There are two primary types of contracts: express contract and implied contract. The express contract is formal, and stated either verbally or in writing. The implied contract is one that is not written down, but considered to be understood between the parties. It is a matter of inference and deduction.
Though most oral contracts are not legally binding, they are undertaken on ethical principles. In the United States every contract for that sale of goods that involves an amount that exceeds $500.00 must be written to be legally enforceable. The courts generally recognize any defined meeting of the minds of competent persons with a like purpose and intent to undertake some common task as a contract. The Statute of Frauds mandates for some contracts to be enforceable they must be in writing.
There are three ways a term may be implied into a contract:
1. By custom – A contract may incorporate as an implied term any relevant custom. The custom must be well known within a particular trade and business and be generally accepted within such trade or business.
2. By statute – The most common terms implied by statute are those relating to the sale and supply of goods and services. The Sale of Goods Act of 1979 provides for implied terms in respect of: 1) that the seller has the right to sell the goods 2) that goods sold are of satisfactory quality; 4) that goods sold are reasonably fit for the purpose they were bought; and 5) that goods sold by sample correspond with the sample. The Supply of Goods and Services Act of 1982 states with regard to implied terms in a contract that the service will be carried out with reasonable care and skill, within a reasonable time and for a reasonable price.
3. By the Court – Courts do not like to interfere in the construction of contracts. They will only imply terms into a contract under certain circumstances and with certain pre-conditions. Terms can be implied in fact or in law.
A contract implied in fact is one in which the circumstances imply the parties have reached an agreement even though they have not done so expressly.
A contract implied in law (the quasi-contract) is not an actual contract, but a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. If one party has agreed to a term, but the other party has not, it will not be implied into a contract. Further, terms will not be implied into a rigorous contract with detailed written terms where any omission would be deemed to be deliberate.
Express terms of a contract outline the primary obligations of the parties. Distinction has been made among the various types of express terms. This distinction is important as it sets apart the remedies available to the innocent party in the event of a breach. Such terms fall into three categories:
1. Conditions – the major terms of the contract.
2. Warranties – the minor terms of the contract.
3. Miscellaneous terms – neither conditions or warranties.
An implied term cannot contradict an express term. However, it may widen or narrow an express term when necessary if the express term is flexible.
The basic rule is that parties to contracts must perform as specified in the contract unless (1) the parties agree to the change in the contract's terms, or (2) the actions of the party who deviates from the terms of the contract are implicitly accepted ("ratified") by the action or non-action of the other party. If there is no acceptance of deviation from the terms of the contract, and the deviation is serious enough to make any real difference in the intended result of the contract, then the deviating party is said to have breached the contract. His justified prevention or interference with the performance of the other party is also a breach. Of course if one party fails more or less entirely to perform the contract, or totally prevents the performance of the contract by the other party, the situation is straightforward. The situation becomes more complex where the argument is over specific terms such as the quality of materials or the timing of work. Breach of contract leaves the non-performing or improperly performing party open to a claim for damages by the other party. If the breach is a material breach, the non-breaching party is relieved of his obligations under the contract by the other party's breach. There are many possible ways for performance of a contract to give rise to dissatisfaction. The courts have been forced to analyze the matter in much more subtle terms than "breached" or "not breached." The doctrine of "substantial performance" saves a party who has largely fulfilled his obligations under a contract from suffering major loss merely because he has unintentionally fallen short in some particular manner which does not affect the essence of the contract.
A breach is not defined as promises laid out explicitly in a contract, rather a breach of contract is defined as any violation of law, principal or obligation. It is this definition of breach that leaves room for parties to file suits involving breaches of implied contracts.
Sunday, October 25, 2009
Monday, October 19, 2009
The Whistleblower - Pharmaceutical Fraud
In September of 2007, Bristol-Myers Squibb Company and its wholly owned subsidiary, Apothecon, Inc. agreed to pay over $515 million to resolve a broad array of civil allegations involving their drug marketing and pricing practices. In December 2007 the Corporate Crime Reporter reported Merick to pay $670 million to settle federal and state charges that it violated the False Claims Act by engaging in nominal pricing fraud. In 1986, more than $20 billion was paid out in fraud lawsuits brought by whistleblowers.
