© Forbes, April 2005

Dirty laundry. Expensive

The state paid $126 million to a man who “surrendered” his company to justice

Neil Weinberg(Forbes, USA)

Douglas Durend is the poster child for exposing corporate fraud. After becoming vice president of sales for TAP Pharmaceutical Products in early 1995, Darend soon became suspicious that his parent corporation was colluding with doctors to illegally siphon tens of millions of dollars from the government treasury by inflating the government's Medicare bills. Instead of figuring out who was to blame, Darend began collecting evidence to confirm his suspicions. In 1996, Darend resigned from TAR and filed a lawsuit against it. His motivation was quite clear: if he could convict a pharmaceutical company of fraud, he could count on a substantial reward from the money that TAR would return to the federal treasury.

Darend worked with the government for eight years to help prepare the trial against TAR. Testifying before prosecutors in four states and a grand jury in Boston, he compiled a list of TAR employees he suspected of fraud and then called his former colleagues from a phone that had been tapped by FBI agents.

Moreover, Durend also filed a lawsuit against TAP's competitor, Zeneca (now called AstraZeneca), accusing it of similar charges. Ultimately, the government supported Durend's lawsuit and, by initiating civil and criminal proceedings against TAR, forced the company to agree to a settlement. As a result, TAR had to pay the state $885 million (six times the amount that the company was supposed to have fraudulently misappropriated). Douglas Durend became an overnight multimillionaire, receiving $126 million from the US government, and retired. Durend, 53, now lives with his wife and daughter in the luxury resort town of Tarpon Springs, Florida.

Meanwhile, TAP itself has never been accused of submitting fictitious Medicare bills for payment. A little-known rule of law was used against the company, according to which drug suppliers are liable even in cases where someone else issues fictitious invoices to the state for the drugs they produce. On the day the agreement between the federal government and TAR was reached, October 3, 2001, a prosecutor charged the pharmaceutical company's executives with criminal deception, alleging that they had masterminded the billing fraud. “This is a stark warning to the entire pharmaceutical industry,” prosecutor Michael Sullivan said publicly in court at the time.

But then Durend’s version of the events that took place in TAR began to “fall apart.” During the trial of 12 TAR employees, which ended just last year, lawyers for the defendants discovered a host of inaccuracies in Durend's claims. In particular, Durend claimed that TAR gave kickbacks to doctors - it turned out that this was not true. In addition, according to Durend, the company inflated the prices of drugs in order to illegally receive additional compensation from the Medicare program - but it turned out that this was not the case. Last July, a federal jury in Boston found all defendants not guilty.

Where do people come from who are willing to expose corporate fraud, and what motivates them?

Doug Durend was born in Aket, Rhode Island, grew up in a large family (he has seven siblings), earned a degree in pharmacology at the University of Rhode Island and then worked for the pharmaceutical company Merck & Co. for 20 years.

His career at Merck & Co ended in scandal. In 1994, Durend filed a lawsuit against Merck with the Equal Employment Opportunity Commission. Durend said the company began retaliating against him because he expressed support for a co-worker who sued Merck's president, whom she accused of sexual harassment. To settle the matter amicably, Merck paid Durend $255,000. But Durend was not satisfied and filed an additional lawsuit against Merck, giving an affidavit in which he claimed that Merck had ruined his career. Darend was relieved of his position and “sent” on paid leave. Then the enterprising manager went to get a job at TAR, where he introduced himself as the current senior regional director of Merck, who just wanted to change his job. When Darend subsequently testified before a grand jury, he hid details of his dismissal from Merck from the jury, saying only that he had been offered a new job by headhunters.

TAR, meanwhile, was fighting for life and death. This company was formed in 1977 as a result of the merger of Abbott tabs and Takeda. After TAP created the drug Lupron, which made it possible for the first time to treat advanced prostate cancer without castration of the patient, the company's sales jumped from $135 million in 1990 to $744 million in 1995. Patients prescribed treatment with this drug received one Lupron injection per month. The drug sold for $400 per dose, but 80% of the cost of the drug was covered by Medicare.

