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The defense and health care industries are joining forces in an effort to destroy the False Claims Act. The False Claims Act permits private citizens to file suit on behalf of the United States against companies and individuals who submit false claims for payment to the government, and entitles the whistleblowers to share in the proceeds of any subsequent settlement or judgment.
Hughes Aircraft is now bringing the first legal challenge to the False Claims Act to reach the Supreme Court since the law was beefed up in 1986.
Defense industry groups -- the Aerospace Industries Association, the Shipbuilders Council of America, the National Security Industrial Association and the Electronic Industries Association -- and health care industry groups -- the American Medical Association, the American Hospital Association and the American Association of Medical Colleges -- have filed amicus briefs in support of Hughes in the case.
The associations argue that the False Claims Act is being used to unfairly prosecute their members over "regulatory disputes."
The story of corporate opposition to the False Claims Act is told in the title of a January report by the Washington, D.C.-based Project on Government Oversight, "Rather Than Clean Up Their Act, They Attack the Act."
The report documents a long list of major defense and health care companies that have been forced to pay millions of dollars back to the government.
"We have discovered that since 1994, the health care industry has been forced to reimburse the government over $1 billion and the defense industry over $850 million, through the False Claims Act alone," says Danielle Brian, executive director of the Project.
"Of course big industry wants to eliminate this Act," says Brian. "Returning billions of dollars to the government and protecting and rewarding whistleblowers isn't in their best interest. Our report exposes how often these contractors had themselves defrauded the government and been forced to pay up. These critics of the law lost their battle in Congress, now they're trying to win in the courts."
In 1994, the Project helped to defeat industry-sponsored legislation when it released a report that showed that from 1990 to 1993, over 90 percent of defense contractors had either been found guilty, pled guilty or settled in civil and criminal cases for fraudulent conduct.
More Citric Conspiracy
Haarman & Reimer Crop., a New Jersey-based subsidiary of the Germany-based pharmaceutical and chemical giant Bayer AG, pled guilty in January and will pay a $50 million criminal fine -- the second largest criminal antitrust fine ever -- for participating in an international conspiracy to fix prices and allocate sales in the citric acid market worldwide.
A senior executive of the Germany-based Haarman & Reimer, Hans Haartmann, a German citizen, also has been charged for his role in the citric acid conspiracy.
The case represents the fourth round of charges filed as a result of the Department of Justice's ongoing investigation into illegal, collusive practices in the food and feed additives industry.
In October, Archer Daniels Midland pled guilty and was fined $100 million -- the largest criminal fine ever -- for its participation in international conspiracies involving two such additives -- citric acid and lysine.
In December, a Chicago federal grand jury indicted three former top ADM executives and a Japanese executive -- Michael D. Andreas, Mark E. Whitacre, Terrance S. Wilson and Kazutoshi Yamada -- for conspiring to fix prices and allocate sales in the lysine market worldwide. At the same time, a Korean company, Cheil Jedang Ltd., pled guilty and agreed to pay a $1.25 million fine for its involvement in the conspiracy.
Citric acid is a flavor additive and preservative produced from various sugars. It is found in soft drinks, processed food, detergents and pharmaceutical and cosmetic products. Citric acid is a $1.2 billion a year industry worldwide.
"This conspiracy affected literally hundreds of commonly used household foods and products -- and almost every consumer in the United States," says acting Antitrust Division chief Joel Klein.
Haarman & Reimer and Hans Hartmann agreed to cooperate in the ongoing investigation. They have played a significant role in securing the cooperation of co-conspirators, federal officials say.
In response to a hard-hitting parody by members of the Coalition for a Smoke-Free City, Philip Morris in January removed its Virginia Slims advertisements from New York City taxi rooftops.
The parody features a ravaged, prematurely aged woman smoker with the tagline "Virginia Slime -- It's a cancer thing." Philip Morris' ad featured an attractive model with the tagline, "Virginia Slims -- It's a woman thing." The drawing and moniker, Virginia Slime, came from a national children's contest for counter-advertising messages.
The Coalition battled Philip Morris' earlier campaign slogan, "You've come a long way baby," by turning it on its head as "You've come the wrong way, baby."
Counter-ad sponsors, which include the American Women's Medical Association and the National Organization for Women, promise to continue to educate young women and girls that tobacco addiction is unhealthy and unattractive.
- Russell Mokhiber