addresses those decisions. As I sit here today, I
    am not certain that their proposed language would ensure the
    desired result, but that is for technical reasons that lawyers
    and law professors can debate about. It has to do with the
    precise wording chosen, not with the intent, because our intent
    and their intent is the same. We are trying to ensure the
    result that we all want.
        As to the public disclosure bar, Mr. Chairman, it appears
    to me that after listening to the Department of Justice and
    reading their comments and their appendix, we in the relators
    bar and the Department of Justice are very close to being on
    common ground. One of the most troublesome aspects of the
    public disclosure bar is its availability to defendants as a
    jurisdictional defense, regardless of the defendant's
    culpability. We strongly agree with the premise of the bill
    that it should be the Government's sole prerogative to seek
    dismissal of a qui tam action on public disclosure grounds. The
    Government is uniquely in a position to know whether it
    considers the whistleblower somebody it wants to be protected
    from or values him as an ally whose assistance and resources
    will help prosecute the case. We deplore the tendency of some
    courts to interpret the current public disclosure bar far too
    broadly. That has caused a lot of problems.
        Now, we have some questions about how the Department of
    Justice and the courts would interpret some of the terms and
    conditions that the Government has suggested as grounds on
    which the Government could seek a dismissal under public
    disclosure if they had the sole discretion. But we are very
    optimistic that we in the relators bar can work with the
    Department of Justice to reach agreement on some common ground
    that we could recommend to change the language. But the primary
    thing is taking the public disclosure bar out of the hands of
    defendants as a jurisdictional defense, when it has nothing
    whatever to do with their culpability, it is purely technical
    when it comes to the relator.
        Thank you, Mr. Chairman.
        [The prepared statement of Judge Clark appears as a
    submission for the record.]
        Senator Grassley. Thank you, Judge Clark.
        Now Mr. Boese.

      STATEMENT OF JOHN T. BOESE, PARTNER, FRIED, FRANK, HARRIS,
                SHRIVER & JACOBSON LLP, WASHINGTON, D.C.

        Mr. Boese. Senator Grassley, Senator Durbin, and members of
    the Committee, I appreciate the opportunity to testify today on
    behalf of the U.S. Chamber of Commerce and the U.S. Chamber
    Institute for Legal Reform in opposition to S. 2041. For the
    last 25 years, I have had the privilege of defending False
    Claims Act cases against large and small companies in health
    care, oil and gas, technology and defense, as well as colleges
    and universities, airports, churches, and local government
    agencies--precisely the diverse group of defendants that this
    bill so deeply affects.
        My legal treatise, ``Civil False Claims and Qui Tam
    Actions,'' has been the leading authority cited by academics in
    Federal courts for almost 15 years.
        The Chamber fully supports the Department of Justice's
    efforts to recover from those who cheat the Government, and we
    recognize the importance of an appropriate use of the False
    Claims Act in those efforts.
        As I listened to you and Senator Specter and Chairman Leahy
    and Senator Durbin speak this morning, I think the difference
    between us, Senator, is that you are concerned about the guilty
    under the False Claims Act, and I am concerned about the
    innocent. And I am concerned about the abuse of qui tam
    enforcement by the private plaintiffs bar against innocent
    defendants in qui tam cases.
        The Chamber opposes 2041 because we believe it will not
    assist the Government in its fraud-fighting efforts and will
    not result in increased moneys being returned to the Treasury.
        Instead, the bill will breach the legitimate expectation of
    American businesses and institutions who honestly do the
    Government's work that their Government will treat them fairly,
    and this bill does not.
        I want to first dispel a common misperception that these
    amendments are necessary for private attorneys to combat major
    fraud by big corporate interests because those big corporate
    interests outgun DOJ attorneys. In my experience, the exact
    opposite is true, and the statistics bear that out. Of the $20
    billion recovered under the False Claims Act between the 1986
    amendments and 2007, far less than 2 percent--really 1.4
    percent--was recovered in qui tam cases handled by private
    counsel where the DOJ did not take over the case and prosecute
    it. These amendments, which are intended to encourage qui tam
    enforcement really without DOJ, benefit only those qui tam
    plaintiffs and their lawyers, and not the U.S. taxpayer.
        I have also read the DOJ letter that we received on Friday.
    We have a number of comments about that that I hope we will be
    able to address in our answer.
        With that, I will now quickly address the most egregious
    impacts of 2041.
        First, this bill would dramatically expand the scope of the
    Act to cover many private contracts and transactions. Although
    I believe completely unintended, the bill's broad definitions
    of the terms ``Government money'' and ``administrative
    beneficiary'' will, for example, bring within the scope of the
    False Claims Act disputes between Federal employees and their
    hairdressers and their landscapers if they are paid with the
    Federal employee's salary. It will usurp State contract and
    tort law if either party receives Federal money in any way or
    form, and every product liability case will become a False
    Claims Act case if the product is bought by a Social Security
    recipient with their Social Security check.
        This amendment is an unjustified reaction to a handful of
    decisions which came to the unremarkable conclusion that the
    False Claims Act should only apply if the Federal Treasury has
    been cheated. The Act was never designed to make a Federal case
    out of every transaction involving money that the Federal
    Government has touched in any way.
        Second, the 1986 amendments struck a delicate balance to
    allow true whistleblowers to come forward and be rewarded while
    preventing parasitic qui tam suits by plaintiffs who file qui
    tam cases based on public information. By effectively
    eliminating the public disclosure and original source defense,
    the bill will force American businesses and institutions to
    defend themselves against qui tam plaintiffs who are not true
    whistleblowers. And it will allow individuals to use public
    information to take 25 percent of Government recoveries simply
    because they are the first to file a qui tam case.
