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

US Army Corps of Engineers whistleblower Bunny Greenhouse is featured in a chapter of the new book, Your America: Democracy's Local Heroes. The book by John Siceloff and Jason Maloney arises from episodes of the PBS series "NOW" with David Brancaccio.

The book is available online for $24.95 plus shipping and handling from Powell's Books at: http://www.powells.com/biblio/2-9780230605336-0 
 

Bunny Greenhouse blew the whistle on the Army's contracting abuses in giving no-bid contracts to Halliburton to manage Iraq's oil after the invasion. Here, Bunny presents a copy of the book to her attorney, Michael D. Kohn:
 

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Two False Claims Act Settlements were reported yesterday, totaling approximately $280 million in fraudulently obtained government contract money that is now being returned to the US taxpayers.

• Health insurance giant Amerigroup has settled with the governments of the United States and the State of Illinois, agreeing to pay $225 million plus legal fees. Amerigroup was exposed by whistleblower Cleveland Tyson, who was the company's Government Relations executive. He brought the suit in 2002, which went to trial, where, according to a press release issued by his attorneys:
  
  "...the jury found that Amerigroup deliberately avoided enrolling recipients with costly health conditions or who were pregnant and in their third trimester. These actions were taken while Amerigroup received IDPA payments calculated on Amerigroup providing healthcare to all enrollees."
  
  
• CoxHealth, a large non-profit hospital chain in the Springfield, MO area, has announced a $60 million FCA settlement stemming from allegations of "improper Medicare billing and questionable business relationships."
  
  
  

The False Claims Act is the most effective whistleblower law on the books, as these settlements show, but it has been eroded in recent years by negative court decisions, such as  Allison Engine Co., Inc. v. United States, ex rel. Sanders. To counter these decisions, Senator Charles Grassley and other Congressional leaders have introduced a bill to amend the FCA. Most recently, the bill was approved by both the Senate and House Judiciary Committees.

 

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Yesterday the House Judiciary Committee approved legislation to amend the False Claims Act, sending the measure along to be voted on by the full House of Representatives. Companion legislation (S.2041) was passed by the Senate Judiciary Committee in April.


The False Claims Act Corrections Act will help undo some of the damage that has been done to the FCA in recent years by poor judiciary decisions, such as Allison Engine v. US.


I will post the full text of the approved language as soon as it becomes available.

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If you do the math on a Washington Post story yesterday it turns out the paper reported on what amounts to 225 scandals.

The Justice Department told the Post there is a backlog of approximately 900 False Claims Act cases, and that the backlog could take years to unclog. Obviously the time involved can damage the ability to pursue even the most meritorious cases. Justice also told the Post that they reject about 75% of all filed FCA cases, and most of those have little merit. I would bet that quite a few of the cases rejected have some merit but why quibble over that? If there are 900 cases in the system and a quarter represent cases that should be pursued, that means there are 225 good cases of fraud stuck in a black hole. That means we have not one scandal but as many as 225 scandals, because each such case deserves priority treatment the Justice Department simply does not have the resources to handle. These 225 cases have to be relatively big and they likely involve major contractors who can continue to commit fraud against the United States. Of the remaining 675 in which the Justice Department may investigate and see no merit, the inability to kick them back to private attorneys quickly does not help.

Private Attorneys would at least like to clear their own backlog but they would also like the chance to pursue some of those cases. Justice may have legitimate reasons not to pursue a case a private attorney might take a chance on, but if the case waited three years for an initial determination very few whistleblowers will still have the resources, time and ability to continue the fight even if they are right.

But the fact is, according to Justice there must be at least 225 cases that have merit. How can we let this continue? We know. We know by Justice's own procedures that there must be some 225 cases of major fraud and nobody can even get to deal with them. That's a pandemic of fraud and we are not fighting the disease. Within those 225 cases that means, important safety concerns and governmental functions are being undermined by unscrupulous contractors. The contractors who profit from fraud gain a competitive advantage and push out honest contractors who want to do good work. Fraud is very profitable and if you can get away with it provides a great competitive advantage. Right now you can get away with it.

