This article makes one statement for sure is that someone is ready to gamble on just about anything. This kind of dilutes the seriousness of the situation when investors basically are sitting back and bet on the outcome of litigation. So now it appears bets outside of the normal areas of financial fraud are coming up for grabs. The Glaxo case that was on 60 Minutes took 8 years to settle so again this is a long time hedge bet if you will. 
The Glaxo Case In Puerto Rico–Bad Drugs and Bad Manufacturing-WhistleBlower Lawsuit
I wonder how folks at the FDA may feel about this when investigating potential crimes and know that hedge funds are out there betting on the outcome? Would a whistle blower still come forth with “doing the right thing” if they were aware that their actions as well as themselves were going to make a bunch of investors rich? Would investors at any point in time have any influence here behind the scenes?
I think this is a case for the SEC to ponder in the area of ethics. BD
Hedge fund managers say that US whistleblower lawsuits filed against drug companies could provide attractive investment opportunities.
Under US rules, individuals that file lawsuits against fraudulent companies on behalf of the government are entitled to a share of the settlement, between 15 and 30 per cent. Such suits often run to hundreds of millions of dollars. In October, UK drugmaker GlaxoSmithKline (GSK) agreed to pay $750 million (£480 million) to settle charges related to the manufacture and distribution of its drugs. Of the $436 million that went to the government as part of the civil settlement, Cheryl Eckard received $96 million for blowing the whistle on her former employer.
'The investment community is already looking at those kinds of opportunities,' says David Desser, managing director of Juris Capital, a US hedge fund that specializes in litigation finance.
The key is visibility: how much can the fund find out about the case? Without a reasonable chance of quantifying the probability of success, the fund manager is unlikely to invest, says Desser. He adds that he would always look to have the smallest stake in any settlement, behind the whistleblower and his or her legal counsel. Putting in more than that could change the incentives.
Dorfman says that an increase in hedge fund investment would be unlikely to affect the number of people coming forward with whistleblower cases. The high number of cases and the large payouts probably provide enough incentive, independent of what funds might offer them.
Hat Tip: Pharmagossip
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