        Third, S. 2041 will effectively encourage Federal
    employees, including Federal auditors and investigators, to use
    the private information they obtain as Federal employees to
    enrich themselves by filing qui tam suits. The so-called
    safeguards included in the bill are impractical and illusory.
    One cannot imagine a better way of destroying the trust and
    confidence Americans have in their Government and in their
    Government employees. In our view, S. 2041 reflects bad policy
    and bad law. There is simply no reasons to treat so unfairly
    the businesses and institutions who deal with the Government in
    good faith.
        Thank you for this opportunity to present my views. I am
    happy to take any questions the Committee may have.
        [The prepared statement of Mr. Boese appears as a
    submission for the record.]
        Senator Grassley. Senator Durbin, I would like to turn to
    you because I am sure--then I could continue, if you are the
    only one that is going to be here, and if you only want one
    turn, and then I would continue right on through my questions.
        Senator Durbin. Mr. Boese--am I pronouncing your name
    correctly?
        Mr. Boese. Boese, Your Honor. It rhymes with ``crazy.''
        Senator Durbin. Pardon me?
        Mr. Boese. It rhymes with ``crazy.''
        [Laughter.]
        Senator Durbin. Right. And for the record, I am not a
    ``Your Honor.''
        Mr. Boese. That is where I spend most of my time, Senator.
    I spend it in court.
        Senator Durbin. So do I understand your testimony that you
    think our changing the law would mean that if someone brought
    an action against a company for selling a defective product
    and, in fact, a Social Security recipient had bought that
    defective product, you think that is covered by our law?
        Mr. Boese. Yes, sir, I do.
        Senator Durbin. I think you are way off base. I have no
    idea what you are talking about.
        Mr. Boese. Well, Senator, I can explain it very simply.
    We--
        Senator Durbin. Please do, because I am a Senator.
        Mr. Boese. And we can supplement that. We can supplement
    that. And, in fact, in our written statement beginning on page
    9--or 10 of our written statement, we go into very significant
    detail about the definitions of ``Government money or
    property'' and ``administrative beneficiary.'' What those
    really say is, if you read those amendments, especially
    subsections (b) and (c) of those amendments, it broadens the
    definition of who is an administrative beneficiary. If you
    wanted to include--I mean, we can talk about the Coalition
    Provisional Authority because I argued the Custer Battles case.
    I am happy to talk about that case. But if you want to extend
    it to some institutions, I can understand that and we can deal
    with that. But what you have really said is that anyone who
    receives money for a Federal purpose.
        Now, if you are going to give money to a Social Security
    beneficiary, the purpose is to support them. You--
        Senator Durbin. So anything the Social Security beneficiary
    spends money on then comes within the purview of qui tam, as
    you read it?
        Mr. Boese. If you pass this bill as it is written, yes, I
    believe that is--
        Senator Durbin. That is the most tortured logic I have ever
    heard in this Committee. I congratulate you for it. But I think
    you are completely off base.
        Mr. Boese. Senator--
        Senator Durbin. You are a great advocate, I am sure. I can
    tell. And I am sure that you have been very successful in your
    profession. And I have a confession. I used to be one, a real
    trial lawyer, before I got to be a Senator and a Congressman.
    So my hat is off to you. But I think you are off base, and we
    will take a look at it. Certainly it is not our intent, and
    what you have said--I believe Senator Grassley would agree with
    me--has never been our intent.
        Ms. Gonter, if I can ask you the situation here, you have
    heard Mr. Boese suggest that the abuses that might take place
    if we allow the current system to continue. Now, and you also
    heard the earlier testimony from the Department of Justice
    about what they think you should have done with your discovery
    of the fraud on the Government.
        First, the fraud that you found involved in your work for
    the Government, could this have endangered human life?
        Ms. Gonter. It is my belief that--
        Senator Durbin. You have to push the button on your
    microphone to be heard.
        Ms. Gonter. The light is on. I am just not close enough.
        Senator Durbin. OK.
        Ms. Gonter. It is my belief that, yes, this could have cost
    lives.
        Senator Durbin. And was there an ordinary process that you
    could follow to disclose this fraud and to try to do something
    about it within your workplace?
        Ms. Gonter. I approached the quality control manager, who
    was a lateral position, who was doing the multitude of the
    fraud, and then went to our boss, who was the vice president of
    the company. Not only was this happening while I was there, it
    is under--I understand that it had been going on for
    approximately 10 years from looking at the paperwork, if not
    longer.
        Senator Durbin. And I take it from your testimony that that
    did not result in any action being taken to stop this fraud.
        Ms. Gonter. Absolutely not. I was ostracized from meetings.
    I was then pretty much taken out of my position.
        Senator Durbin. So you followed what you understood to be
    the ordinary chain of command, the ordinary rules--
        Ms. Gonter. Absolutely.
        Senator Durbin.--to try to disclose this fraud that you had
    found, with no results.
        Ms. Gonter. No results.
        Senator Durbin. And your only recourse at that point was
    either to quit, accept it and be part of it, or do something
    about it. Is that, as you saw it, the only choice?
        Ms. Gonter. There was no choice. I had to do something.
        Senator Durbin. And so you chose to wear a tape recorder
    and to record 8,000 pages of testimony or transcript
    conversation.
        Ms. Gonter. Approximately 8,000. Yes, sir.