These aren't small cases. Nobody takes the trouble to file a False Claims Act case these days if they can't find at least millions in damages because by the time the Relator gets their share, it does not leave much for what now appears to be years and years of legal work. Billions of dollars of fraud are lost this way. The whole point of the FCA is to punish and deter fraud. How do you deter fraudulent activity when it is clear to everybody that the Justice Department does not have the people power to stop it?

At least some of the fraud must compromise vital government activity. More and more contracts are being used to do what we used to think of as inherently governmental functions. The very mail room in the Justice Department where these cases arrive is run by a private contractor now. Its scary to think about how dependent national security is on private contractors who can commit fraud in this environment. It is also hard to think of anything that corrodes our basic faith in government more readily than the extensive nature of this fraudulent activity.

The Post story blew the whistle (if you will pardon the expression) on the problem, but who are we to blame? Certainly not the career Justice lawyers who are overworked beyond reason. Assistant United States Attorneys working on False Claims Cases have dockets of 60 cases. Open the file on each case and look at it and a whole week is gone. Main Justice has only 75 lawyers they can assign to these cases. The people trying to deal with these cases want to investigate the cases responsibly and they want to win even in a judicial environment hostile to whistleblowers. There are simply not enough attorneys and investigators to go around.

Justice has approximately the same number of attorneys working on these cases that they did in the early 1990s when far fewer cases were brought, far less government functions were handled by private contractors and when the kinds of cases were not generally as complicated or big. How do you investigate a fraud, which may have occurred in Afghanistan or Iraq? How does the same lawyer become an expert on Medicare regulations AND Defense contract procedures overnight?

Here's a starting suggestion. Hire all the lawyers. There has never been a better time. The only area of law experiencing growth right now besides fraud is bankruptcy, so there should be plenty of attorneys looking for work. I don't care if the Justice Department has to appoint special attorneys general to investigate one case or if they want to just take the first 750 resumes that come across the door, we have to do something. There are private law firms that have that many attorneys. Why is it so outrageous for the federal government to hire enough attorneys and investigators to deal with a serious issue of national importance, which would, if they did it save as opposed to cost tax money? We hear lots of talk about cutting waste fraud and abuse in an election year.

We don't hear much talk of a bill to specifically expand Justice by enough lawyers and more investigators to fight fraud. What else could the government spend money on which would certainly return money to the taxpayer directly and also improve the quality of work done for the government? Here is a law that actually gives investigators and lawyers at least some chance of fighting fraud in a courtroom. Now if we could only get enough people involved in bringing the cases there we might be able to find out what is going on in those 225 scandals sitting on a shelf in a Government office.

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In Allison Engine Co., Inc. v. United States, ex rel. Sanders, the plaintiff was a whistleblower, or relator, who filed a qui tam lawsuit on behalf of the U.S. government under the False Claims Act seeking the recovery of hundreds of millions of dollars of taxpayer money resulting from alleged false statements about work performed by a subcontractor to a huge multi-billion dollar Navy contract. The Supreme Court faulted the plaintiff for not proving that the subcontractor's invoices or false statements to the contractor, in this case a huge shipyard, were actually submitted to the government to get the claim paid. 


Although the plaintiff-relators in Allison Engine Co. assert in the aftermath of today’s Supreme Court decision that the proof in their case satisfies this heightened standard, today’s decision now creates a huge loop-hole in the False Claims Act and severely undercuts the ability of the government and whistleblowers to hold subcontractors accountable for fraud on the taxpayers that is committed by subcontractors.


Often the U.S. government is not billed directly for the work of subcontractors, and the subcontractors’ invoices are not submitted directly to the government.  Rather the subcontractors bill the contractor and get paid from funds that were paid by the government to the contractor.  For example, when the U.S. government hires a contractor to deliver a ship, a plane, or a weapons system, the government does not review and approve every invoice for work performed by subcontractors.


However, the Supreme Court has now held in Allison Engine Co., that without an invoice from the subcontractor submitted to the government, or other proof that the government relied on the false statements or fraud of the subcontractor to pay the claim of the contractor, then there is no recovery for the U.S..  In other words, it is not enough to prove that the subcontractor cheated to get paid on a government contract.


This decision is a green light for subcontractors to steal.  The real losers here are, once again, the US taxpayers.


It is now up to Congress change the law to stop subcontractors from robbing the taxpayers on huge government contracts, and to hold subcontractors fully responsible for their fraud.

