From 17 Corporate Crime Reporter 16, April 21, 2003
INTERVIEW WITH NEIL V. GETNICK, GETNICK & GETNICK, NEW YORK, NEW YORK
Through this life I've wandered, I've seen lots of funny men, some will rob you with a six gun, and some with a fountain pen -- Pretty Boy Floyd
Did Pretty Boy Floyd know Bayer AG, or what?
Here you have a major multinational corporation, literally robbing Medicaid for $100 million. Cold. The largest Medicaid fraud in history.
And pleading guilty to some mislabeling crime. (See Bayer Pleads Guilty in Medicaid Fraud Case, page one)
Will anybody spend any time in jail for this? Probably not.
Will Bayer be debarred from doing business with the federal government?
But Bayer will pay $251 million to settle civil charges, plus a $6 million criminal fine.
Bayer was forced to settle the case because of the courageous efforts of one man, George Couto, a senior marketing executive at Bayer, and his lawyers at Getnick & Getnick.
Couto blew the whistle on his employer after he tried to get his superiors to resolve the issue internally. His superiors ignored him.
So, he hooked up with Neil Getnick and Lesley Skillen of Getnick & Getnick. And the rest is recent history.
To gain some understanding of the case, we called on Getnick, a lawyer specializing in business integrity practices and anti-fraud litigation.
We interviewed Getnick on April 17, 2003.
CCR: What is the practice of your firm?
CCR: How long have you been in business?
CCR: What kinds of cases do you take?
The first is complex fraud investigation and litigation. We typically are brought in by an individual or company that is the victim of some kind of criminal fraud or wrongdoing. We investigate that case, and engage in both civil litigation and encourage parallel prosecution.
The second area is federal and state whistleblower cases, typically under the federal False Claims Act and its state equivalents, where we represent whistleblowers who have knowledge of fraud against the federal or state governments.
The third area is internal investigations and independent monitoring. We may be brought in voluntarily by a company, asking us to investigate a situation involving potential wrongdoing. In the area of independent monitoring, we are brought in by a governmental entity to supervise the activities of a company with a public contract, to make sure that it is fulfilling that contract honestly and well.
Finally, the fourth area is business integrity, transparency and compliance counseling, where we work with companies to help them develop robust compliance programs, codes of conduct, and ways of doing business that reflect both integrity and transparency principles. We are now expanding that activity internationally, and some of the most exciting work that we are doing is in Russia.
CCR: Bayer is the biggest settled case in your firm's history,
That was a precedent-setting case. Since then, there have been a number of health care fraud settlements that have matched or topped that.
The Bayer case is the largest Medicaid fraud case in history, with Bayer paying $251 million in the civil settlement, and then a $6 million criminal fine on top of that.
CCR: How did this case come in the door?
CCR: When did George Couto approach the firm?
CCR: When you first met with him, what did he tell you?
Only after that program failed to respond did he then seek to go elsewhere.
CCR: What was his position at the company?
CCR: What was the problem that he observed?
Under the Medicaid program, a manufacturer is required to give the federal government the benefit of whatever its best price is. That is accomplished through a rebate at the end of each quarter in terms of the differential charged to the best customer versus the price to Medicaid.
In this case, Bayer made a minor change on the label and pretended that Kaiser was manufacturing the drug, and therefore, no rebate was paid.
CCR: How much did Bayer save on this scheme?
CCR: George Couto, when he learned about this, what did he do?
The training session was kicked off by a video address by Helge Wehmeier. He was the head of Bayer's entire U.S. operation.
He said this: "Everyone is expected to obey the law -- not only the letter of the law, but the spirit of the law as well. You will never be alone to adhere to the high standards of the law. Should you feel prodded, speak with a lawyer, or call me. I'm serious about that."
The assembled employees in the room erupted into laughter. It was quite a moment.
CCR: Was George Couto aware at that time of the mislabeling problem?
Two days after the ethics training session, George wrote a memo to his boss saying that according to the ethics training class, Bayer's policy apparently called for obeying not only the letter of the law, but the spirit as well. And he questioned the pharmaceutical division's continued and expanded private labeling activities.
CCR: What was the name of his boss?