        Senator Durbin. Yes. Mr. Hertz earlier was dismissive of
    your role in this type of thing, saying, you know, the
    Government has a way of taking care of these things. Was there
    anything that--you were employed by a private contractor, I
    believe, at this time. Is that correct?
        Ms. Gonter. That is correct.
        Senator Durbin. Was there anything that you could have
    turned to, anything outside of your company, for example, where
    you think you might have turned to the Government for help?
        Ms. Gonter. Not that I know of. Just from working with
    Norfolk Navy Shipyard, we knew that there had to be some type
    of avenue to report something like this. We knew we had to let
    someone know. We got on the phone and just started calling
    everybody that we could think of, and we were directed toward--
    through the Government, actually. I cannot even remember the
    guy's name. But he gave us Rick Morgan's name.
        Senator Durbin. And this is a private attorney--Mr. Morgan?
        Ms. Gonter. Yes.
        Senator Durbin. OK. And that is what resulted in the qui
    tam suit.
        Ms. Gonter. Yes, sir.
        Senator Durbin. Tell me the outcome of that suit again.
    When it was all over, was your claim substantiated? Did they
    agree with you that there had been a defrauding of the
    Government?
        Ms. Gonter. It was settled for $12 million. Almost $3
    million.
        Senator Durbin. How much?
        Ms. Gonter. It was 12-point something, almost $13 million.
        Senator Durbin. Almost $13 million.
        Ms. Gonter. Yes, sir.
        Senator Durbin. It was found that they had defrauded the
    Government of that amount. Is that correct?
        Ms. Gonter. That was the settlement agreement.
        Senator Durbin. Settlement.
        Ms. Gonter. I do not know that they admitted to anything.
        Senator Durbin. All right. Judge Clark, as you cautioned us
    ahead of time, you are not a plaintiffs' lawyer, so I will not
    accuse you of that.
        [Laughter.]
        Judge Clark. It is not a bad word.
        Senator Durbin. I did not think so. I made a living at it.
        Judge Clark. But I am on the other side of that bar, as a
    rule.
        Senator Durbin. I understand. And so you have heard Mr.
    Boese talk about the abuses of this process. Would you like to
    comment on his interpretation or his evaluation of the
    Grassley-Durbin bill?
        Judge Clark. Well, some of Mr. Boese's comments strike me
    as fantasy when he talks about the broad interpretation that
    could be given. I also take a little offense at the notion that
    there are a lot of abusive relators' representatives filing
    these lawsuits. I know personally, I guess, most of the,
    perhaps 200 or 300 lawyers around the country who are primarily
    involved in this kind of litigation. And I do not know a finer
    group of people or a more responsible group of people. They
    choose their cases carefully and always try to choose cases
    that the Government will like and intervene in.
        Senator Durbin. Can you relate to me the complexity of
    these cases, if they are undertaken?
        Judge Clark. They are very complex, and it is a tough road
    to go down, not only for the relator, like Ms. Gonter, to make
    that decision, but for the lawyer to make that decision,
    because these cases typically involve complex facts, facts that
    have been concealed sometimes for years in the corporate
    records or some employer's records, facts that are hard to get
    to. The defendants oftentimes are represented by law firms that
    have 700 or 800 or 1,000 partners and maybe twice that many
    paralegals, and so you are embarking on a serious battle if you
    take one on.
        Senator Durbin. Ms. Gonter's testimony suggests that she
    was involved in this for years, as I remember. Is that
    commonplace in this type of litigation?
        Judge Clark. It is. Some of these cases remain under seal
    for many years. I filed one lawsuit in 1998 for a relator who
    was in his late 70's at the time. It was finally resolved
    almost literally on New Year's Eve--yes, New Year's Eve 2004.
    And I had to remind the court at one time, when the thing was
    dragging along and settlement negotiations were prolonged, that
    Charles Dickens used to write about cases in the English
    chancery courts that parties got born into and died out of. And
    my now 83-year-old relator was concerned whether he was going
    to survive this case. These cases can take a long time. It is
    not at all uncommon for one to remain under seal for 3, 4, 5
    years.
        Senator Durbin. Well, I think that is an important part of
    the record, Senator Grassley, because testimony from Mr. Boese
    on behalf of the Chamber of Commerce may lead one to believe
    that this is an ambulance chase that ends very quickly. But it
    sounds to me like it is a lawsuit that can involve a lot of
    emotional commitment and a lot of time against the odds,
    against formidable representation on the other side, and
    lawsuits of long duration. I do not know many attorneys that
    would sign up for a lawsuit like that unless they really
    believed that they had a chance for recovery, a legitimate
    claim. That has been my experience. You will not keep your law
    office open very long if you make too many miscalculations in
    that type of lawsuit.
        Judge Clark. You will not. I am the only one in my law firm
    who devotes most of his time to this kind of lawsuit. Everybody
    else is trying to do things that produce a regular stream of
    income.
        Senator Durbin. Thank you, Senator Grassley.
        Senator Grassley. Senator Durbin, it should not surprise
    you that we have business taking the same point of view,
    because for 4 years after we passed this legislation, the
    defense industry tried to gut it, various amendments on
    appropriation bills, et cetera. We stopped that. When they did
    not have the credibility to get the job done, they turned to
    the hospitals of America for a couple years, trying to gut it.
    They finally gave up. So the last 15 years, we have not had to
    defend it through the appropriation process and riders trying
    to gut it and all that. But there are still people that do not
    want this legislation to function the way it was intended.
        Senator Durbin. Well, they should have known better than to
    take on an Iowa corn farmer.