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This week, President Bush signed the National Defense Authorization Act for Fiscal Year 2008 (HR. 4986). Section 846 of this bill is a provision designed to protect employees of defense contractors when they report fraud to Congress, an Inspector General, the Government Accountability Office, or a Department of Defense employee charged with overseeing contracts.


The Bush administration has consistently opposed whistleblower rights for employees of the federal government and its contractors. Veto threats have been issued against the whistleblower protection legislation that has been proposed by the Congress (click here for the latest on those bills). The administration claims that protecting whistleblowers could harm national security, but the truth is the exact opposite: strong whistleblower laws can help keep this country safe and secure, as well as save us billions of dollars in wasted revenue.


In this case, the President had no choice but to sign the Defense Authorization bill into law, but then he went out of his way to express sharp disapproval of the whistleblower provisions in his signing statement. This statement (below), goes against the spirit of the law, and gives the president justification to ignore a congressional mandate.

“Provisions of the Act, including sections 841, 846, 1079, and 1222, purport to impose requirements that could inhibit the President's ability to carry out his constitutional obligations to take care that the laws be faithfully executed, to protect national security, to supervise the executive branch, and to execute his authority as Commander in Chief. The executive branch shall construe such provisions in a manner consistent with the constitutional authority of the President.”

In short, the new law is a victory worthy of great praise, but the President’s brash treatment of legislation designed to protect honest employees is deplorable.


See the full text of HR. 4986, sec. 846 after the jump...


SEC. 846. PROTECTION FOR CONTRACTOR EMPLOYEES FROM REPRISAL FOR DISCLOSURE
OF CERTAIN INFORMATION.

(a) Increased Protection From Reprisal- Subsection (a) of section 2409 of
title 10, United States Code, is amended--

(1) by striking `disclosing to a Member of Congress' and inserting
`disclosing to a Member of Congress, a representative of a committee of
Congress, an Inspector General, the Government Accountability Office, a
Department of Defense employee responsible for contract oversight or
management,'; and

(2) by striking `information relating to a substantial violation of law
related to a contract (including the competition for or negotiation of a
contract)' and inserting `information that the employee reasonably believes
is evidence of gross mismanagement of a Department of Defense contract or
grant, a gross waste of Department of Defense funds, a substantial and
specific danger to public health or safety, or a violation of law related to
a Department of Defense contract (including the competition for or
negotiation of a contract) or grant'.

(b) Clarification of Inspector General Determination- Subsection (b) of such
section is amended--

(1) by inserting `(1)' after `Investigation of Complaints- ';

(2) by striking `an agency' and inserting `the Department of Defense, or the
Inspector General of the National Aeronautics and Space Administration in
the case of a complaint regarding the National Aeronautics and Space
Administration'; and

(3) by adding at the end the following new paragraph:

`(2)(A) Except as provided under subparagraph (B), the Inspector General
shall make a determination that a complaint is frivolous or submit a report
under paragraph (1) within 180 days after receiving the complaint.

`(B) If the Inspector General is unable to complete an investigation in time
to submit a report within the 180-day period specified in subparagraph (A)
and the person submitting the complaint agrees to an extension of time, the
Inspector General shall submit a report under paragraph (1) within such
additional period of time as shall be agreed upon between the Inspector
General and the person submitting the complaint.'.

(c) Acceleration of Schedule for Denying Relief or Providing Remedy-
Subsection (c) of such section is amended--

(1) in paragraph (1), by striking `If the head of the agency determines that
a contractor has subjected a person to a reprisal prohibited by subsection
(a), the head of the agency may' and inserting after `(1)' the following:
`Not later than 30 days after receiving an Inspector General report pursuant
to subsection (b), the head of the agency concerned shall determine whether
there is sufficient basis to conclude that the contractor concerned has
subjected the complainant to a reprisal prohibited by subsection (a) and
shall either issue an order denying relief or shall';

(2) by redesignating paragraphs (2) and (3) as paragraphs (4) and (5),
respectively; and

(3) by inserting after paragraph (1) the following new paragraphs:

`(2) If the head of an executive agency issues an order denying relief under
paragraph (1) or has not issued an order within 210 days after the
submission of a complaint under subsection (b), or in the case of an
extension of time under paragraph (b)(2)(B), not later than 30 days after
the expiration of the extension of time, and there is no showing that such
delay is due to the bad faith of the complainant, the complainant shall be
deemed to have exhausted all administrative remedies with respect to the
complaint, and the complainant may bring a de novo action at law or equity
against the contractor to seek compensatory damages and other relief
available under this section in the appropriate district court of the United
States, which shall have jurisdiction over such an action without regard to
the amount in controversy. Such an action shall, at the request of either
party to the action, be tried by the court with a jury.