Darend became head of TAP's sales department in January 1995, when Lupron had a powerful competitor - the cheaper Zoladex, developed by Zeneca. Although Darend's main goal in his new job was to bring the acid reflux drug Prevacid to market, he was immediately confused by TAP's methods of promoting Lupron. TAP was indeed very energetic: inviting doctors to Lupron presentations, holding conferences at fashionable resorts, giving doctors televisions so they could show Lupron advertising videos to patients. The company even joked that TAR lawyers actually work in the “sales prevention department.”

Durend was particularly concerned about the failure of sales managers to keep strict records of the free samples of Lupron given to doctors. This is necessary to ensure that doctors do not submit fictitious bills for Medicare coverage for drugs received free of charge. Doctors are required (by law) to provide a receipt for each dose of drug they receive free of charge, and if they then bill Medicare, the drug manufacturer may be charged with criminal deception.

Durend gradually realized that the rules for accounting for free Lupron samples were being broken on purpose - precisely so that doctors could receive additional money from Medicare. Later testifying in court against former colleagues, Durend claimed that he was able to track down a sales manager who forced doctors to sign for doses of Lupron that were not actually dispensed to them. “It was a very serious problem,” Durend said, but he could not remember whether he himself took any action to solve it. Moreover, Durend, having suspected TAR of fraud, did not consider it necessary to consult with TAR's external lawyer. When the judge asked why Darend had not consulted a lawyer, he replied that only two employees below the rank of vice president had such authority, and he, Darend, was not one of these persons.

In August 1995, Durend became even more concerned: at a company staff meeting, it was discussed that it would be a good idea to pay doctors who prescribe Lupron to patients a 2% fee “to cover administrative expenses” (legislation allows such compensation to be paid only to medical insurance companies and other organizations purchasing medicines, but not to private practitioners). From a legal point of view, the proposed scheme was dubious. “Can you imagine how our Douglas Durend will look in a striped prison uniform?” one of the leaders joked then. Everyone laughed except Darend, to whom the remark seemed “not funny at all, but ominous.”

Darend began to think about how to protect himself from possible troubles. He now claims that he was afraid of being accused, which would inevitably happen if the federal government suddenly became aware of TAR's criminal activities. “I wanted to do the only right thing in this situation,” Durend says. He told a former colleague from Merck about the “joke” about the robe, and a month later he recommended Durend a lawyer - attorney Elizabeth Ainslie, who headed the criminal deception section of the federal prosecutor's office in Philadelphia.

Ainsley suggested that Durend begin collecting incriminating evidence, which might allow him to accuse TAR of fraud and initiate legal proceedings against the company. Shortly thereafter, Durend faxed Ainslie a newspaper clipping with the headline reading: “Rugby Laboratories paid $7 million to reach a settlement with the federal government, which accused it of fraud. The former employee of the company who filed the claim received $1.1 million,” and asked if the lawyer had something like that in mind. Ainsley meant it.

And Darend began to provide Ainsley with internal TAR documents, correspondence from the company's lawyers, and internal memos that TAR exchanged with its competitor, Zeneca.

At the beginning of 1996, Darend left TAR and moved to AstraMerck. Another month later, he officially hired lawyer Elizabeth Ainslie and instructed her to prepare a whistleblower lawsuit. Ainsley undertook to cover all of Darend's legal costs (if her client won, she expected to compensate these costs at the expense of the losing party), and in return Darend guaranteed her a certain percentage of the amount he would receive if TAR had to compensate for the damage caused to the state. Three months later, Ainslie and Durend brought cases against TAP and Zeneca. Like all whistleblower claims, they were brought secretly, “behind the seal.” The federal government is required to investigate cases brought in this manner, which it has done without informing the defendants of its actions.

Over the next five years, Durend made repeated appearances at federal prosecutors' offices in Philadelphia, Boston, Chicago and Wilmington, urging government prosecutors to support his cases. Durend sent a fax to the Virginia federal prosecutor from the Philadelphia District Attorney's Office from his office at Astra headquarters in which he boasted that "the morning had been extremely productive": he had managed to get the phone numbers of his former subordinates from TAR, and now he would call them all, accusing in crimes, and the FBI will listen to these conversations at this time. The FBI did secretly tape-record Durend's telephone conversations with former colleagues. In one of the recordings, Darend is heard calling his former colleague at home, a child answers the phone, Darend introduces himself as a “friend” of his father, and then lies to a senior TAR employee, claiming that he has already received a subpoena, in the hope that the former colleague he himself admits to committing fraud.