        [Laughter.]
        Senator Grassley. Thank you. Thank you. Are you done? OK.
        I have questions of everybody, but I am going to start with
    Ms. Gonter. First of all, I need to thank you for testifying,
    and I have been a person that has found whistleblowers to be
    courageous people. I find very few of them that come to me that
    do not have a great deal of credibility and lead us to a lot of
    skeletons being buried in the bureaucracy or within
    corporations that need to be exposed and we have been able to
    expose them. And I also agree with what has been testified to
    already that for the most part whistleblowers ruin themselves
    professionally as a result of their patriotic efforts. And so,
    obviously, I come from the standpoint that not every
    whistleblower might be right, but so many are right that we owe
    that class of people a debt of gratitude.
        Whistleblowers are strong-willed people, obviously. So what
    was it like to be a whistleblower wearing a wire undercover
    without your co-workers knowing what you were really doing and
    some hardships connected with that?
        Ms. Gonter. Well, first off, it was scary. Mostly being
    afraid that you were going to be discovered. There was times
    where I had to go to the ladies' restroom in a stall and change
    the tapes out, which you could imagine would make a little bit
    of racket, unusual racket in a stall that people would probably
    wonder about.
        There was one incident when I was actually in the office,
    and the tape started malfunctioning. I do not know, somehow it
    went into like a reverse mode and started clicking relatively
    loud in my shirt. So I just started talking loudly and tried to
    back out of the room.
        It was uncomfortable. It was scary, and especially in the
    beginning. But toward the end, I kind of felt like it was my
    security blanket. And I do not know if I am allowed to do this,
    but if there is a whistleblower out there and if you can do
    that, I would recommend it, because it really shows that what
    is going on is happening, that you are not putting words into
    other people's mouths. But it was scary.
        Senator Grassley. I do not know whether you answered a
    question like this for Senator Durbin or not, but do you
    believe that your firing was directly related to your work when
    you tried to correct the quality at Hunt Valve?
        Ms. Gonter. Yes, sir, I do.
        Senator Grassley. Do you have any advice for others who
    know of fraud or are contemplating blowing the whistle? And I
    think you just in your previous statement gave them
    encouragement. Do you have any further advice for
    whistleblowers?
        Ms. Gonter. If you are thinking about blowing the whistle,
    the first obligation is to go through your chain of command.
    That is not a question. That is your obligation. You go through
    the chain of command. And I think that anyone, any respectable
    person in their field, whatever it is, knows that that is the
    appropriate avenue.
        If it is serious enough and your heart just tells you that
    this is so unacceptable that you cannot deal with it, it is no
    longer a choice. It is not a choice of whether, you know, I do
    this or I do not. You have to do it. Who else is going to do
    it? If it is that important to you, then you have to make that
    move. You have to contact people that are going to listen to
    you.
        In my case, it was not a choice because we were talking
    about our sailors' lives.
        Senator Grassley. Judge Clark, yesterday the Supreme Court
    addressed the Totten decision in the Allison Engine case. I
    have long stated that I believe the Totten decision was
    incorrectly decided and that it is contrary to the intent of my
    amendments in 1986.
        As a member of the Committee on Finance, I wear another hat
    because we have so much jurisdiction over Federal Medicare and
    Medicaid programs. I am concerned with the impact of the Totten
    decision and its progeny may have on health care fraud cases.
        As you have litigated a number of Medicare- and Medicaid--
    related false claim cases, what is your opinion of the impact
    that Totten has had on health care-related false claim cases?
        Judge Clark. Senator, I am very concerned about that
    because one court in Texas has recently indicated that he
    thinks the Federal Government does not have standing to make a
    claim for Medicaid fraud. And that is partly as a result of the
    Totten decision. So it is a source of considerable concern.
        Senator Grassley. Is the Totten decision being used as a
    defense to the false claims liability in health care fraud
    cases? Is that what you just told me?
        Judge Clark. That is the indication that I got. This is not
    a case of mine, but one that another party is pursuing--well,
    the State of Texas is pursuing it.
        Senator Grassley. I assume you have read a lot of
    legislative history about the 1986 amendments. Do they
    contradict the Totten decision?
        Judge Clark. Well, yes--
        Senator Grassley. You understand?
        Judge Clark. I think so. I think clearly the intention of
    Congress is contravened by the Totten decision. The statute was
    intended to reach the kind of thing that Totten says it does
    not, in my opinion.
        Senator Grassley. In the views letter submitted by the
    Department, they propose different language to correct the
    presentment problem of Totten. For instance, they suggest that
    we keep the language in subsection 3729(a)(2) that references
    ``payment or approval by the Government'' and suggest
    modifications in subsection 3729(a)(1) to include the (a)(2)
    language instead of the presentment language. They also propose
    expanding subsection (c) defining the word ``claim.''
        In your view, will this proposal from the Department of
    Justice adequately address the Totten problem?
        Judge Clark. Senator, I am not sure that it does. I have
    some concern about certain terms, like the prepositional phrase
    ``for payment or approval by the Government.'' But these are
    some things that I would like to personally talk to
    representatives of the Department of Justice about because I
    think they and I as a relators counsel are aiming to do the
    same thing, and that is, to ensure that we cure the problem.
