The Detroit Free Press is reporting that DaimlerChrysler and U.S. government attorneys have reached an agreement in which the company will pay $185 million to settle charges that it paid bribes to foreign officials to obtain at least $50 million in business profits. Company auditor David Bazzetta objected to the bribes, and went over his boss' head to try to get the company to stop the practice. In 2004, the company fired him. Company officials are now expected to answer the charges in a federal court in Washington, DC, next week. The company probably could have saved a couple million dollars if they had just listened to their whistleblower. Better late than never, I say.
The Maryland Senate yesterday passed a state version of the False Claims Act (FCA) by a vote of 37 in favor and 8 against. Before passing this bill, however, the Senate watered it down with an amendment. The Maryland False Health Claims Act of 2010, SB 279, as amended, no longer allows the state (or a whistleblower acting on behalf of the state) to obtain compensatory damages. The amendment also requires a court to dismiss the action if the State of Maryland declines to intervene. The Senate's amendment also waters down the provision for attorney fees. It now provides that attorney's fees and costs "may" be allowed by the court, and that the court must consider the amount of penalties and damages recovered. This last provision is contrary to prevailing law that calls on courts to award attorney fees based on market rates, without regard to any proportionality to the amount of recovery. The Senate's bill also allows courts to reduce the amount of the whistleblower's recovery if the court finds that the whistleblower participated in the violation. A more enlightened view would have barred recovery only if the person caused the violation through actions other than following orders of a superior. Also, I mentioned before that Maryland could gain even more if this bill covered all frauds, and not just those arising in medical care programs. Perhaps the Maryland House will consider these shortcomings when its Judiciary and Appropriations committee conducts the bill at its first hearing on April 1. The Senate bill does include an anti-retaliation provision, Section 2-607, that would allow employees to sue if they suffer retaliation for participating in a lawsuit, objecting to a violation, or refusing to participate in a violation. According to a Baltimore Sun article, the state administration estimates that between 5 and 10 percent of the state's $6 billion in annual medical spending is lost in fraudulent claims. The article quotes a spokesperson for the hospital association as saying that the amendment would cost the state the extra 10% it would receive from federal false claims lawsuits in the state. This refers to the Grassley Amendment to the federal FCA which increases a state's share if the state's law meets certain minimum requirements. Apparently, making hospital administrators happy is more important to Maryland's Senators than protecting taxpayer dollars.
Two years ago, this blog reported on a study by a University of Chicago researcher that finds employee whistleblowers detect more corporate fraud than any source of detection. Now Dallas News columnist Will Deener has reviewed the same research by Adair Morse. The study is about to be published in The Journal of Finance. Of the pool of 216 cases of corporate fraud from 1999 to 2004, whistleblowers detected the fraud in 17% of the cases -- more than any other group. Short sellers came in second, uncovering the fraud in 14.5% of the cases. Analysts were third, with 13.8%. The Securities and Exchange Commission (FCA) detected only 6.6%.
Morse also finds that the qui tam reward for whistleblowers in the False Claims Act (FCA) is a powerful inducement to encourage employees to detect and report fraud. In the health care industry, where most FCA qui tam cases arise, the rate of whistleblower detection jumps to 41% -- a testament to the value of rewarding whistleblowers.
The finding about the role of whistleblowers as fraud detectors matches what the PriceWaterhouseCoopers Global Economic Crime Survey and the Transparency International 2009 Global Corruption Report: Corruption and the Private Sector (GCR) found. Whistleblowers, not government agencies, are the best detectors of fraud.
George Fort has won over $2 million in damages and an order of reinstatement to his position as Chief Financial Officer (CFO) of Tennessee Commerce Bank. Under the Sarbanes-Oxley Act (SOX), the reinstatement order has immediate effect and will not be stayed while the bank appeals. 18 USC § 1514A(b)(2)(A) and 49 USC § 42121(b)(2)(A). The Occupational Safety and Health Administration (OSHA) issued the order on Wednesday. Congratulations to Tennessee attorney Bruce Shine who represents George Fort.
