Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

Frank Palestro has been an officer of the New York Police Department for nine years.  Other officers thought well enough of Palestro to make him their union delegate. However, when he saw another officer telling subordinates to write summonses for traffic violations that they never witnessed, refusing to take complaints and tampering with a gun at the crime scene, he had to speak out. Palestro made three anonymous calls to report this corruption. Then, the logs of these calls mysteriously appeared on his locker at the stationhouse. Now Palestro has been ridiculed and victimized for exposing corruption within the department. "I was the [Patrolmen's Benevolent Association] delegate, and now I'm labeled a rat for doing what I was supposed to do," said Palestro. "This will stay with me for the rest of my career." The "code of silence" that uses social pressure to keep police officers from reporting crimes committed by other officers is still alive and well. The story reminds us of the brutal retaliation Officer Frank Serpico received in 1970 and 1971, as documented in the Sydney Lumet movie, Serpico. Palestro’s reputation has been scarred for standing up against corruption, a reprehensible reaction from the NYPD officers. Thank you to Gothamist.com for bringing this story to light.

Intern Quinn McCall contributed to this blog entry.

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We just received a lovely visit from Keiko Nagai Ito and Tomoshige Nakamura of CrossIndex Corp. The are reviewing whistleblower protection laws from around the world in preparation of Japan's 2011 review of its Whistleblower Protection Act.  Pictured here are Phil Barrett (intern with the National Whistleblowers Center), myself, Keiko Nagai (consultant to CrossIndex Corp.), Tomoshige Nakamura (CEO of CrossIndex Corp.) and Michael D. Kohn (president of the National Whistleblowers Center).

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The Center for Progressive Reform (CPR) has released a report on the historic problems OSHA has had in making American workplaces safe. Called Workers at Risk: Regulatory Dysfunction at OSHA, the report explains how OSHA has never had the funding it needs to keep pace with the new chemicals and technology used in American workplaces. Also, an anti-regulatory political environment has made it hard for OSHA to issue regulations on current safety needs.

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Federal Judge Richard W. Roberts has denied a motion to dismiss a major suit claiming the Japanese manufacturer Toyobo sold millions of dollars of defective bulletproof vests.

Dr. Aaron Westrick filed the suit under the Federal False Claims Act in 2004, and the U.S. government formally joined the suit in 2005. The suit alleges that Toyobo conspired with Second Chance Body Armor, Inc. to sell defective body armor made of Toyobo's Zylon material.

Thousands of vests were sold to police departments across the United States and the federal government. One police officer was killed and others were injured as a result of the use of defective Zylon in vests. The suit alleges that Toyobo and the companies who sold these vests knew about Zylon defects and concealed this information from their customers. The full text of a press release by the National Whistleblowers Center (NWC), with links to key documents, follows in the continuation of this blog entry.
 

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Hundreds of Transportation Security Officers (TSOs) and their allies rallied today in Washington for the right of these federal employees to have union recognition. Union leaders remembered that many union members gave their lives in the rescue efforts on 9/11, took down the shooter at Ft. Hood, and defend our security every day as pilots, flight attendants and law enforcement officers.  Indeed, we would be more secure if TSOs knew they had protection on the job when they raise safety concerns against management.  The American Federation of Government Employees (AFGE), AFL-CIO, has just filed a petition to represent 40,000 TSOs, and is rallying support for HR 1881 to assure these dedicated public servants the freedom of association, speech, and petition for redress of grievances that are guaranteed in the First Amendment to the Constitution. Pictured here is Amanda Schroeder of AFGE Local 2157 in Portland, Oregon. Some attenders even signed up for the National Whistleblowers Center's Action Alert network to call for passage of HR 1507 and assure all federal employees a right to trials by jury in their whistleblower cases.

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This month, the Missouri Supreme Court recognized and defined a tort claim for whistleblowers. The Court explained that the traditional "employment-at-will" doctrine is not static, and may be changed to reflect public policy. In Fleschner v. Pepose Vision Institute, P.C., the Court confirmed that Michelle Fleshner had a right to sue for wrongful discharge.  Fleshner claimed she was fired after she spoke with a wage and hour investigator for the U.S. Department of Labor. The Court remanded the case for a new trial due to the trial judge's failure to conduct a hearing on a juror's alleged anti-Semitic remarks. The Court also established that jurors should be instructed to find unlawful retaliation if retaliation was a "contributing factor" in the employer's adverse action. "No one can lawfully do that which tends to be injurious to the public or against the public good," the Court held.  The Court said public policy can come from the Constitution, statutes, regulations or governmental rules. "To find otherwise would allow employers to discharge employees, without consequence, for doing that which is beneficial to society," the Court explained. Missouri now protects employees for "refusing to violate the law," or for, "reporting wrongdoing or violations of law to superiors or public authorities."