This TAR employee was ultimately not charged.

Government prosecutors from the federal prosecutor's office in Boston became interested in Durend's case after a second informant turned up - Dr. Joseph Gerstein, who was responsible for the procurement of medicines at Tufts University. When Gerstein decided to choose Zoladex, made by TAP competitor Zeneca, over Lupron, TAP employee Kim Chase and one of his colleagues offered the doctor an “educational grant” if he changed his mind. Gerstein, regarding this as an attempt at bribery, decided to tell the journalists about everything, but they were not interested in this topic. Gerstein then contacted federal prosecutors in Boston.

“They were interested in investigating these types of cases because they had a large health department,” Gerstein explains. After hiring a lawyer, Gerstein met with government prosecutors in late 1996 and filed a whistleblower lawsuit against TAR in March 1998. At the insistence of FBI agents, Gerstein allowed them to install a hidden video camera in his office and agreed to wear a “bug” on himself when going to meetings with TAR representatives. Gerstein met with them twice, each time “reassuring” company employees with feigned promises to reconsider their decision and resume purchasing Lupron.

In April 2001—five years after Durend filed his plea—federal prosecutors in Boston decided to pursue the case. Darend's lawyer, Elizabeth Ainslie, asked the court to dismiss Gerstein's case and invalidate his claim because her client filed the claim earlier. However, two informants soon settled the matter amicably: Gerstein agreed to 3% of the amount that TAR would reimburse the state, and Darend’s share was 14%.

Meanwhile, TAP has denied all allegations, saying that distributing free samples of drugs, providing educational grants to doctors and other methods of promoting medicines are completely legal and are practiced by many pharmaceutical companies. This was a bad move, since the federal government had two very interested informants and 500 volumes of documents. In October 2001, TAP was found guilty of organizing a “national conspiracy” (this is exactly the wording proposed by the federal government), inciting doctors to write fictitious bills for free samples of drugs, and bribing doctors (thus the company incentivized them to write prescriptions for Lupron) and inflating wholesale drug prices to fraudulently obtain additional Medicare benefits. As a result, TAR agreed to compensate the damage caused to the state, as well as pay fines and interest. The total amount of these payments was $885 million.

TAR had to pay another $150 million to reach a settlement agreement with consumers and insurers, who brought a separate claim against the company. Thus, the total amount of fines paid by the company exceeded $1 billion. And in 2003, the state recovered $355 million from the pharmaceutical company AstraZeneca (formerly Zeneca). Darend never worked for Zeneca, but still filed a whistleblower lawsuit against it.

In a separate case brought against several TAR employees last summer, Judge Douglas Woodlock dismissed charges of inflated wholesale prices brought by Gerstein against TAR officials. Darend testified during this trial, and, in his own words, during a week of cross-examination he was “shaken to the core.” In his lawsuit, Durend claimed that TAR paid doctors a “remuneration” of 2%, but during the trial it turned out that only one TAR client received such a remuneration, and on completely legal grounds.

In addition, the testimony that Durend gave to government prosecutors from Chicago turned out to be untrue. He claimed that TAP accounted for only half of the free drug samples it gave to doctors. In fact, the company kept a much stricter record of free drugs. Durend testified under oath that TAR, at its own expense, flew doctors to a conference held in St. Quit and Nevis (an island nation in the Caribbean), which in fact turned out to be a pleasure trip. It turned out that Darend lied again - the doctors who participated in the conference paid for the trip themselves. In addition, they stated that the conference was very useful.

“If you were able to figure out all of these situations yourself, would that have any impact on your decision to sue the company?” - Darend was asked in court. Here's his response: "If I had been allowed to solve the problems I was trying to solve, I might not have filed this lawsuit in the first place."

So, last summer the court finally sorted it all out, revealing all the inconsistencies in the case, all the logical inconsistencies and inaccuracies, but by that time TAR’s position had already been seriously shaken. Darend received $79 million in a lawsuit against TAP and $47 million in a lawsuit against AstraZeneca, his lawyer Elizabeth Ainslie became richer by $13.5 million, Gerstein and Tufts University received $16 million. The amount of the fee received by Gerstein’s lawyer was not disclosed (naturally, he was reimbursed for all expenses).

