Steven Cohen gambled his home to fight fraud.
The Chicago lawyer represented a district sales manager at Merck & Co. who turned over evidence of alleged billing fraud by the drugmaker to federal prosecutors more than seven years ago. The lengthy investigation forced Cohen to take out second mortgages on his Chicago home and a Michigan vacation home to cover his unpaid time and expenses that climbed to more than $2 million.
His big bet just paid off.
A week ago, Merck agreed to pay more than $400 million to state and federal governments to settle the lawsuit, one of the biggest sums collected in a whistle-blower case. The sales manager alone will receive about $68 million. Cohen and two colleagues who worked on the case will get an undisclosed share of the whistle-blower award plus their attorneys fees.
To root out fraud in the health-care industry, the federal government relies on private lawyers like Cohen and citizens armed with inside information about their companies. Their partnership is fueled by a controversial federal anti-fraud law that provides generous financial incentives to encourage whistle-blowing on government contractors and other businesses that receive taxpayer money. The law, the False Claims Act, has yielded astonishing results. Since 1997, the government has recovered nearly $9 billion from health-care whistle-blower suits, according to Department of Justice statistics through Sept. 30, 2007.
The whistle-blowers' share: $1.4 billion, or an average of 15 percent.
Several of the biggest penalties in recent years have been paid by pharmaceutical companies, including TAP Pharmaceutical Products Inc., Schering-Plough Corp., Abbott Laboratories and now Merck, the country's third-largest drugmaker. The Merck case is likely the first of several cases focusing on whether pharmaceutical firms used unfair pricing practices to bilk Medicaid, the government's health-care program for the poor.
The Merck investigation also illustrates how risky these cases are for lawyers and their clients. Lawyers usually take these cases on contingency, meaning they only get paid if their client wins. Winning usually hinges on whether the government intervenes in the complaint as a plaintiff, and the odds for that are low.
The government rejects two out of three whistle-blower suits.
"I invested most of the money I had made as a private lawyer into this case," Cohen said. "It's not for everybody."It was a leap of faith for the 54-year-old, filled with bureaucratic stops and starts, an untested legal theory and a detour through Nevada before culminating in a once-in-a-lifetime windfall.
Read more at The Chicago Trib
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