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The Senate version of the Whistleblower Protection Act (S.372) contains troublesome provisions that actually reduce whistleblower rights but may be passed soon due to a Senate tactic called “hotlining.” When a bill is “hotlined” in the Senate, there is no roll call vote, no debate, no amendment process, and the bill is passed after a certain amount of time as long as no Senator objects. Even more outrageous, in some instances, the “hotline” notification may not even reach some Senators! Although many provisions of S.372 enhance whistleblower protection, there are many “poison pills” that must be corrected, including these:

• the strong FBI whistleblower protection law is repealed (page 46)
• agency heads (covering over half the federal workforce) may unilaterally fire a whistleblower with no administrative or judicial review (page 73)
• the agency that fires a whistleblower is given exclusive power to investigate on whether that agency broke the law (page 70)
• gives the federal agency the ability to request the dismissal of a case without giving the employee a hearing or jury trial (page 57)

The House of Representatives version of the bill (HR.1507) enhances whistleblower protection and the National Whistleblowers Center fully supports the passage of the House version.

It only takes one Senator’s demand that these issues be fixed in order to stop this Trojan horse from destroying existing whistleblower protections. That Senator can be yours. Please TAKE ACTION and contact your Senator today!

*Philip Barrett (a NWC intern) contributed to this posting

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The National Employment Lawyers Association (NELA), is presenting "Effective Appellate Advocacy In Employment Cases." Using a mock case, the seminar will feature workshops on brief writing and oral argument. This program will be held on March 12 - 13, 2010, at the Crowne Plaza Hotel Dallas Downtown, in Dallas, Texas. Use this link to register now.

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On February 19, 2010, David Colapinto participated in an on-air panel during the “Your Call”radio show. Mr. Colapinto is General Counsel of the National Whistleblowers Center. Other panel members included Daniel Ellsberg who released the historic Pentagon Papers which helped to shorten the Vietnam War and Marsha Coleman-Adebayo a former analyst for the EPA who was fired was while blowing the whistle on contamination in South Africa. Daniel Ellsberg is releasing a movie about his story “The Most Dangerous Man in America” which is premiering in the California area in early March.

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In the continuation of this post, I provide the full text of my comments to OSHA about its whistleblower program.  OSHA is conducting a public session to hear from stakeholders on March 4, 2010, at its Washington, DC headquarters.  My comments are presently scheduled for 5:30 p.m.

My attached comments focus on the benefits of consolidating whistleblower investigators into a single national office.  I also make suggestions for changes to the investigations manual, on how to train investigators, and in appreciating developments in whistleblower law.  If you have comments about my comments, I would be happy to hear from you.

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Florida nurses rallied at their state capitol this week to call for minimum staffing ratios and whistleblower protection. The Miami Herald was there to report on the rally. The nurses cite research showing that improving nurse-to-patient ratios saves lives and costs less than alternative safety procedures that would cost more. The bill would also provide employee protection for nurses who refuse unsafe assignments or file complaints against the hospital or clinic. These protections would drastically improve their right of free speech within the workplace. The march was sponsored by the National Nurses Organizing Committee which is organizing nurses in Arizona, California, Florida, Illinois, Maine, Missouri, Nevada, Ohio, Pennsylvania and Texas.

Intern Quinn McCall contributed to this blog entry.

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Iceland’s economy has been ravaged by the international financial crisis. Rage against corruption sparked protests.  Iceland's legislature is now trying to resurrect their economy by ensuring that citizens will have free speech rights that will spur economic growth. On February 16 members of the Icelandic Parliament proposed a bill which could make Iceland a “journalist haven.” It would also provide protections for whistleblowers and other sources who expose fraud. Members of Parliament are obviously keen to the role fraud played in the current crisis. National Public Radio reports on the leadership of the Icelandic Modern Media Initiative (IMMI) in calling for a slew of reforms.