        Senator Grassley. OK. I want to ask Mr. Boese a question,
    but I would like to have you listen, Mr. Clark. I may want you
    to comment on it. And, again, I get back, Mr. Boese, to the
    Supreme Court oral arguments yesterday on Allison Engine. In
    that case, similar but unrelated to Ms. Gonter's case, a
    defense contractor is accused of jeopardizing the lives of Navy
    sailors by building defective battleship generators. The
    contractor argued that it is not liable under the False Claims
    Act simply because a U.S. Government employee had not
    personally approved or paid its invoices. Because some courts
    have supported this application of the law which is contrary to
    the intent of Congress in 1986, I authored the legislation to
    clarify that point.
        Mr. Boese, do you argue that we should keep this
    presentment requirement in the Act, thereby only attaching
    liability to those claims that are actually presented by a
    Government employee or official? Mr. Boese, since you make that
    argument, why shouldn't we protect all Government funds, not
    just those funds directly paid or approved by Government
    employees?
        Mr. Boese. Senator Grassley, I was at the oral argument
    yesterday, and--because I filed an amicus brief, as you did,
    in--I filed it in support of the defendant in that case. I was
    at the oral argument, and I was particularly drawn to Justice
    Breyer's concern. Now, no one could really talk about--you
    know, he seemed to have come to the argument originally,
    frankly adverse to the Government contractor viewpoint. But
    during the course of the Solicitor General's argument--and the
    Department of Justice argued in favor of the defendant in that
    case. In the course of listening to the theory of the Justice
    Department, Justice Breyer realized something that I think is
    very important to this entire argument, which is, when you talk
    about Government money because of Government contracts,
    Government grants, and Government programs, Government money is
    endemic in the American economy. There is virtually no entity
    that would not have some Government money. And if a fraud on an
    entity--Justice Breyer asked, if a fraud on an entity which
    received some Government money becomes a violation of the False
    Claims Act, there is no end to the statute. It has no limits,
    and it can be enforced either by the Justice Department, but
    much more likely by qui tam relators. And I am sorry, I think
    Senator Durbin misunderstood me. I did not accuse all qui tam
    relators of being ambulance chasers. But one must understand
    that because of the treble damages and enormous penalties that
    are available under this statute, the ability of getting rich
    very quickly attracts some cases that should never be brought.
        Returning back to your question, Senator, about the Totten
    case, what the Supreme Court currently has before it--and I
    would strongly urge the Committee to see what the Supreme Court
    says, because I think the judgments that are going to be issued
    and the explanations that are going to be given are going to
    explain this issue, which I also discussed with Senator Durbin:
    If you basically make a false claim to any person or entity who
    receives Federal money, if that is your definition, then you
    are expanding the False Claims Act far beyond its roots. The
    roots of the False Claims Act are that we are out to remedy
    fraud on the Federal Government.
        Now, that fraud on the Federal Government can take many
    forms. I personally have no basis for arguing--I would never
    argue that fraud on Medicaid or Medicare does not come within
    the scope of the False Claims Act because of the Totten
    decision. In fact, I wrote at the time of the Totten decision
    that I thought it was a decision of very limited applicability
    to entities like Amtrak and the Coalition Provisional
    Authority. That is less than one-tenth of 1 percent of all
    False Claims Act cases.
        And what we are doing in S. 2041 is overturning and
    potentially expanding the False Claims Act beyond its entire--
    beyond its roots to every aspect of the American economy simply
    to fix two almost unique cases that the Supreme Court may fix
    for us.
        Senator Grassley. Mr. Clark, I would like to have you
    either have a rebuttal or a commentary on that from your
    experience of what Mr. Boese just said.
        Judge Clark. Senator, I think it is important to note that
    there is a big difference between the Government spending money
    and the Government putting money in somebody's hand, like a
    grantee, to spend the money for the Government, as directed by
    the Government. I do not see anything in the bill that suggests
    to me that it was intended to reach controversies between
    private parties or, for goodness sake, to reach something
    purchased by a Social Security recipient.
        I think the intent was, it appears to me, to protect the
    Government's money when it puts it in somebody else's hands to
    spend as directed pursuant to a program or to protect
    Government money or money that the Government is holding in
    trust, so to speak, for somebody else.
        I guess I would turn the question around a bit and say, If
    someone tries fraudulently to get their hands on money that
    came from the United States pursuant to a program, why
    shouldn't they be penalized for trying to do that?
        Senator Grassley. OK. I am going to have another series of
    questions that involve all three of you. I want to go back to
    Ms. Gonter.
        Your testimony highlighted many of the reasons why I
    drafted the qui tam provisions of the False Claims Act in 1986.
    Most notably, I am pleased to hear that you were able to
    continue your case against the contractors, the shipbuilders,
    even though the Department of Justice declined to intervene.
    You stated the reason that they declined was never given to
    you, so I have to ask you: Why do you believe the Department of
    Justice declined to intervene against the shipbuilders?
        Ms. Gonter. My personal view is that there are only, you
    know, a few shipbuilders, you know, yards that actually can
    build submarines. They know that they have the contracts with
    them, and it was said. It was said that they were going to have
    to make up that money in future contracts. Whatever they paid,
    they would have to make up in future contracts. I believe they
    are in bed with them.
        Senator Grassley. Well, at least there were rumors flying
    around about that being the reason.
        Ms. Gonter. Yes, there were.
        Senator Grassley. I mean, you had heard--
        Ms. Gonter. I had heard.
        Senator Grassley.--people comment that way.
        Ms. Gonter. Yes, sir.
        Senator Grassley. Yes. What was the judge's reaction when
    he learned that the Department of Justice would not intervene
    along with you?
        Ms. Gonter. I believe from looking at his expression on his
    face that he was surprised.