`(3) An Inspector General determination and an agency head order denying
relief under paragraph (2) shall be admissible in evidence in any de novo
action at law or equity brought pursuant to this subsection.'.

(d) Definitions- Subsection (e) of such section is amended--

(1) in paragraph (4), by inserting `or a grant' after `a contract'; and

(2) by inserting before the period at the end the following: `and any
Inspector General that receives funding from, or has oversight over
contracts awarded for or on behalf of, the Secretary of Defense'.

------
Here is the law that section 846 amends:

10 USC § 2409

Sec. 2409. Contractor employees: protection from reprisal for
disclosure of certain information

(a) Prohibition of Reprisals.--An employee of a contractor may not
be discharged, demoted, or otherwise discriminated against as a reprisal
for disclosing to a Member of Congress or an authorized official of an
agency or the Department of Justice information relating to a
substantial violation of law related to a contract (including the
competition for or negotiation of a contract).
(b) Investigation of Complaints.--A person who believes that the
person has been subjected to a reprisal prohibited by subsection (a) may
submit a complaint to the Inspector General of an agency. Unless the
Inspector General determines that the complaint is frivolous, the
Inspector General shall investigate the complaint and, upon completion
of such investigation, submit a report of the findings of the
investigation to the person, the contractor concerned, and the head of
the agency.
(c) Remedy and Enforcement Authority.--(1) If the head of the agency
determines that a contractor has subjected a person to a reprisal
prohibited by subsection (a), the head of the agency may take one or
more of the following actions:
(A) Order the contractor to take affirmative action to abate the
reprisal.
(B) Order the contractor to reinstate the person to the position
that the person held before the reprisal, together with the
compensation (including back pay), employment benefits, and other
terms and conditions of employment that would apply to the person in
that position if the reprisal had not been taken.
(C) Order the contractor to pay the complainant an amount equal
to the aggregate amount of all costs and expenses (including
attorneys' fees and expert witnesses' fees) that were reasonably
incurred by the complainant for, or in connection with, bringing the
complaint regarding the reprisal, as determined by the head of the
agency.

(2) Whenever a person fails to comply with an order issued under
paragraph (1), the head of the agency shall file an action for
enforcement of such order in the United States district court for a
district in which the reprisal was found to have occurred. In any action
brought under this paragraph, the court may grant appropriate relief,
including injunctive relief and compensatory and exemplary damages.
(3) Any person adversely affected or aggrieved by an order issued
under paragraph (1) may obtain review of the order's conformance with
this subsection, and any regulations issued to carry out this section,
in the United States court of appeals for a circuit in which the
reprisal is alleged in the order to have occurred. No petition seeking
such review may be filed more than 60 days after issuance of the order
by the head of the agency. Review shall conform to chapter 7 of title 5.
(d) Construction.--Nothing in this section may be construed to
authorize the discharge of, demotion of, or discrimination against an
employee for a disclosure other than a disclosure protected by
subsection (a) or to modify or derogate from a right or remedy otherwise
available to the employee.
(e) Definitions.--In this section:
(1) The term ``agency'' means an agency named in section 2303 of
this title.
(2) The term ``head of an agency'' has the meaning provided by
section 2302(1) of this title.
(3) The term ``contract'' means a contract awarded by the head
of an agency.
(4) The term ``contractor'' means a person awarded a contract
with an agency.
(5) The term ``Inspector General'' means an Inspector General
appointed under the Inspector General Act of 1978.

