Articles Posted in Whistleblower law

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

Presidenti-elect Trump has named Shawn Krause, head of Quicken Loans’ government relations division to the transition’s team for the Department of Housing and Urban Development. Quicken loans is involved in a case taken against it by the Department of Justice. The DOJ sued Quicken concerning allegations it knowingly issued defective mortgages insured by HUD’s Federal Housing Administration. Quicken has refused to settle.

Kruase is a registered lobbiest who leads Quicken’s government advocacy. The question has already been raised as to whether her new position would raise a conflict of interest given the pending case.

Jeffrey Newman represents whistleblowers




The new Trump administration is not expected to take it easy on banks and other financial institutions that commit financial crime.

Senator Jeff Sessions who has been nominated to be the next attorney-general and is expected to be approved by the Senate, has taken a tough line on white-collar crime. While serving on the Senate judiciary committee, he  supported stiff sentences for offences such as fraud and embezzlement.  He spent 20 years as a federal prosecutor in Alabama, where he tried cases involving federal land banks caught up in the 1980s savings and loan crisis.  He is considered a tough and fearless law and order  prosecutor. Mr Sessions, who was one of just 25 senators to vote against the 2008 US bank bailout, may bring a populist sensibility to the DoJ. In a 2007 hearing, he said “that the crooks in the corporation [should] be sent to jail”. At another hearing in 2002, he said sentences for white-collar crooks “should not be a lot different than somebody who robs a bank”.

In 2010, Mr Sessions objected when a DoJ nominee said prosecutors should be cautious about indicting corporations for fear of hurting innocent employees and shareholders. The comments followed the 2002 collapse of Arthur Andersen, the auditor that had been charged with obstruction of justice for its role in the Enron scandal.

Drugmakers have secretly been paying insurance companies and benefit managers rebates and discounts to the tune of over $100 billion for years to lessen their cost of drugs for diabetes, asthma, arthritis and allergies. All the while Americans are being squeezed to pay from their own pocket resulting from insurance plans with deductibles as high as $4,000 for a family. The insurers receive the rebates even though they have not paid a single penny.

Novo Nordisk, Merck, Pfizer and Mylan told Bloomberg news that their contracts with benefit managers require rebates to be paid to them on all prescriptions, even when the patients pay the full cost due to high deductibles. That means, for example on a $500 prescription, the insurer could receive a rebate of $250 and could pocket that money without sharing it with the patient.

Jeffrey Newman represents whistleblowers

Aspen Pharmacare a large pharma company in South Afruca was fined nearly $5.5 million by the Italian antitrust authorities for stopping its supplies of cancer drugs to strengthen its negotiation position to boost prices by as much as 1500 percent. ASpen bought drugs from GlazoSmithKline and then began negotiation with the Italian Medicines Agency on prices on drugs including Leukeran and Alkeran. The drugs temporarily disappeared from the market and Aspen was able to raise prices by 300-1500 percent. Patents on the drugs had expired according to the written ruling.

Aspen is apparently the only supplier of these kinds of cancer treatments in the Italian market. Regulators fined the company after complaints were raised from a consumer group, which had been contacted by patients complaining about shortages of the medicines. In this country, it has been suggested that pharma companies have also created shortages of badly needed medications to increase their bargaining power to set prices higher. Congress is looking into this matter.

Jeffrey Newman represents whistleblowers