[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 

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                       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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