        Senator Grassley. Do you think that it would have been
    sufficient to let the prime contractors off the hook because
    the subcontractor paid a settlement?
        Ms. Gonter. Oh, absolutely not. The prime contractors were
    just as guilty, if not more so. It was their responsibility to
    make--whoever they give out their subcontracts to, that they
    follow those requirements. And they did not do that. They have
    to contract with people that are going to meet the
    requirements, and they absolutely did not do that.
        The source inspector that was onsite, a representative of
    EB, knew exactly what was going on there. He did not stop it,
    at times even contributed to it. He was on tape in as much--and
    his resolution--I asked him for help, actually. And his
    resolution to me was to take a stick of dynamite and blow the
    place up. That was not a joke.
        Senator Grassley. OK.
        Ms. Gonter. I mean, he may have been exaggerating about the
    stick of dynamite, but, you know, he was serious about how bad
    it was.
        Senator Grassley. OK. Mr. Clark, the public disclosure bar
    is an area of great debate in the false claims community. In
    1986, we sought to undo the overly burdensome Government
    knowledge bar and replace it with something more workable. The
    compromise that we developed was the public disclosure bar,
    which limited False Claims Act cases based upon public
    information unless the relator was the original source.
        As your testimony shows, the courts have litigated this
    section of the False Claims Act to death, and to the detriment
    of good-faith relators and American taxpayers. Further, these
    interpretations, including those in Rockwell, created a
    disincentive for relators. Our bill amends the public
    disclosure bar and removes this jurisdictional challenge from
    the hands of opportunistic defendants and puts it in the hands
    of the Justice Department, the party that the bar was
    originally intended to benefit.
        So to what extent has the public disclosure bar become a
    strategic tool utilized by defendants to shape the relationship
    between the Department and the relator? And do you have any
    examples?
        Judge Clark. Well, the public disclosure bar is used by
    defendants to a large extent. It is one of their favorite
    defenses. They assert it every time they get a chance.
        I have spent a lot of time answering public disclosure bar
    motions in cases, motions that really had no basis and were
    filed by somebody who either did not understand what the public
    disclosure bar meant, or they were trying to confuse the court.
    There was a recent case out of Atlanta in which a district
    court wrote an opinion and said, in denying a public disclosure
    bar motion to dismiss, this looks to have been done to create
    delay.
        But when the defendant can use it as a jurisdictional bar,
    that is a great irony because the whole purpose of the public
    disclosure bar was to encourage relators to come forward and to
    protect the Government from having to share rewards with
    relators who really did not do anything except copy something
    out of the newspaper. So when it becomes a jurisdictional bar
    that has nothing to do with what the defendant did, that is a
    real irony. It has created a lot of mischief. It is probably
    the most litigated provision of the current False Claims Act.
        Senator Grassley. OK. To what extent has the public
    disclosure bar become a problem with relators rushing to file
    false claims cases without a complete record only to protect
    their claim from becoming public?
        Judge Clark. The relator, of course, always needs to be
    concerned about being the first to file, but for a couple of
    reasons, the relator also wants to be sure that he has got the
    facts right, because you do not want to file pleadings in a
    Federal court that are not well founded in fact because you can
    get sanctioned for doing that. So you want to be sure you are
    right, but you want to be sure you are first.
        I have dissuaded prospective relators from filing Freedom
    of Information Act requests, for example, because of the court
    decisions that have said that when the Government responds to a
    Freedom of Information Act request by sending you the document
    that you ask for, that that is an administrative report. I
    think that is a far extension of the statute, but that is what
    some courts have said.
        Senator Grassley. Mr. Boese, kind of along the same lines,
    I want to ask a question, and then I want to state something
    you assert in your testimony, and then a final question. So I
    would like to have you answer them both at the same time.
        Isn't the Government in the best position to determine
    whether a relator is bringing a parasitic qui tam lawsuit? You
    assert in your testimony that the public disclosure bar is
    normally only applied when the Government does not intervene.
    Yet in the Rockwell case, decided by the Supreme Court last
    year, the relator was not thrown out by the bar until after the
    Government intervened and a successful trial verdict was
    reached. This case seems to refute that argument as well as
    demonstrate a clear deviation from the congressional intent in
    the 1986 amendments. Wouldn't you agree that when the Court
    interprets a statute inconsistent with the intent of Congress,
    it is appropriate for Congress to pass corrective legislation?
        Mr. Boese. Senator, I will start with the Rockwell case
    because I think it is interesting. It was also an anomaly. I
    have been doing work on the False Claims Act under the 1986
    amendments since 1986. I was doing this work 5 years before
    that. I have almost--I think one time I have filed a public
    disclosure/original source motion in a case in which the
    Government had intervened, and then only because it was such an
    outrage and I knew that I was going to get hit for attorney's
    fees, and I won that motion.
        When the Government intervenes in a qui tam case, public
    disclosure and original source become irrelevant. Our major
    goal is to resolve the issues with the Government. And,
    remember, the Government only intervenes in 20 percent of these
    cases, and 99 percent of the recoveries under the False Claims
    Act cases are in cases in which the Government intervenes. So
    my concern is, once the Government intervenes, resolving that
    case with the Government. And if at that point in time I have
    to pay attorney's fees, that is the price of doing business.
    Once I filed a public disclosure. Rockwell was simply an
    anomaly. Rockwell had raised that defense in the very beginning
    and had asserted it throughout. The relator, nevertheless,
    spent almost $10 million--they were only liable for about $3
    million in damages. The attorney'S fees were $10 million, and
    that is the reason that case--that case is not a reason in
    order to pass this legislation because in 99.9 percent of the
    cases in which the Government intervenes, which is where you
    get 99 percent of the recoveries, this is not an issue.