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Congratulations to carpenter Dennis Brown for his courageous efforts to expose unhealthy conditions at the Broward County School District in Florida. Brown raised concerns about the atrocious environment he was forced to work in. A mildew infested classroom made his asthma worse. He brought in notes from his doctor confirming the health effects, but officials never transferred him to a safer facility. Brown’s attempts to expose this danger fell on deaf ears, “I’ve gone to the superintendent and all the school board members, but they look the other way,” Brown said. EBossWatch reports that a jury has now determined that school officials must pay $210,000 to compensate Brown for the retaliation he suffered. Perhaps those jurors could relate to the parents who might wish that school carpenters, and students, have nothing but safe places in public schools. 

Intern Quinn McCall contributed to this blog entry.

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Pipe manufacturer JM Eagle is lashing out against whistleblower John Hendrix, claiming that he spoke to a prospective witness and offered that witness a kick-back. JM Eagle has made the claim in an interview with industry magazine PlasticsNews. Meanwhile, Hendrix's attorneys at the Washington, DC, law firm of Phillips & Cohen are denying the allegation, calling it a distraction.  Hendrix was an engineer with JM Eagle, and he claims that the company knowingly supplied pipe that lacked the required tensile strength. JM Eagle denies that allegation. Still, anyone who likes to have water arrive cleanly to their home, and not flooding their streets, will appreciate the value of good tensile strength. 

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Tonight Participant Media kicks off its social action campaign for the film The Informant! with a panel discussion entitled “Anyone Can Whistle – The Essential Role of the Whistleblower in American Society.” A panel of whistleblowers will be discussing their own personal experiences and the importance of advocating for change. I cannot overstate the importance of citizen involvement in achieving meaningful protections for whistleblowers. You can do your part by Taking Action in support of H.R. 1507 which would protect all federal employee whistleblowers from retaliation.  You can also Support the Clemency Campaign for UBS whistleblower Bradley Birkenfeld by sending a letter and joining our new Facebook Cause page.

You can watch the event live online beginning at 7:00 pm EST tonight by clicking here.

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I had the pleasure this evening of speaking to Prof. Jane Uebelhoer's business ethics class at Marymount University in Ballston, Virginia, this evening.  The class was inquisitive, and we had a wide ranging discussion about the history of whistleblower protections, current controversies and the need for new legislation.  They were surprised to learn that our nation's patchwork of whistleblower laws still has gaping holes where there is no protection for whistleblowers, such as in health care.  I was pleased to learn that the class had such a ready consensus that every American should have access to a jury trial if they are fired for reporting any type of illegality.  Hopefully, they will soon all join the National Whistleblowers Center's Action Alert network. I thank Prof. Uebelhoer and student leader Samuel Papkin for inviting me to this promising class. Here is my photo of Marymount University's Ethical Issues in Business and Society class of 2010:

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Albert D. Campbell worked for Lockheed Martin from 1981 to 1995. He worked as a financial analyst, and was promoted in 1989 to chief of cost control for the $3.5 billion LANTIRN project. The LANTIRN project built navigation and targeting pods for fighter jets. Between 1993 and 1995, Campbell used sophisticated analytic exercises to show that LANTIRN was wasting millions of dollars in non-productive costs.  Company management warned him that it would be career suicide to raise these concerns. In 1995, Campbell filed two qui tam whistleblower suits under the False Claims Act (FCA) against Lockheed Martin, alleging that the company had defrauded the federal government. The government intervened in one case, and in 2003, Lockheed Martin entered into a settlement of both claims. Campbell received a reward of $8.75 million from the government.  This reward was paid to his attorneys who deducted their fee of $3.5 million and then paid $5.25 million to Campbell. Instead of reporting this income and paying taxes on it, Campbell filed a "disclosure" of the reward, but paid no tax. Campbell did not consult with a tax attorney, but prepared and filed his own tax return. When the IRS disagreed with this tax position, Campbell claimed that his reward was not taxable income, but rather an assignment of the government's non-taxable fraud recovery.  The Tax Court has disagreed. While the government had no duty to pay tax on its recovery, the reward to Campbell was income to him, and taxable.  The Tax Court did allow Campbell to deduct the $3.5 million paid to his attorneys. For the other $5.25 million, Campbell now has to pay taxes, and also a penalty for asserting a position that had no reasonable basis. The case is Albert D. Campbell v. Commissioner, 134 T.C. No. 3 (January 21, 2010). Campell testified to a House Committee about his support for FCA amendments. It is too bad that the government could not be content with collecting the taxes and interest due. Imposing a penalty on the whistleblower works a disservice to the goal of encouraging knowledgeable officials to come forward with information that will actually save the taxpayers money. Given that this decision now requires whistleblowers to pay taxes on qui tam rewards, it would be wise for whistleblowers getting such a reward to hire a good tax attorney to prepare their return.