Pharmaceutical fraud cases represent the largest percentage of False Claims Act recoveries by the United, and qui tam relator whistleblower lawsuits. The False Claims Act Is a federal whistleblower law which has its roots in the civil war era and allows private citizens to file actions against federal contractors and corporations who conduct fraud against the government and the public. It is the United States’ most powerful tool for rooting out fraudulent government contracts. With the advent of the Medicare prescription plan, even more federal tax dollars will flow into the pockets of large ruling companies illegally and in violation of current law. In an industry with great power and profitability, there are lots of pressures upon companies to ignore federal laws designed to prevent fraud and curb costs.
Pharmaceutical fraud can take a variety of forms and involve complex issues. The following are some example:
Charging the government for drugs not used and returned to pharmacy providers;
Marketing, promoting, and selling drugs for use other than those approved by the FDA;
Paying kickbacks and inducements to physicians, hospitals and pharmacists to prescribe or otherwise favor a drug; Engaging in off-label marketing; and Providing false data to the FDA or withholding negative data from FDA about the efficacy of a pharmaceutical drug or medical device in clinical research trials to get approval to sell and market the pharmaceutical drug or medical device.
Currently, the United States Government, along with the governments of 15 states and the District of Columbia, have joined with two whistleblowers who allege that drug manufacturer Wyeth defrauded U.S. taxpayers out of hundreds of millions of dollars. According to the Wall Street Journal, Wyeth is accused of overcharging Medicare and Medicaid programs nationwide for purchases of it’s acid-reflux drug Protonix. Under federal law, drug companies are required to offer prescriptions to federal aid programs at the lowest possible price. The Wyeth suit alleges that Wyeth was offering Protonix at a 90% discount to a private hospital, while charging the federal government much higher rates.
Other drug companies that have settled qui tam lawsuits include Pfizer, TAP Pharmaceuticals, Bayer, and Schering-Plough Corp. A federal official recently said the government has approximately 150 pharmaceutical fraud cases pending involving over 500 different drugs.
Pharmacy benefits management companies have also come under increasing scrutiny as a result of the False Claims Act. In one of the most prominent whistleblower cases reported, Phillips & Cohen represented two whistleblowers whose qui tam lawsuits resulted in a settlement of $875 million to settle the lawsuits and related criminal charges.
If you believe you have discovered fraud, you should try to assess the magnitude of the fraud and gather whatever documentary or electronic evidence is lawfully available. Be sure you do not violate the law or the terms of your employment agreement. Write down the details of any meetings or events where fraud was discussed, who was present and what documents may exist that memorialize the event. This documentation should be given to your attorney.
Keep in mind, you cannot recover in a qui tam action if another whistleblower has already filed an action based on the same documentation and information.
Pharmaceutical fraud cases represent the largest percentage of False Claims Act recoveries by the United, and qui tam relator whistleblower lawsuits. The False Claims Act Is a federal whistleblower law which has its roots in the civil war era and allows private citizens to file actions against federal contractors and corporations who conduct fraud against the government and the public. It is the United States’ most powerful tool for rooting out fraudulent government contracts. With the advent of the Medicare prescription plan, even more federal tax dollars will flow into the pockets of large ruling companies illegally and in violation of current law. In an industry with great power and profitability, there are lots of pressures upon companies to ignore federal laws designed to prevent fraud and curb costs.
Pharmaceutical fraud can take a variety of forms and involve complex issues. The following are some example:
Charging the government for drugs not used and returned to pharmacy providers;
Marketing, promoting, and selling drugs for use other than those approved by the FDA;
Paying kickbacks and inducements to physicians, hospitals and pharmacists to prescribe or otherwise favor a drug; Engaging in off-label marketing; and Providing false data to the FDA or withholding negative data from FDA about the efficacy of a pharmaceutical drug or medical device in clinical research trials to get approval to sell and market the pharmaceutical drug or medical device.
