Whistleblowers are once again in the news this week after two former sales representatives for MiMedx Group Inc. alerted the U.S. Department of Veteran Affairs of fraud and that they were being overcharged millions of dollars. According to the Star Tribune, the two men will split a $1.625 million whistleblower award.

The National Whistleblower Center (NWC) estimates that funds recovered via whistleblower complaints account for 72 percent of all funds recovered by the government for contracting or procurement fraud. In 2019, funds recovered through the False Claims Act amounted to a whopping $2.1 billion. 

VA Whistleblower Complaint

The Georgia-based medical company MiMedx agreed to pay $6.5 million to resolve allegations that the company had inflated the prices of grafts used at VA medical facilities in Indiana, Nebraska, Texas, Iowa, Michigan, Wisconsin, and North Dakota. Jess Kruchoski and Luke Tornquist, two former sales representatives for the company, filed their whistleblower complaint exposing the company in 2016, six weeks after they were fired.

“I am happy that this is public and that the truth has come out,” said Tornquist. “It’s not fun to go through this in silence. … It’s been really hard for Jess and I for the past three years.”

Kruchoski and Tornquist alleged that MiMedx had knowingly charged the government more for a specific skin graft, a 16-millimeter disk, at the commercial cost. When asked why the company wasn’t offering the grafts at a lower price point, MiMedx’s Vice President told Kurchoski that they were charging the government more because they knew “the government would pay for the more expensive 16-mm disk.” Kurchoski was then reportedly told never to let the VA know the commercial prices of the graft.

False Claims Act

The False Claims Act (FCA) was passed during the Civil War to help protect the government from being cheated by those selling supplies to the military. The Act was put in place when it became clear that suppliers were selling substandard goods to government bodies.

The FCA seeks to recover funds from third-parties who either charge the government an unfair amount or denies the government full compensation for “what it is owed”. The FCA is valid in any country or instance so long as federal spending or contracts are involved. The FCA can be used to build criminal or civil cases and can be utilized by non-U.S. citizens.

The most powerful and long-standing provision of the FCA is the qui tam or whistleblower provision. This provision is meant to encourage whistleblowers to come forward by providing a whistleblower award amounting to as much as 30 percent of the recovered funds. Whistleblowers are protected under the law.

The FCA has been expanded upon and revised many times throughout the years. One major change occurred in 1986 when the efforts of Senator Charles Grassley and Representative Howard Berman introduced an amendment to significantly increase the amount given in a whistleblower reward.

“Going after waste, fraud, and abuse without whistleblowers is about as useful as harvesting acres of corn with a pair of rusty old scissors,” Grassley said during a speech on National Whistleblower Day, 2018.

The Success of the Whistleblower Award 

The NWC reports that, after whistleblower awards were increased in 1986, the total fraud recovered in the U.S. went from $88.4 million in 1987 to $3.7 billion in 2017. Whistleblower complaints made under the FCA have brought in $42.5 billion to the U.S. Treasury. Out of that total amount, the complaints have also netted complainants $6.4 billion in whistleblower awards. On average, a whistleblower award is equal to 12 percent of the total amount recovered by the government.

This article is not legal advice. It is presented
for informational purposes only.