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A jury in Andrews, Texas, has acquitted an experienced nurse of charges that she misused official information when she sent an anonymous letter to a state medical board to complain about a doctor's malpractice.  Anne Mitchell had been a nurse at the Winkler County Memorial Hospital for 25 years. In April 2008, Dr. Rolando G. Arafiles Jr. arrived. At the trial, other nurses confirmed that Mitchell had good grounds to be concerned about Dr. Arafiles' malpractice, and the hospital administration had not done enough. The New York Times reports that the jury foreman questioned why Mitchell had ever been arrested. “We just didn’t see the wrongdoing of sending the file numbers in, since she’s a nurse,” Harley Tyler, a high school custodian, told the paper. Mrs. Mitchell, who did not testify in her defense, said after the verdict that she had been trying only to protect her patients. “It’s a duty to every nurse to take care of patients,” she said, after wiping away tears of relief. Rebecca Patton, president of the American Nurses Association, told the Times that the verdict is “a resounding win on behalf of patient safety.” Mitchell's lawyer, John H. Cook IV, said “there was great damage done in this case, and this [acquittal] does not make them whole.” Cook has now filed a wrongful discharge case on behalf of Mitchell and her co-worker. This case is a good example of why whistleblowers need access to jury trials.  The jury could tell when the nurse was acting properly in reporting medical malpractice, even when the sheriff, the prosecutor and the judge could not.

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Sen. Charles Grassley (R-Iowa) has introduced a bill that will make changes to the False Claims Act (FCA) in response to court decisions that limited the rights of whistleblowers.  The main features of S. 2964 (introduced January 28, 2010) would add administrative procedures designed to make it more difficult for crooks to set up phony medical providers to submit false bills to Medicare and Medicaid.  However, in a third branch of the bill, Sen. Grassley proposes to fix a writing error introduced last year to the anti-retaliation provision. Sen. Grassley also proposes a nationwide two-year statute of limitations for retaliation claims.  The national statute of limitations would address the Supreme Court's holding in Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409 (2005). The Supreme Court said that the FCA's six-year statute of limitations did not apply to the FCA's whistleblower protection claims.  Whistleblowers would have to respect the statute of limitations in their home state instead. (Karen Wilson's retaliation claim was then dismissed because she missed North Carolina's three-year statute of limitations.) Sen. Grassley also proposes to expand the definition of "original source" so that a whistleblower can still receive rewards if he or she has, "knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and has voluntarily provided the information to the Government before filing an action . . .." The Senate has referred S. 2964 to its Finance Committee.

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The LA Times reported last week on a series of trends in securities fraud. The $65 billion lost in the Madoff scandal highlights the huge losses millions of investors suffer as a result of corporate fraud.  Meanwhile, the new enforcement chief at the Securities and Exchange Commission (SEC) reports a dramatic rise in enforcement actions. The numbers of formal investigations and restraining orders have approximately doubled.  The total sum of restitution orders has more than doubled.

After serving his first year as the SEC's enforcement director, Robert Khuzami is now calling for improving the protections for whistleblowers, and even rewarding them for turning in their bosses or co-conspirators.  Khuzami proposes "cooperation agreements" that could assure whistleblowers that they will receive leniency or exemption from SEC enforcement action, or legal assistance in the event of prosecution. Khuzami is also calling for changes in the law to protect whistleblowers and even to reward them financially. "Whistle-blower laws provide a powerful incentive for people to come forward," Stephen M. Kohn told LA Times reporter Kathy M. Kristof.  Kohn is Executive Director of the National Whistleblowers Center. Kohn adds,  "The U.S. government has collected billions and billions of dollars as the result of the False Claims Act." Khuzami's call for a whistleblower reward recognizes what works.  The reward provided by the False Claims Act (FCA) has recovered billions of dollars for U.S. taxpayers.

Kristof's article notes that the success of Khuzami's new proposal may hinge on what happens to the world's most famous corporate and tax fraud whistleblower, Bradley Birkenfeld.