        Public disclosure and original source, in all candor,
    Senator, is used by courts to get rid of meritless cases--
    meritless cases that the Government does not intervene in. The
    courts have significant discretion as to how they define public
    disclosure and how they define original source. And in my
    experience--and this is a very practical experience--courts
    have used public disclosure and original source, as well as one
    other defense, in order to dismiss meritless cases. This is not
    an issue on cases where there is real fraud. This is not an
    issue in a case like Ms. Gonter's case. It is not an issue
    there because the Government comes in and that is where your
    recoveries are.
        Senator Grassley. Well, you surely have to admit that Ms.
    Gonter's case is an example of a serious fraud that proceeded
    without the Justice Department's help.
        Mr. Boese. I would not agree with that, Senator. A couple
    of things about that case--
        Senator Grassley. You would not agree?
        Mr. Boese. I would not agree with your statement. And with
    full disclosure, my firm represented one of the shipyards in
    that case, so I know the case a little bit better, but it was
    not my case.
        The Government, as Ms. Gonter says--and she is a courageous
    relator. I believe that she is exactly the way this law should
    work, because when she brought her allegations to the attention
    of the Government, they sprang to action. The investigators
    sprang to action. They put a wire on her. They started to
    investigate this matter. And the system worked the way it did.
        The Justice Department did intervene against whom they
    believed to be the wrongdoer, which was Hunt Valve. They did
    not intervene against the two shipbuilders. I do not know why.
    They know why. You can ask Mr. Hertz why they did not do it.
    But the real wrongdoer here was Hunt Valve, not the
    shipbuilders.
        Eventually, the shipbuilders settled that case because they
    had contract claims. The very fact that they had an inadequate
    supplier like Hunt Valve subjected them to significant contract
    damages--not False Claims Act damages but contract damages.
        Senator Grassley. I would like to ask one last question,
    and I am going to start with you, Mr. Boese, and then I might
    ask Mr. Clark to listen and probably have some rebuttal. No
    court has ruled that there is a per se ban against Government
    employee relators. However, most courts have held that a
    Government employee cannot qualify for the original source
    exception when there has been a prior public disclosure, as
    under the false claims public disclosure bar.
        Given this confusing legal backdrop, the proposed
    amendments seek to clarify how the act applies to Federal
    employees who discover fraud during the course of their
    employment. The bill provides the Government the authority to
    move to dismiss the action of any Federal employee who brings a
    qui tam action under the Act without first meeting certain
    requirements. These requirements provide the Government fair
    notice and opportunity to investigate. Only after reporting the
    claims to supervisors, the Inspector General, and/or the
    Attorney General can the employee file a qui tam.
        In Ms. Gonter's case, she was not a Government employee,
    but as her testimony shows, the Government was reluctant to
    pursue the fraud by the prime contractor due to their future
    contracts with the Government. Had she been a Government
    employee, how would that fraud have been recovered? The False
    Claims Act is an important safety valve then for uncovering
    fraud when a governmental agency has been unwilling or unable
    to prosecute.
        Isn't a defined set of procedures for Government employees
    to follow before becoming a relator better than the current and
    ad hoc system of the circuit-to-circuit seesaw that we are
    involved in?
        Mr. Boese. Senator, first of all, I agree with you that
    some set of rules was better than nothing. However, I would
    echo the statements by Mr. Hertz on behalf of the Justice
    Department and, I might add, Professor Pam Bucy, who submitted
    a written testimony but was not able to be here, saying that
    allowing Government employees to bring qui tam cases is not
    just bad policy, it is toxic. We spend a fair amount of time in
    our written report on pages 21 through 27 talking about all the
    problems that occur. I would specifically refer the Committee
    to review the discussion of the POGO case on page 25, where a
    Government employee who was actually interpreting regulations
    that were the subject of a False Claims Act suit, of a separate
    qui tam suit, that same employee was receiving 10 percent of
    the results of whatever the qui tam relator received.
        Now, the Justice Department sued both the relator and the
    employee in Federal court under the Ethics in Government Act
    and just earlier this month got a result. But when you allow a
    Government employee to bring a qui tam suit, then all the
    deference that should be due an employee's decision because
    they are independent--in other words, we give deference to a
    Government employee's interpretation of the law because they
    are independent. Once we allow them to bring qui tam cases to
    benefit themselves personally, we are essentially taking that
    deference away from them because they will not be acting for
    the good of the public. They are going to be acting for the
    good of themselves.
        The problem I have with the procedure you set forth is that
    in many ways it is the worst of all possible worlds. It is the
    situation where an IRS agent or another agent audits an
    individual or a company and then uses that information to put
    money in their own pocket. That is what this bill allows, and
    that is why we are so opposed to it.
        Senator Grassley. As I suggested, Judge Clark, what do you
    think, whether or not Congress ought to clarify the playing
    field so that there is not this mismatch and also circuit
    discrepancy that we have on whether or not an employee can be a
    qui tam relator?
        Judge Clark. I have not had the experience myself of being
    approached by a Government employee to be a whistleblower, but
    then we do not have nearly as many of those in San Antonio as
    there are in Washington. But I guess the bottom line for me is
    I would hate to see a fraud against the Government go
    unredressed simply because the person who knows about it and is
    trying to blow the whistle about it is a Government employee.