(Added Pub. L. 99-500, Sec. 101(c) [title X, Sec. 942(a)(1)], Oct. 18,
1986, 100 Stat. 1783-82, 1783-162, and Pub. L. 99-591, Sec. 101(c)
[title X, Sec. 942(a)(1)], Oct. 30, 1986, 100 Stat. 3341-82, 3341-162;
Pub. L. 99-661, div. A, title IX, formerly title IV, Sec. 942(a)(1),
Nov. 14, 1986, 100 Stat. 3942, renumbered title IX, Pub. L. 100-26,
Sec. 3(5), Apr. 21, 1987, 101 Stat. 273; amended Pub. L. 102-25, title
VII, Sec. 701(k)(1), Apr. 6, 1991, 105 Stat. 116; Pub. L. 102-484, div.
A, title X, Sec. 1052(30)(A), Oct. 23, 1992, 106 Stat. 2500; Pub. L.
103-355, title VI, Sec. 6005(a), Oct. 13, 1994, 108 Stat. 3364; Pub. L.
104-106, div. D, title XLIII, Sec. 4321(a)(10), Feb. 10, 1996, 110 Stat.
671.)

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Warning regarding litigation under the False Claims Act

The False Claims Act has one of the strongest whistleblower protection provisions in the United States. However, it has many complicated components and requirements which can harm any person that pursues such a claim without counsel. Due to the potential for a significant financial recovery, it is usually possible to retain an attorney for such an action. If, after reviewing this section, you believe that you may have an action arising under the False Claims Act and need an attorney, please complete our Attorney Referral Service / Report Fraud Now form.

 

What is the False Claims Act (Qui tam)?

The False Claims Act is 31 U.S.C. Sections 3729 through 3733. Qui tam, under the False Claims Act, allows persons and entities with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the United States Government. In Qui tam actions, the government has the right to intervene and join the action. If the government declines, the private plaintiff may proceed on his or her own. Some states have passed similar laws concerning fraud in state government contracts.

What Actions Are Considered Violations under the False Claims Act?

• Knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment 
• Knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government 
• Conspiring with others to get a false or fraudulent claim paid by the federal government 
• Knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.
  

Who Can File a Qui tam Action?

Any persons or entities with evidence of fraud against federal programs or contracts may file a Qui tam lawsuit. If the government or a private party has already filed a False Claims Act lawsuit based on the same evidence as you, you cannot bring a lawsuit.

Where Should a Qui tam Action Be Filed?

A qui tam action must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the plaintiff's possession, must be confidentially served on the U.S. Attorney General and the U.S. Attorney for the district in which the complaint is brought. An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed.

What Are the Civil Penalties Under the False Claims Act?

Violators of the False Claims Act are liable for three times the dollar amount that the government is defrauded and civil penalties of $5,000 to $10,000 for each false claim.

A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the Act, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough. You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.

What Are the Statutes Of Limitations for Filing a Qui Tam Lawsuit?

Under the False Claims Act, an action must be filed within the later of the following two time periods:

1. Six years from the date of the violation of the Act; or 
2. Three years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act.

(One Circuit Court has interpreted the second provision as requiring that the action be filed not later than three years after the qui tam plaintiff rather than the government knows, or should have known about the violation.)

What Are the Whistleblower Protection Provisions in the False Claims Act?

Under Section 3730(h) of the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole. Such relief may include:

• Reinstatement 
• Double back pay 
• Compensation for any special damages including litigation costs and reasonable attorneys' fees.

You should be aware, however, that the scope of whistleblower protection under Section 3730(h) is an issue that currently divides the courts.

Many states have wrongful discharge or other employment laws that may provide other remedies for such discrimination.

The Statute of Limitation for filing a FCA retaliation case is different then that for filing a qui tam recovery case. Retaliation case must be filed under the statute of limitation applicable to the similar state wrongful discharge action.

What about State False Claims Acts?

Due to the success of the Federal False Claims Act, a growing number of states including New York, California, and Virginia, have enacted State versions of the False Claims Act. These laws permit whistleblowers to recover a “finders fee” for reporting fraud in state, local and municipal contracting.

What about Tax Fraud?

In 2006, Congress amended the Internal Revenue Code to permit whistleblower to obtain a reward for reporting tax fraud.

How can I get help?

If you need to speak to an attorney, you can contact us using the NWLDEF’s Attorney Referral Service / Report Fraud Now form.

 

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