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I previously reported that the Occupational Safety and Heath Administration (OSHA) had scheduled an open forum for Wednesday, February 10, 2010.  OSHA postponed the "stakeholders meeting" due to the snowfall in the Washington, DC, area.  It is now rescheduled for Thursday, March 4, 2010, from 9:00 a.m. to 6:20 p.m.  Doors will open at 8:30 a.m.  It will still be held in the auditorium of the Frances Perkins Building, 200 Constitution Ave., NW, Washington, DC  20210.  Enter at the visitors entrance at 3rd and C Streets, NW.  I am scheduled to speak at 5:30 p.m.  OSHA will now make live video available during the event.  To look in, visit:

http://www.dol.gov/dol/media/webcast/live/

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On January 28, 2010, the Washington Post announced that the Swiss government has suspended the disclosure of information about tax cheats to the United States under a February 2009 “deferred prosecution” agreement and may seek to renegotiate the deal.  Under the agreement the Swiss government was supposed to provide the U.S. with 4,450 accounts of the 52,000 secret accounts not declared to the IRS.

Basically, this means that 14,700 people walked away without prosecution under the IRS amnesty program, the head of entire illegal UBS program Martin Liechti was allowed to return to Switzerland without prosecution, the 4,450 tax cheats are likely to escape prosecution, and Bradley Birkenfeld (the person responsible for blowing the whistle and ending the illegal UBS program) is still the only banker sitting in prison.

When will the U.S. government wake up?  Bradley Birkenfeld’s prison sentence is not only unjust in terms of how they treated every other person associated with the UBS scandal, it is permanently harming national and international efforts to fight corruption.  Once again, what whistleblower is going to want to come forward after seeing how Mr. Birkenfeld was treated?

Please TAKE ACTION to stop this injustice now!

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We are pleased to have the talents and energy of a new group of interns for this winter semester.  Here they are:

Top row: Michelle, Jacquie, Jamie. Next row: Quinn, Caitlin. Penultimate row: Ryan, Kevin, Tom. Bottom row: Amanda, Amy, Kylie, Lauren. Not pictured: Kevin, Megan, Phil.

We remain indebted to our interns for their innumerable contributions and limitless energy. Thank you.

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With sadness we report the death of Howard Zinn, historian, author, activist, and founding Board member of the National Whistleblowers Center. Other sources have already reported Zinn's remarkable biography. I recall how the time flew by thirty years ago when I read A People's History of the United States during subway rides to law school. Zinn's clear and informative writing made me wish I had taking history classes in college.

Here is a photo of Howard Zinn speaking last year at Busboys and Poets in Washington, DC:

Zinn played an important role in assisting Daniel Ellsberg in the disclosure of the Pentagon Papers.   Zinn, perhaps better than anyone, recognized the historical importance of putting the truth about the Vietnam War on the public record.

After ferrying the Pentagon Papers, Zinn continued his guiding role in the whistleblower movement. Zinn was a teacher and mentor to two partners of Kohn, Kohn & Colapinto, LLP, specifically Stephen M. Kohn and David Colapinto. Both had the privilege of studying history from Zinn at Boston University. Later, Zinn wrote a preface for Stephen Kohn's American Political Prisoners: Prosecutions Under the Espionage and Sedition Acts.

When Stephen Kohn, his brother Michael Kohn, and David Colapinto decided to form the National Whistleblowers Center, Howard Zinn joined them (as did Dennis Brutus, who death we mourned just last month). Zinn remained a Board member of NWC for the remainder of his life, just as he supported whistleblowers throughout his professional life.  His writing, speaking and activism have inspired generations to desire peace, work for justice and shine of the light of truth wherever it is needed.

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Yesterday, Transparency International (TI) released a practical guide for combating corruption in relief and reconstruction efforts.

“Disasters like the catastrophe in Haiti highlight the absolute necessity of ensuring that the funds and supplies allocated actually reach those in need. Corruption in emergency aid is a matter of life and death. Stopping and preventing corruption should be a strategic priority for the humanitarian community,” said Christiaan Poortman, Global Programmes Director at TI.

Strong whistleblowing mechanisms are recommended as the best way to stop corruption and ensure that humanitarian aid gets where it needs to go.  The report states that a “confidential and independent mechanism (whether internal or exernal) helps create an environment intolerant of corruption, in which staff feel safe to blow the whistle without fear of reprisal.”  TI recommends that whistleblowing actually be made a staff duty and if an investigation finds corruption, the agency must take action to ensure that staff trust the whistleblowing process to correct their complaints (Pages 19-20).

For entire report please click here.

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