CCR: How long was the memo?
CCR: What was the date of the memo?
CCR: What was the response to the memo?
CCR: What did he do after not receiving a response?
CCR: Who did he call?
CCR: Did he resign from the company before he went to you?
CCR: Even though this lawsuit was going to be filed under seal,
and the company wouldn't know about it, right?
CCR: Then why did he resign?
A process began in which Bayer executives were going to be brought into meetings with counsel. It created a conflicted situation for George. On the one hand, he was responsible for full disclosure to the government. On the other, he'd be talking with Bayer lawyers.
CCR: When did he resign from the company?
CCR: He was a young man. He passed away in November 2002. He was
After he was able to stabilize his condition, he made it known in no uncertain terms that he wanted to see this case through to the end. As a result, we as his attorneys began a process, which was joined in by the U.S. Attorney's office, to preserve his testimony in the form of a videotaped deposition.
Over the strenuous objections of the attorneys for Bayer, the federal district court in Boston ordered that trial deposition to go forward.
Last August, during the hottest week of the year, in an unairconditioned room, he was able to deliver his testimony on direct and then undergo and stand up to four grueling days of cross examination.
CCR: Who were the attorneys representing Bayer?
CCR: Mr. Green has a reputation. Did he live up to it?
George Couto lived up to his reputation as someone who could be counted on to not only do the right thing, but to do so with great courage.
CCR: When you first heard these accusations, you must have realized that
Bayer was just plain stealing from the federal government.
CCR: When you realize that there is criminal liability in a qui
tam kind of case, who do you call?
CCR: They pled guilty to a crime, right?
As counsel, you want to make sure that you are going forward in a way that will allow the government to pursue the case as it sees fit, and preferably on both tracks.
We had the good fortune to bring this case to the Boston U.S. Attorney's Office, which enjoys a formidable reputation for its ability to handle health care fraud matters.
CCR: Who did you deal with there?
CCR: It's their call whether to bring a criminal charge, right?
CCR: Do they have to go to main Justice to get clearance on this,
or can they go it alone?
Ultimately, if a decision is going to be made to intervene in the case on behalf of the Justice Department, then main Justice is very much involved in that decision making process.
Here, I can say that this was the ideal partnership between our firm and the government.
And it was also an ideal partnership between the various federal and state governmental agencies that were involved in this case -- including the Boston United States Attorneys Office, main Justice, the Federal Bureau of Investigation, Health and Human Services, and the state Attorneys General and Medicaid Fraud Control Units.
That being said, there would have been many opportunities for this to have fallen off track if people weren't able to get along and support one another.
CCR: In the GlaxoSmithKline case, who was the whistleblower?
George pointed out in his complaint, in his disclosure statement, and in his communications with the government that if you look at the modus operandi that existed in Bayer's dealings with Kaiser, and then looked at the national drug code numbers on other prescription drugs for other companies, one could reasonably infer that this practice was not limited to Bayer on these two drugs.
One of the companies that was brought to the attention of the government by George in his initial complaint was GlaxoSmithKline.
That led the government to open an investigation into that matter. And that resulted in the settlement we saw yesterday.
The GlaxoSmithKline settlement was $87 million. The Bayer settlement was $251 million for the settlement of the civil portion of the case, and then the additional $6 million criminal fine.
The company pled guilty to failing to list private label Cipro with the Food and Drug Administration.
CCR: At one point, when Couto was discussing this matter with his
boss, his boss joked "we'll all look good in stripes."
CCR: What probe?
When the news of that probe began to appear in the press, there was a good deal of talk in the company about this, and it was sprinkled with the customary black humor.
So, for example, an account manager at Bayer left a voice mail for Ken Labonia -- George's boss. In that voice mail, the account manager referred to press reports and said "I think as we probably understood when this was done that someday we would, may -- have to pay the piper or would have to reconcile this."
In the process of documenting the private labeling practice Bayer ran an analysis which was completed in February 1999 calculating the "savings" of this program. And by that point, the number had already reached $97 million.
When one of the Bayer analysts saw the result of the study, he observed "all they have to do is find that document and it is all over."
CCR: Did Couto have that document?
