A Motherlode for Forensic Accountants

In the he-said, she-said world of the False Claims Act (FCA), whistleblowers can be an unreliable lot. So instead of depending on their words alone, qui tam attorneys turn to corroborating evidence and expert witnesses to persuade the government to join their cause.

Several years ago a case against Bank of America alleged an elaborate form of bond fraud, recalls Stephanie Skaff, a partner at Farella Braun + Martel in San Francisco. With her background in finance and accounting, she worked alongside the state Attorney General's office to represent hundreds of cities, counties, and public agencies in the case. Investigators relied on financial documents that filled a four-story building the bank rented to house the records. "They did it to show their diligence," Skaff says.

During the investigation, the plaintiffs hired the forensic accounting firm of Hemming Morse to pore over the documents. "Many false claims cases require that kind of accounting," Skaff explains. "Generally, the allegations are about a pattern of fraud or false claims, and [the accountants] identify that pattern. So much of your case is having very good experts."

The Bank of America case was staffed by four attorneys at Farella Braun and a number of others at the AG's office. It settled in 1998 for $187.5 million - one of the largest recoveries ever under the California False Claims Act (state ex rel. Stull v. Bank of America, No. 968484 San Francisco Super. Ct. settlement order filed Mar. 19 , 1999).

Defense counsel also commonly rely on forensic accountants and other experts in these cases, says Nicola T. Hanna, a white- collar defense attorney at the Irvine office of Gibson Dunn & Crutcher. A certain case, he says, may call for someone skilled in the nuances of regulatory compliance, or with a background in medical coding and off-label drug use. In addition, Gibson Dunn uses statisticians who can analyze and interpret sample documents from large discovery requests, as well as experts in government contracts and damages valuation.

The range of expert resources is so wide because false claims allegations run the gamut from "cooking the books, to people who fail to perform what they are supposed to perform and then lie about it, to people selling shoddy material," explains Robert L. Vogel, a qui tam attorney at Vogel, Slade & Goldstein in Washington, D.C. The firm often lines up former FBI and Inspector General employees to help in its investigations, he notes.

Work on internal investi-gations may begin even before the false claims complaints are unsealed, says Yvonne Craver, a partner in Deloitte Financial Advisory Services. In fact, she says, "We start doing interviews and reviewing data" as soon as a client gets an inkling it may be subject to an investigation.

When Deloitte confronts an enormous amount of disputed data, Craver says, her team - which includes PhD-level economists - can do statistical samples "to see if anything stands out." But electronic data isn't always easily acces-sible. "Sometimes we pull data from an old [computer] system and put it on our [current] system," she says. "It's not like the old days, where we laid spreadsheets and invoices out on the table."

To accommodate an anticipated flood of new cases in the next few years, Craver says, Deloitte - like its big-law counterparts - is "ramping up. We are looking for economists, data analytics people, people with strong database and programming skills, and government contracts people."

Patrick McGeehin, a consultant with FTI Consulting in Florida and Maryland, has a team of 25 people that handle false claims investigations. At any given time they can be employed by defense counsel, government investigators, or qui tam attorneys. FTI also has a health care group in Atlanta focused on false claims litigation.

During an intervention proceeding, McGeehin's team might prepare a PowerPoint presentation estimating damages - an important issue, since no case could proceed without establishing actual damages. "What you are looking for goes beyond ... normal accounting," McGeehin says.

Some FCA cases resemble accounting fraud disputes less than product liability suits, according to Mitchell S. Ettinger, a defense attorney at Skadden, Arps, Slate, Meagher & Flom in Washington, D.C. In one case, for instance, he hired a metallurgical expert to examine the rotors on a helicopter.

But for both sides, Ettinger contends, a false-claims case often comes down to numbers. When a single health care coding case involves millions of separate billing claims, "only experts can unscramble those eggs," he says. "I just finished a case that produced a terabyte of data."

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