This is the kind of tale that may give some pause before they decide they have a whistle to blow. After Jim Marchese left his job as a sales rep for Cell Therapeutics several years ago, he met with the Justice Department to say the drugmaker had fraudulently marketed a cancer drug and bilked Medicare out of millions of dollars, The New York Times reports. And the government joined him in suing the drugmaker.

In April, Cell Therapeutics agreed to pay $10.5 million to the government to settle the charges. And Marchese was in line to receive as much as a quarter of that sum, or $2.8 million, as his reward for blowing the whistle. But the Times writes that the Justice Department had a change of heart and is asking a federal judge to award him nothing. The government now contends that Marchese, 38, was the mastermind of a much bigger scheme within the company than the ones on which he blew the whistle.

“Giving Marchese a share of the settlement proceeds would merely serve to reward Marchese’s egregious wrongdoing,” federal prosecutors in Seattle stated in a court filing this month. If the government believes that a whistleblower was also a “planner or initiator” of a fraud, it can argue that the reward should be reduced, even down to zero, although such instances are rare. “This happens once in a blue moon,” John Phillips, a lawyer in Washington, who is considered a leading expert on whistle-blower lawsuits, tells the paper.

For his part, Marchese denies the allegations. “I was blown away when they said they were going to zero percent,” says the former sales rep, who now works for a mortgage lender in New Jersey. And like many whistleblowers, he says he paid a high personal price for talking to the government, including being blackballed from the drug industry. “I’ve lost six years of my life, my job, my home. It has destroyed my marriage and made my life hell.”

This tangled story began in 2000 when Cell Therapeutics won FDA approval to sell its Trisenox cancer drug, but only for a relatively rare form of leukemia known as acute promyelocytic leukemia, or APL, which affects about 1,500 new patients a year. Cell Therapeutics sought ways to expand the use of the drug, which is a form of arsenic, but it settled on ways that were illegal, according to filings by both prosecutors and Marchese. (In resolving the charges against it, Cell Therapeutics denied any wrongdoing and continues to dispute suggestions that it broke the law.)

Marchese’s days at Cell Therapeutics ended in 2002 when he was fired over charges that he arranged kickbacks to drug wholesalers, an accusation he denies. That year, he also contacted FDA officials and asserted that Cell Therapeutics was illegally promoting Trisenox to treat cancers for which it hadn’t been approved. One method, according to Marchese, involved paying bogus consulting fees to doctors to attend meetings that promoted off-label use of the drug.

However, the case against the company, court documents indicate, didn’t gain momentum until mid-2004 when Marchese first met with federal prosecutors in Seattle. He gradually provided them with hundreds of company documents, tape recordings and other materials, his filings state. In early 2006, Marchese filed his whistleblower suit, which the government later joined. In such cases, a whistle-blower is guaranteed 15 percent to 25 percent of a recovery based on his or her contribution to the case.

Federal prosecutors don’t dispute his entire story, but they say he concealed the biggest part of the scheme inside Cell Therapeutics from them for a simple reason: he had created it. “Marchese personally planned and initiated the fraudulent scheme at the core of this case,” they have charged. It’s difficult to tell from filings precisely when Marchese and prosecutors turned from allies to adversaries. The assistant United States attorney handling the case, Peter Winn, referred questions to the Justice Department. A spokesman there declined to comment.

But filings show that prosecutors, apparently based on evidence uncovered during their inquiry, notified Marchese in the fall of 2005 that he was the subject of a criminal investigation related to his activities at Cell Therapeutics. Prosecutors contend Marchese engineered a complex scheme that misled oncologists and Medicare into believing that Trisenox had been approved for treating cancers other than APL. Marchese said that if he did anything wrong, it was an innocent mistake.

To make matter worse, prosecutors say, Marchese destroyed and hid evidence to conceal his role. A main witness against him is a former girlfriend. She told prosecutors that she accompanied Marchese in 2004 to a storage warehouse in New Jersey to retrieve company documents for his planned whistle-blower lawsuit against Cell Therapeutics. But she said he told her that he needed to cull the files and destroy materials that would implicate him, filings show.

There is also the issue of an unpublished manuscript by Marchese, “The Heart of the Matter.” The salesman’s former girlfriend, who is not identified by name in filings, has told prosecutors that she read and helped edit the manuscript, which she says details Marchese’s days at Cell Therapeutics, including his “successful efforts to illegally market Trisenox.” He disputes that, describing the manuscript as an eight-page document and a crude attempt at fiction rather than fact. Prosecutors say they would like to see the manuscript so they can judge for themselves.

Next month, a federal judge in Seattle will hold a hearing to determine what Marchese deserves as a whistleblower, if anything. Marchese’s lawyers, who are seeking the maximum 25 percent, said in a filing that prosecutors tentatively dangled a settlement offer but then did not make it formal. He said that if the government believes that he is a criminal, it should have indicted him, a course prosecutors have chosen not to pursue. He also contends that the government, by denying him what he considers his just reward, is sending a message that will deter other whistle-blowers.

“They are saying that it is better to commit fraud than to report it, and that is a shame,” he said.

For his part, Phillips, the lawyer and whistleblower expert, is not so sure. He said that while he was unaware of the facts of Marchese’s case, the law has boundaries for a reason. “If the message goes out that you better not start a fraud internally and think you can profit it from it, then that is a good message to send out,” he said.

Source: The New York Times