Currently, the United States Government, along with the governments of 15 states and the District of Columbia, have joined with two whistleblowers who allege that drug manufacturer Wyeth defrauded U.S. taxpayers out of hundreds of millions of dollars. According to the Wall Street Journal, Wyeth is accused of overcharging Medicare and Medicaid programs nationwide for purchases of it’s acid-reflux drug Protonix. Under federal law, drug companies are required to offer prescriptions to federal aid programs at the lowest possible price. The Wyeth suit alleges that Wyeth was offering Protonix at a 90% discount to a private hospital, while charging the federal government much higher rates.
Other drug companies that have settled qui tam lawsuits include Pfizer, TAP Pharmaceuticals, Bayer, and Schering-Plough Corp. A federal official recently said the government has approximately 150 pharmaceutical fraud cases pending involving over 500 different drugs.
Pharmacy benefits management companies have also come under increasing scrutiny as a result of the False Claims Act. In one of the most prominent whistleblower cases reported, Phillips & Cohen represented two whistleblowers whose qui tam lawsuits resulted in a settlement of $875 million to settle the lawsuits and related criminal charges.
If you believe you have discovered fraud, you should try to assess the magnitude of the fraud and gather whatever documentary or electronic evidence is lawfully available. Be sure you do not violate the law or the terms of your employment agreement. Write down the details of any meetings or events where fraud was discussed, who was present and what documents may exist that memorialize the event. This documentation should be given to your attorney.
Keep in mind, you cannot recover in a qui tam action if another whistleblower has already filed an action based on the same documentation and information.
Thursday, October 15, 2009
Whistleblower – Federal Government and Federal Government Contractor Fraud
A large percentage of the United State’s enormous annual spending goes to development and implementation of new weapons systems, facilities, equipment, supplies, and logistical and technical services through the procurement of government contracts. Such government contracts frequently involve military defense contracts such as B-1 Bombers, military tanks and vehicles, military fire power and uniforms, and extends to areas such as computer technology and food services for our troops.
Defense contractor fraud remains one of the most prominent areas of false claims litigation under the Federal False Claims Act.
In April 2009 TRW Inc.’s efforts to stop a scientist from revealing his research findings about faulty electronic components the company sold to the government for military and intelligence-gathering satellites were the basis for a whistleblower lawsuit that Northrop Grumman Corp. settled for $325 million. It was the largest settlement ever paid by a defense contractor in a whistleblower case and the second largest ever paid involving defense contractor fraud.
The whistleblower was awarded $48.7 million for his work and the work of his attorneys on the case. The Federal False Claims Act requires the government to award whistleblowers 15 to 25 percent of the amount the government recovers as a result of whistleblower cases.
A false certification of regulatory and statutory compliance, necessary to obtain a contract, can render false all claims for payment under that contract. A contractor’s failure to meet contract performance requirements and failure to provide goods and services in conformance with federal statutes and regulations may be sufficient to violate the False Claims Act.
Presentation of a claim to the Government for payment, when the failure to abide by contract requirements has not been disclosed to the Government, is deemed equivalent to false certification of compliance with such laws and regulations. Therefore, if a claim for payment is submitted and the contract requirements have not been fulfilled in all respects, if federal funding is conditioned on compliance, gives rise to a False Claims Act case. Claims may be false, even though goods or services otherwise fulfill contract specifications.
Defense contractor fraud remains one of the most prominent areas of false claims litigation. Billions of dollars have been recovered from defense contractors, mainly as a result of whistleblowers. Some common ways in which defense contractors have tried to defraud the government are as follows:
1. Cross-charging. This occurs when a defense contractor improperly shifts costs and expenses from one defense contract to another in order to boost its profits.
2. Improper Product Substitution. Contracts frequently request the contractor use a specific grade or quality of product or part. There are often requirements that the products be new or made in the United States. Defense contractors often attempt to save costs by substituting cheaper or substandard parts.
3. Improper Cost Allocation. Under this scheme the defense contractor will improperly allocate or shift cost from private businesses or foreign governments onto the cost-plus contracts they have with the United States government.