A growing trend in employer attempts to evade liability for discrimination is to find a manager with no record of discrimination and use that manager to be the official "decision maker" for firing the employee. Civil rights and whistleblower advocates use the "cat's paw" theory to argue that the official decision-maker was just a "cat's paw" for the manager who really wanted the employee fired for an illegal reason. The U.S. Supreme Court is now poised to decide whether it will consider the validity and requirements for establishing that a decision-maker is a cat's paw. It invited the Solicitor General to file a brief on the issue. Solicitor General Elena Kagan has now filed that brief and it is an excellent explanation of why we need the cat's paw theory to prove illegal discrimination. Anyone who needs to prove employer knowledge of protected activity, or that animus by one official is connected to the decision-maker, should study this brief.
NEWS FLASH: On April 19, 2010, the Supreme Court granted Vincent Staub's petition and agreed to hear his case.
Federal Administrative Law Judge Daniel Leland issued an order yesterday reinstating truck driver Cynthia Ferguson to her job with New Prime, Inc. He also awarded her $26,601 in back pay, $2,269 in compensation for her personal property, $50,000 in compensatory damages, and $75,000 in punitive damages for conduct that "was both reprehensible and inimical to the purpose of the Act." That Act is the Surface Transportation Assistance Act (STAA) that protects truck drivers when they blow the whistle on safety violations.
Ferguson refused to driver her truck over the Donner Pass near Reno, Nevada, on December 25, 2008. Ferguson saw the weather and the hazardous driving conditions as she drove. After consulting other drivers, listening to radio weather reports and receiving reports from the State authorities advising against travel, Ferguson said that she was not going to drive through Donner Pass until weather and driving conditions improved. Her dispatcher got upset with her and recommended that New Prime, Inc., fire her. Prime then dispatched Ferguson to Springfield, Missouri, where a Prime management official, Jack Ewing, fired her.
The New Jersey Supreme Court heard arguments on Tuesday in a case where whistleblower Joyce Quinlan is asking for reinstatement of her $10 million jury verdict. An appellate court had vacated the verdict finding that Curtiss-Wright was justified in firing Quinlan for taking company documents for use in her litigation. The New Jersey Law Journal reports that the questions during oral argument suggest the state supreme court is likely to agree that whistleblowers cannot use company documents without the company's permission, even if those documents show that the company engaged in illegal discrimination. I hope the court's decision will make clear that:
- If the company permitted you to see the documents during work, then copying the documents is not theft if you leave the originals for the company.
- If the documents show the company engaged in illegal conduct, then it is against the public interest for the company to require employees to keep the documents secret.
- If a whistleblower sees documents while performing normal work duties and copies them for use in official government investigations or judicial proceedings, then making and using the copies is protected activity.
- If a company has a duty to provide documents in discovery and fails to do so, then the company should be punished and not the employee who caught them breaking the law.
If the New Jersey Supreme Court decides instead that company policies of confidentiality are more important than eliminating discrimination, then it will point to the need for a federal private sector whistleblower law that makes the scope of protected activity clear. The case is Quinlan v. Curtiss-Wright Corp., A-51-09 (64,728). The question presented is, "Was plaintiff’s removal of confidential documents from her employer for use in advancing plaintiff’s gender-discrimination lawsuit against the employer protected activity under the Conscientious Employee Protection Act?"
Sherron Watkins became a Time Magazine Person of the Year in 2002 (with Cynthia Cooper of WorldCom and Coleen Rowley of the FBI) after blowing the whistle on Enron's house of cards. Now she has published a review of No One Would Listen, the new book by Harry Markopolos. Markopolos tried repeatedly, over nine years, to get the Securities and Exchange Commission (SEC) to investigate Madoff's fund. Markopolos figured out that it was a fraudulent Ponzi scheme, and told the SEC, but could not get them to lift a finger.
Watkins can relate. In her review published in Financial Times, Watkins says, "Both Markopolos and I were by turns dogged, shocked, frustrated and treated like pariahs." "No one would listen to me either," Watkins adds. "Unfortunately, whistleblowers who expose the emperor as having no clothes are usually ignored. The apparent success of the emperor – Madoff or Enron – and the power and popularity they enjoy can make them immune to dissenters."Continue Reading...