Another analyst joked to George when they were flying back home after a business trip about having a pin-striped shirt on.
This type of banter was the type of coded language passing back and forth between executives which became a tacit acknowledgment of the problematic nature of this program.
CCR: The New York Times reporter, Melody Petersen, wrote a very detailed article about this case and it ran in this morning's paper.
She quotes Dr. Stephen Schondelmeyer, a professor of pharmaceutical
economics at the University of Minnesota. He found that the number of
medicines that had been relabeled had grown from 791 in 1990 to 20,801
It is a legitimate practice for a company to sell to a repackager and for that repackager to then go on and resell the drug. That is a practice that takes place in the distribution network.
That doesn't constitute a problem, because the repackager is a seller of drugs and under its national drug code number, is required to make the appropriate Medicaid rebate. So, there is no theft from the Medicaid system.
The problem with private labeling as carried out by both Bayer and Kaiser is that both companies knew that Kaiser would never be reporting anything back to the federal government, and would never be making a rebate. So the rebate was entirely lost to the system. And that was understood by everyone right from the outset.
Having said that, I certainly do not believe the problematic practice of private labeling is limited to Bayer and GlaxoSmithKline.
Hopefully this case will be part of a continuing investigation by the health care fraud investigators in this country. And second, hopefully, it will prove to be a wake-up call to the industry to cease and desist from engaging in these practices in the future.
A very significant part of what was accomplished yesterday goes beyond the civil and criminal settlements. It is the corporate integrity agreement that Bayer was required to sign, which means that it will now be monitored by the federal government to ensure that it will engage in appropriate practices from this moment forward.
CCR: Is it safe to say that but for the ethics program that Couto
attended he would not have acted on this?
CCR: But from your conversations with him --
In addition, the ethics training also pushed him to act.
Those two factors coming together at about the same time created an environment where he was persuaded to seek a resolution.
First he tried to get an internal answer. Failing that, he decided to go outside to resolve it.
CCR: What was the company trying to show on cross-examination?
This was the classic case of the truth standing up to all attacks. The fact of the matter is that this was not something that George was relating on his own. There was hard documentary evidence that had been turned over by that time by George to the government.
And in fact, the Bayer company itself had documented their practice internally, both in terms of what they did and how much it cost the government.
So, in my view, all that cross-examination did was to underscore the strength of the case and demonstrate what an extraordinary person George was.
As a litigator, I came to the conclusion -- and I believe everyone in that room where the deposition was taken came to the same conclusion -- that no defendant company would ever had wanted that videotape played before a jury at trial.
The success of George in delivering his testimony is what accounted for this case resolving itself within months thereafter.
CCR: The $34 million relator's fee goes to his estate. Does he
CCR: What is Kaiser's liability in this case?
CCR: Do you know whether individuals are targets of the investigation?
CCR: Do you have other cases pending in this mislabeling area?
CCR: You said Couto knew about your firm's work. How did he know
about your firm's work?
If you remember, I was interviewed by the Corporate Crime Reporter back in mid-1992, when the False Claims Act had not yet really expanded to the health care area.
One of the things we discussed back then was that Getnick & Getnick was forming the equivalent of a private economic crime unit to deal with health care fraud through the False Claims Act.
Coincidentally, the following year, that whole practice area took off.
And we were at the forefront of that area, right from the start.
CCR: The $34 million award to Couto's estate -- how was that arrived
Because of George's enormous contribution to this case, particularly in the final months of the case, the federal government agreed to award him a 24 percent share of the federal portion of the recovery.
This equals the highest percentage ever voluntarily approved by the Department of Justice in a qui tam lawsuit where the recovery exceeded a hundred million dollars.
Some strategic decisions had to be made to narrow the case sufficiently to allow it to come to a conclusion within his lifetime.
So, around August 2002, a decision was made to focus on the Bayer portion of the case, allowing us to go forward with the preservation of the testimony as to that one defendant, and to allow the government to pursue the remaining matters on their own, independently of him.
CCR: But the case wasn't resolved in his lifetime --
CCR: Do you believe that after his testimony he was clear in his
mind that this case would be resolved in his favor?