In August 2002, Darend, along with a crowd of other “informants,” participated in Oprah Winfrey’s talk show, regaling viewers with stories of his heroism. “In a financial sense, I lost a lot,” Darend sadly admitted to a popular TV presenter. True, ten months earlier he received $80 million, but this interesting detail was mentioned only in passing during the talk show.

Perhaps she received TAR on business.

Perhaps Darend received his huge reward well deservedly - he still helped expose the company’s machinations. But the fact is that in cases brought by whistleblowers against companies operating in other industries, the government limits the amount of compensation to whistleblowers to quite reasonable amounts: $200,000 for ordinary claims, $1.6 million for bank fraud claims. Still, it is very strange when the law turns into multimillionaires people who first condone the violations happening under their noses and then wash their dirty laundry in public.

"Snitches." World after Enron

After the high-profile insider revelations that led to the collapse of Enron, congressmen listen with bated breath to the speeches of “truth-tellers” talking about abuses in their own company, they are sung their praises on television, and Time magazine proclaims them “persons of the year.” In fact, many of them are driven by a banal thirst for profit, and for the sake of money they are ready to distort the facts.

The United States owes this amazing phenomenon to the whistleblower law, which was adopted in 1986. According to this law, the informant receives up to 30% of the amount that the state will collect from the criminals as compensation for the damage caused. The initiator of the adoption of the law was one of the lawyers defending state interests in the courts. Subsequently, he opened a private law office, retraining as a defender of the interests of informants, and earned millions.

After the law came into force, the courts were literally bombarded with lawsuits filed by whistleblowers. During all this time, $7.9 billion received by corporations illegally was returned to the state, and $1.3 billion of this was paid as rewards to insider whistleblowers. About 200 lawyers already specialize in handling cases brought against whistleblower claims. As rewards for information about observed or suspected crime have increased (two men who snitched on the NRA corporation received $100 million, and a man who filed a lawsuit against the pharmaceutical company Schering-Plough received $32 million), the number of lawsuits themselves has grown rapidly. In fiscal year 2003, 326 whistleblower lawsuits were filed in courts, ten times more than in 1986. Initially, the law was directed mainly against companies that carried out orders from the military department, and was intended to protect informants from among the rank-and-file employees of these companies who exposed corrupt officials. Now the main targets of informants are insurers who commit fraud with medical policies, and many other companies operating in a variety of industries. And sometimes this law also protects - and enriches - senior managers who blow the whistle on their companies.

In numbers

Billions of dollars stolen by scammers have returned to the US government treasury. The informers also got something.

If family affairs are not going well, the partners do nothing but test each other’s nerves; the last thing they can do for their relationship is to find “free ears” and pour out all the accumulated negativity there. Most often, close friends or relatives become such an emotional drain, who will not only listen, but also pat you on the head, repeating the mantra “I told you so!”

1. People's envy

It would seem, what is there to envy? You feel bad, this quarrel has deprived you of all your strength, you are upset and depressed. Your friends should support you, but what actually happens? Most often, malicious statements come from their mouths addressed to their partner, which only add fuel to the flames of discord. Because all people, some are simply jealous of your happiness, some have been single for a long time and have a grudge against you or your partner, some are gloating. In matters of the heart, you should not trust even the closest people, no matter how much you might want to.

2. Preconception

Even if the intentions of your loved ones are the purest, they remain ordinary people, with their own subjective views, assessments and experiences, which greatly influences the perception of your confession. Most often, people begin to project their own experiences and problems onto your couple. From there all these phrases: “he’s the spitting image of my ex,” “all women are fools,” “they’ll leave you, it happened to me!” Advice from loved ones will be biased and subjective, add to this the unpleasant aftertaste regarding your partner that you have sowed with your past outpourings. In the end, you will make up again, but your friends and parents will remain belligerent, eroding your confidence.

