Articles Posted in Whistleblower law

Massachusetts Secretary of State is investigating whether some of the nations top retail brokerage firms send customer buy and sell orders to exchanges that offer them brokers kickbacks. He is also looking to see this prevents ordinary investors from getting the best price for their trades. Galvin has asked for information from 7 of the biggest U.S. brokers including Fidelity, Charles Schwab & Co. Scottrade, TD Ameritrade, E-TRade Financial, Edward D. Jones and Morgan Stanley.

Traders have historically been paid for their orders. This is called rebates in the industry. Due to electronic trading  the number of exchanges and trading sites grew and so did the trader rebates.

Galvin mentioned a New York Time article written by Yale Law School’s Jonathan Macey and Yale Chief Investment Officer David Swensen who said customers don’t get the best price when brokers choose exchanges for the rebates they offer.

According to recent news reports Mylan NV may have been paid over one billion more by Medicaid  for EpiPen allergic-reaction treatments than it should have from 2006 to 2016. This is  more than what  Mylan NV said it agreed to pay to settle overcharging allegations. The company said in October to pay $465 million to resolve the allegations by the Justice Department that the company wrongly classified the EpiPen as a generic product and thereby didn’t have to provide as much of a rebate to Medicaid as it would have for a branded drug.

To date, there has been no settlement on the matter.  In a two-page letter, the Office of Inspector General said  that how much Medicaid was overbilled “has several important limitations” due to an absence of information about EpiPen’s lowest negotiated price because Mylan didn’t report that information to the Centers for Medicare and Medicaid Services.

Prescriptions for Mylan’s generic, which went on sale in December, have captured nearly 40% of the auto-injector market

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United States Attorney General Jeff Sessions has announced that he will be pursuing prosecutions against individuals who have leaked information that has resulted in a major threat to national security and that the DOJ may begin issuing subpoenas to media outlets that have reported information thought to be leaked. The number of leaks and leak-related investigations has risen sharply since Mr. Trump took office, Mr. Sessions said.His department has received as many criminal referrals for investigations of the unauthorized disclosure of classified information during the first six months of this year as during the three previous years combined, he said.

Civil-liberties and press-advocacy groups reacted with alarm to Mr. Sessions’ announcement, in particular regarding the Justice Department’s effort to revisit rules put in place during the Obama administration to strengthen protections for reporters. Among the steps Mr. Sessions said the government was taking to combat leaks was to direct Deputy Attorney General Rod Rosenstein and FBI Director Chris Wray “to oversee all classified leak investigations and actively monitor the progress of each and every case.”

​He has also directed Justice Department prosecutors to prioritize cases involving unauthorized disclosures of classified information, ​adding that​the FBI has dedicated more resources to fighting leaks and has created a new counterintelligence unit to manage the cases, Mr. Sessions said.

The Securities and Exchange Commission has  filed charges against Massachusetts businessman Patrick Muraca to stop an alleged ongoing fraud by misuing investments intended for the development of cancer diagnostic tests to instead pay personal expenses and fund his fiancée’s restaurant businesses.

According to the SEC’s complaint, Muraca established two pharmaceutical  companies and raising nearly $1.2 million by representing to investors that their money would be used to develop products to detect cancer and other diseases.  The SEC investigation revealed that the investor funds were deposited into Muraca’s personal bank account and alleges that at least $400,000 has been used to pay rent for the restaurants and fund other purchases by Muraca, including payments to a casino, automotive shop, and cigar shop.

The SEC alleges that investors were never informed of the alternative uses of their investments in NanoMolecularDX LLC and MetaboRX LLC, including the fact that Muraca characterized the general character of the businesses as “Serving Food; Restaurant” in separate documents he has filed with the Commonwealth of Massachusetts to do business in the state.

whistleblower1-300x218The EB-5 investment program, known as the EB-5 visa-for-investment program, is demonstrating a dramatic spike in fraud  in  EB-5 projects. For example 2016 , the Securities and Exchange Commission brought enforcement actions against  $1 billion worth of fraudulent EB-5 projects. A majority of the fraud involved Chinese investors, including a $136 million EB-5 real estate project. According to the U.S. Citizenship and Immigration Services (USCIS), the EB-5 program resulted in $8.7 billion in foreign capital into the United States since 2012.

The SEC has a Whistleblower Program, in which private citizens may receive a reward for providing the SEC with original information about securities fraud, including EB-5 fraud. If the SEC uses a whistleblower’s information to bring a successful enforcement action, the whistleblower is eligible to receive 10% to 30% of the monetary sanctions collected as an award. One whistleblower received over $14 million for reporting EB-5 fraud.

Since the enactment of the whistleblower program, the SEC has paid more than $150 million to whistleblowers.

Here’s a sad irony to the world-wide cyber-security attacks which have disrupted hospitals, railway systems, universities and millions of computers: the assault has resulted in a massive increase of the value of cyber security company stocks. In addition, as the attacks are expected to increase the jump in the stock price is also expected to continue to rise. Proofpoint had a 9% spike, as did FireEye this week. Cisco Systems which generates over $2 billion a year from its security business is up 3% and rising.

Security spending is high on the list of priorities for corporations of every kind and as the threat is growing so are the budgets for security. While investors haven’t made a killing in buying cybersecurity stocks yet, this may change soon. Proofprint provides email security and is likely to be attractive to companies who want to protect their communications.