4. Worthless or Substandard Products or Services. In this case the defense contractor with knowledge or through reckless neglect, delivers products that do not perform as promised.
5. Inflation or Costs and Charges. In a cost-plus contract, the government pays the defense contractor a set price plus a percentage of the contractor’s costs for producing the product. In this scheme the contractor improperly inflates their costs and charges to increase revenue the company earns from the U.S. government.
6. Violations of the Truth-In-Negotiations Act. Weapons systems and equipment can be extremely complex. Much of the time, there is only one company in the world producing a particular weapon system or piece of equipment. The government has no choice but to purchase the particular weapon system or piece of equipment from a single supplier. Because other competitors are not bidding, the government has no way of knowing if it is paying a fair price. The Truth-In-Negotiations Act is designed to prevent this problem by requiring defense contractors to disclose all relevant information about its costs to the government in such situations. Defense contractors may sometimes attempt to inflate their costs and expenses because they have no competitor bidding for the contract.
Defense contractor fraud remains one of the most prominent areas of false claims litigation under the Federal False Claims Act.
In April 2009 TRW Inc.’s efforts to stop a scientist from revealing his research findings about faulty electronic components the company sold to the government for military and intelligence-gathering satellites were the basis for a whistleblower lawsuit that Northrop Grumman Corp. settled for $325 million. It was the largest settlement ever paid by a defense contractor in a whistleblower case and the second largest ever paid involving defense contractor fraud.
The whistleblower was awarded $48.7 million for his work and the work of his attorneys on the case. The Federal False Claims Act requires the government to award whistleblowers 15 to 25 percent of the amount the government recovers as a result of whistleblower cases.
A false certification of regulatory and statutory compliance, necessary to obtain a contract, can render false all claims for payment under that contract. A contractor’s failure to meet contract performance requirements and failure to provide goods and services in conformance with federal statutes and regulations may be sufficient to violate the False Claims Act.
Presentation of a claim to the Government for payment, when the failure to abide by contract requirements has not been disclosed to the Government, is deemed equivalent to false certification of compliance with such laws and regulations. Therefore, if a claim for payment is submitted and the contract requirements have not been fulfilled in all respects, if federal funding is conditioned on compliance, gives rise to a False Claims Act case. Claims may be false, even though goods or services otherwise fulfill contract specifications.
Defense contractor fraud remains one of the most prominent areas of false claims litigation. Billions of dollars have been recovered from defense contractors, mainly as a result of whistleblowers. Some common ways in which defense contractors have tried to defraud the government are as follows:
1. Cross-charging. This occurs when a defense contractor improperly shifts costs and expenses from one defense contract to another in order to boost its profits.
2. Improper Product Substitution. Contracts frequently request the contractor use a specific grade or quality of product or part. There are often requirements that the products be new or made in the United States. Defense contractors often attempt to save costs by substituting cheaper or substandard parts.
3. Improper Cost Allocation. Under this scheme the defense contractor will improperly allocate or shift cost from private businesses or foreign governments onto the cost-plus contracts they have with the United States government.
4. Worthless or Substandard Products or Services. In this case the defense contractor with knowledge or through reckless neglect, delivers products that do not perform as promised.
5. Inflation or Costs and Charges. In a cost-plus contract, the government pays the defense contractor a set price plus a percentage of the contractor’s costs for producing the product. In this scheme the contractor improperly inflates their costs and charges to increase revenue the company earns from the U.S. government.
6. Violations of the Truth-In-Negotiations Act. Weapons systems and equipment can be extremely complex. Much of the time, there is only one company in the world producing a particular weapon system or piece of equipment. The government has no choice but to purchase the particular weapon system or piece of equipment from a single supplier. Because other competitors are not bidding, the government has no way of knowing if it is paying a fair price. The Truth-In-Negotiations Act is designed to prevent this problem by requiring defense contractors to disclose all relevant information about its costs to the government in such situations. Defense contractors may sometimes attempt to inflate their costs and expenses because they have no competitor bidding for the contract.
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