3. Other people's interference

Whether you like it or not, advice from caring people who sincerely want to help you will fall on your head. It’s one thing to listen to a person who has enormous life experience, who is happy in a relationship, living in perfect harmony with his partner. It’s another matter when all your friends are either “divorcedes” offended by life with a child in their arms, or simply people who live completely differently from how you dream. And what is the use of such advice? Help from people who do not know all the nuances of a quarrel, who have nowhere else to feel their own importance, who do not have the necessary psychological knowledge, is bad help.

4. Experiences of relatives

It’s one thing to ask your loved ones for help if the situation has taken a serious turn, and you yourself don’t know what to do. Another is to inflate a domestic quarrel into a catastrophe on a cosmic scale and run to “sneak on” to relatives for any reason. Of course, if you are an emotional person, you will get mad and forget, but your loved ones are not so quick-witted due to age or temperament. They are really very worried about you, which can affect their health. Be wiser and do not cause unnecessary worries to your loved ones, especially if the reason turned out to be insignificant.

What to do if emotions take precedence over reason? Take a deep breath, and then exhale with relief. Repeat this several times until you can bring your overwhelming feelings under control. If it’s hard, be indignant, beat a pillow, engage in active sports, and finally cry. Just don’t rush to rashly dump your worries on people not involved in the conflict. Otherwise, everything said may turn against you, doing a disservice.

Learn to control your emotions, make decisions one-on-one with your partner, and then your couple will have a chance for a happy future! Both of you will become more tolerant and calm in situations of conflict, learn to look for support not on the side, but in each other’s arms. And what could be stronger than a family that does not air its dirty laundry in public, and that is capable of solving its problems on its own? Love each other!

We women have one very feminine quality:)

Of course, on the one hand, this is a completely normal desire - to discuss with someone your concerns about your husband’s increased lateness at work lately, to conduct a detailed analysis of his recent action or statement, and of course, to grieve over your fate with a loved one person. Yes, from the outside it all may look harmless, but is it really so?!

Actually, there is one person with whom you can discuss any quarrel with your husband - and this is your mother-in-law. She is the only one who can adequately respond to your complaints against her son and, perhaps, will even help you resolve the conflict and establish peace in the family of her beloved child.

Why? Yes, because she is an interested person, i.e. she wants happiness for her son and his family and she can influence him with good intentions. Yes, it happens that the mother-in-law is jealous of her son and may even take advantage of the opportunity, having learned about your disagreements in the family, to do harm, but that’s another story. So, if your husband’s mother is a completely adequate person, then sometimes, in some cases, you can complain to her and this can bring good results.

Now I would like to figure out why you shouldn’t discuss any difficulties in the family with someone other than your mother-in-law. Everything is very simple. Once upon a time, even my mother told me: “Daughter, you don’t need to tell your friends about quarrels with your husband. You will make peace later and you will be ashamed that you somehow spoke badly about him.” I remembered her words well when I was still a girl.

But this is an example at a rough level. There are also equally important subtle reasons. The point is that a woman has enormous mental power, with the help of which she influences a man, i.e. whatever she thinks her husband is, that’s how he will be. This is true and there is no escape from it, whether we believe it or not. This is amazing, but if a woman attributes some negative qualities to her husband, then he will certainly have them and, accordingly, if she believes in him and looks for positive character traits in him or even behaves as if he already has those qualities that he lacks, then very soon he will become exactly the way she sees him. A woman can either trample her husband and ruin his life or elevate him in ways he never dreamed of.

I recently read a great story about this: “One evening, President Obama and his wife Michelle decided to go out for an unplanned dinner at a restaurant that wasn’t very fancy. Once they were seated, the restaurant owner asked Obama’s security guard if he could address first lady privately. Michelle and the man then had a conversation. After this conversation, President Obama asked Michelle, “Why was he so interested in talking to you?” She replied that in her teenage years, he was madly in love with her. President Obama said, “So if you had married him, you could now be the owner of this wonderful restaurant?”, and Michelle replied, “No. If I had married him, he would have become president."

The moral of the story (and what I want to get at) is that a lot depends on the woman. It depends on us who is next to us now - an intelligent, generous and successful man or a donkey whom we tied to the sofa in the living room; it is we who, through our behavior, reveal the limitless potential of a loved one; it is our words and actions that can create or destroy the family hearth that we wanted and dreamed about so much.