Fox News has sidelined senior legal analyst Andrew Napolitano after he said  former President Barack Obama asked British intelligence to wiretap Donald Trump and his allies during the presidential campaign.

On March 4, the President Tweeted, “Obama had my ‘wires tapped’ in Trump Tower” before the November election. A week later, Andrew Napolitano, a former New Jersey Superior Court judge, appeared on Fox and Friends, saying  that unnamed sources told him that Obama asked British intelligence agencies to spy on Trump and his associates in violation of U.S. law. Herepeated the claim in a column published by Fox News.

Last Friday, The President  blamed the rucus on Fox News.   “All we did was quote a very talented legal mind … so you shouldn’t be talking to me, you should be talking to Fox,” Trumpt said.

Since writing briefly yesterday about how federal investigators have raided three Caterpillar office buildings last week, in what may be a major tax evasion case, I kept going back to the New York Times article. The more I read it, the more I kept saying to myself that this could be something really major as it relates to the growing trend of U.S. Corporations accumulating trillions offshore to save on taxes. In addition, the details of the article raise some interesting and mysterious questions about an analysis of Caterpillar conducted by a Dartmouth professor Leslie Robinson, who teaches financial accounting in the MBA program and who before entering academia, worked as a CPA in the tax division of Ernst & Young. I predict that the New York Times article is just a seed of a story that will have long legs and may lead to revelations of massive tax fraud to the tune of billions.

First, some items of interest I found which will set the foundation: Jesse Drucker is a Reporter for the New York Times, who was hired there last year from the projects and investigations team at Bloomberg News. He has been writing about corporate taxes for years and one piece revealed how Google avoided billions in taxes using two obscure tax shelters known as the “Double Irish” attributing profits to a Bermuda mailbox.

Somehow, Jesse got his hands on an 85 – page analysis of Caterpillar’s overseas tax structure involving billions of dollars and a Caterpillar subsidiary in Switzerland. Drucker quoted directly from the report authored by Professor Leslie A. Robinson and which was commissioned by the government but he does not say which agency. Drucker writes that in the report she wrote that she was asked to provide a written opinion of Caterpillar’s financial reporting relating to various tax accounting standards as pertaining to the investigation of Caterpillar by the Federal Deposit Insurance Corporation Office of Inspector General.  Lead number one. It is possible that Dr. Robinson was hired by this agency office. It is not clear who leaked the report to Drucker or why but Dr. Robinson when called by the Times refused comment.

Last week, it was revealed that Prosecutors say that a former government lawyer named Jeffrey Wertkin tried to sell a whistleblower’s sealed, confidential lawsuit against a Silicon Valley company, for $310,000. He wore a wig to try to disguise him but the man Wertkin was selling to was actually an FBI undercover agent.  Wertkin, 40, worked a coveted job at the Justice Department in 2010 focusing  on cases related to health-care. He remained there until April 2016, when he left for a job at Akin Gump in Washington. His government pay was about $150,000 per year. At  Akin Gump, where Wertkin defended companies sued under the whistle-blower law, attorneys with his background earn as much as $600,000 or more.  According to press reports quoting inside sources,  FBI agents may be questioning Justice Department Trial Lawyers to try to determine where the leaked Complaint came from. If that is the case, this investigation comes at a time when a new Attorney General has just stepped into position at DOJ. It is not clear as to whether Wertkin will cooperate with the Government investigation in order to receive a more lenient sentence. If so, his source could be revealed in a shorter amount of time.

This is a highly unusual case. Wertkin was a senior level trial attorney at line Justice. He  tried a case claiming that hospice chain Aseracare Inc. falsely certified patient eligibility for Medicare funding. The case is on appeal after a judge overturned a verdict for the government. He also handled a case alleging Pharmerica Corp. submitted false claims to Medicare for improperly dispensed drugs, which ended in a $31.5 million settlement, and a suit against Medco Health Solutions Inc. over kickback allegations. That settled for $7.9 million. Justice Department lawyers specializing in False Claims Act cases conduct  investigations in secret after whistle-blowers file a lawsuit accusing companies of defrauding the government. Cases are filed under “seal” to give the government time to investigate. Legally, that suit may not be revealed to anyone outside the government. Companies usually don’t learn about a suit until the government nears the end of its probe.

Mr. Wertkin was arraigned last week on a charge of criminal contempt of court and was released on $750,000 bond. Mr. Wertkin, 40, had recently joined Akin Gump in April after six years as a trial lawyer at the Justice Department. The plan was for him to take a prominent role handling cases for corporate clients.

Many of America’s largest companies create and maintain subsidiaries in offshore tax havens. This allows them to avoid paying an estimated $90 billion in federal taxes each year, according to a report by Citizens for Tax Justice and the IRS. Depending on how these subsidiaries are set up, they may or may not meet the letter of the law but the time is now ripe to encourage Congress and President Elect Trump to close the loopholes to these unpatriotic corporations in order to strengthen the American Economy. An analysis of filings in the Securities and Exchange Commission, 72 percent of the Fortune 500 companies have subsidiary tax haven jrusdictions and they hold over $2.6 trillion in profits offshore for tax purposes.

Here is the list of the world’s worst tax havens, according to Oxfam:

1. Bermuda