        If I might, I would like to add two very brief comments
    addressing a couple of things that Mr. Boese said, if you would
    indulge me in that.
        First, as to whether public disclosure bar motions are
    filed in intervened cases, they are not irrelevant at all. I
    have answered public disclosure motions in intervened cases
    because defendants would love to knock out a relator who is
    sitting there side by side with the United States and has
    brought resources to the battle with the relator. So, yes, they
    file them in intervened cases.
        And as to the statistic about 1.4 percent, or whatever it
    is, of recoveries coming in declined cases and that 80 percent
    of them are declined because they are meritless, in the first
    place there are many reasons cases are declined. I have had the
    Government tell me, when a court unseals a case before the
    Government is ready to intervene, ``Will you carry the ball
    until we can finish our investigation and get in?'' And that
    happens. Not only that, there have been substantial recoveries
    that are in the column that says intervened cases that were
    intervened in right at the last minute for settlement.
        Just a couple of examples. The Merck case that was in the
    headlines just recently, that was a $670 million settlement.
    Now, most of that, $400 million plus, was in one case that the
    Government did intervene in; the balance of that settlement
    came from a declined case that the attorney from New Orleans
    litigated without the Government, right until the time to
    settle.
        The same thing happened in the Gabelli case. That was $130
    million. That was settled on the eve of trial. The Government
    intervened very close to the time of trial.
        The Amerigroup case, $144 million plus penalties, was
    intervened in very close to going to trial.
        The Northrop case, $62 million, that was litigated by the
    relator and his counsel for 10 years, and it was intervened in
    just before it was settled.
        The Alderson case, the Columbia-HCA case, that is another
    one. I do not know the amount of that one, but that one was
    litigated by the relator and their counsel for years. There was
    an intervention, I believe, but it came right at the end as the
    case was being brought to fruition.
        So the statistic that says all this money comes out of
    intervened cases includes those cases that are intervened in
    very late after the relator has litigated that case sometimes
    for years.
        Senator Grassley. Did you have something you wanted to say,
    Mr. Boese?
        Mr. Boese. Well, I believe the Alderson case was the
    Columbia-HCA case. I believe the ultimate recoveries there were
    $1.4 billion. As one of the early attorneys for Columbia-HCA in
    that case, I can tell you that the Government was in it very
    early and very often. They had seven teams of attorneys working
    on that case. That was not a case of un--intervene.
        And with regard to most of the others that he referred to,
    some of which I am familiar with and some of which I am not,
    many of those were done by State Attorneys General who were
    acting under their State qui tam laws. I do not consider that
    to be a qui tam case. I believe that to be a State operating
    under its own qui tam laws and bringing the Government along
    with it.
        Senator Grassley. I am going to close now, but I have a
    summation because I was not able to give an opening statement.
    But before I do that, I am going to ask, without dissent, that
    my opening statement be printed in the record as if read.
        And I also have a request here from Senator Cornyn that a
    statement that he has be placed in the record because he was
    not able to come.
        I thank you all very much for your testimony. It has been
    very worthwhile testimony.
        After this testimony, I do believe that there is agreement
    that the False Claims Act can be strengthened with some
    provisions of 2041. Further, while not endorsing the bill in
    the current form, I have found from the testimony this morning,
    the views letter also from the Justice Department, to be very
    encouraging. I am committed to ensuring that the Department has
    the necessary tools to enforce laws against those who seek to
    defraud. S. 2041 contains some provisions that will help the
    Department of Justice in efforts to root out that fraud. And I
    am going to work with the Department to see if we can get some
    consensus.
        I would like to note that the False Claims Act works
    because of courageous whistleblowers. I speak often about
    honoring whistleblowers, and no less you, Ms. Gonter. As the
    Department's testimony shows, qui tam whistleblowers are at the
    heart of false claims actions, accounting for nearly 63 percent
    of all recoveries. You and your husband and the lengths that
    you went to to ensure that our sailors aboard our Navy
    submarines are safe have to be honored and acknowledged. This
    is the real power of whistleblowers to expose complex fraud
    schemes from the inside and then push the Government to not sit
    on its laurels but recover fraud that was lost.
        I will admit that I struggle to see why the Department
    decided to not intervene in Ms. Gonter's case despite the
    volumes of evidence she uncovered while working from the
    inside. That said, the qui tam provisions worked, and Ms.
    Gonter saved the taxpayers over $13 million, and commendation
    for that cannot be too great.
        With approximately 1,000 qui tam cases under seal, waiting
    intervention, I can only guess that there are hundreds if not
    thousands of whistleblowers just like Ms. Gonter waiting to
    tell their story. While this large number is testament to the
    False Claims Act, it is also a reminder that fraud never sleeps
    and that we need to keep fighting to protect taxpayers'
    dollars. S. 2041 will help strengthen the False Claims Act for
    the next 20 years and help courageous individuals in the
    future, like Ms. Gonter has shown us today, to continue to
    bring fraud to light.
        I especially take note of Chairman Leahy's interest in
    this, more importantly for bringing the attention that he did
    through this hearing and also for his participation in it. And
    I also note that the statements of all Senators other than
    those that I have already mentioned will be received by
    unanimous consent and to remind each of you who are witnesses,
    besides my own questions that I may submit--or will submit,
    that maybe members who could not be here would also have
    questions, that we would ask you to submit, and so the record
    would remain open for 7 days for that purpose.
        Thank you all very much.
        [Whereupon, at 12:15 p.m., the Committee was adjourned.]
        [Questions and answers and submissions for the record
    follow.]

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