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

On Wednesday, the IRS announced a plan for a comprehensive review of its whistleblower program, working with both “internal and external shareholders” to produce a program that can evaluate whistleblower claims and make quicker payouts to whistleblowers. As a part of the review, the IRS will set up new timelines, including a mandatory 90 day deadline to review whistleblower claims after receipt. Furthermore, debriefings of whistleblowers will become “the rule, not the exception.”

This development comes in the wake of a critical report from the Treasury Inspector General for Tax Administration. The report found that the whistleblower program may produce inaccurate data when pursuing cases and that deadline goals were not strong enough. Republican Senator Charles Grassley told Reuters that the report was evidence that “the IRS isn’t serious about processing whistleblower claims in a timely way.”

In 2010, the IRS paid out $18.7 million in rewards to whistleblowers and collected $464.7 million in taxes thanks to whistleblowers. Senator Grassley said that since last September, he has heard a number of complaints from whistleblowers stating that their claims have been stalled at the IRS. If the IRS can run its whistleblower program so that whistleblowers are actually encouraged to submit reports, billions of additional dollars would be recovered from fraudsters.

This blog post was written by intern Julia Maloney.

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Amid this week’s media frenzy, Senator Charles E. Grassley (R-Iowa) has sent a scornful letter to FDA Commissioner Hamburg about the FDA’s targeted whistleblower surveillance program.

If you missed the original story about the FDA’s illegal spy operation, you can catch up by reading the Washington Post’s original article and blog entry or the National Whistleblowers Center’s press release.

Senator Grassley’s letter is worth reading, as it gets to the heart of why the FDA’s program was unjust, unconstitutional, and unethical. His biting words make it clear that the news hit a nerve. This response probably stems from the fact that the FDA intercepted protected correspondence to and from his Congressional office.

FDA managers were looking for dirty laundry on the whistleblowers, but Grassley seems to think it’s the managers that need to clean up their act.

Senator Grassley’s letter concludes by demanding prompt answers to ten questions that every public servant – indeed, every citizen – should be asking about what happened at the FDA. Read them over and leave a comment below with your thoughts on his reaction to this week’s big whistleblower headline.

1. Who authorized the monitoring of all of the whistleblowers’ email accounts for communications with Congress?
2. Are any of the original nine FDA physicians and scientists that wrote the letter to the Presidential Transition Team in 2009 still employed by the FDA? If not, please provide the circumstances surrounding each of their departures.
3. Did the FDA monitor all employee email accounts, including personal accounts, or was the monitoring targeted only at the nine whistleblowers?
4. Did FDA obtain the passwords to the employees’ personal email accounts, which would allow emails to be intercepted even when not sent or received from a government computer?
5. Is FDA currently monitoring any employee email accounts? If so, please provide the circumstances surrounding the monitoring.
6. What steps have you taken to reassure employees that they have a right to have direct communications with Congress?
7. Does FDA have any procedures to ensure that Congressional correspondence remains confidential?
8. Please produce copies of all emails that were intercepted to or from my office by FDA.
9. To whom did the Agency give access to any email correspondence to or from Congress, and why?
10. Please provide all records relating to communications between FDA and iCAD Inc. with respect to the release of confidential business information.

Let FDA Commissioner Hamburg know that you, too, are waiting for her responses by TAKING ACTION!

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This week The Washington Times published a lament of Attorney General Eric Holder’s treatment of FBI whistleblowers based on a public complaint from Senator Chuck Grassley (R-Iowa). The article is aptly titled, “Grassley: Whistleblower Cases Stuck ‘in limbo’ Under Holder."

In his letter, Senator Grassley declared that, “perpetual delays for resolving FBI whistleblower cases at the Department of Justice,” led him to the conclusion that, “The process of resolving whistleblower cases appears to be broken.” The Department of Justice refused to comment for the Washington Times article.

To support this point, Senator Grassley used the specific examples of FBI whistleblowers Jane Turner and Robert Kobus. Jane Turner has seen her case stalled for nine years now, while Robert Kobus’ case has been help up for about four.

Jane Turner, a highly decorated 30-year FBI veteran, was fired after reporting that FBI agents had taken “souvenirs” from Ground Zero after the 9/11 attacks. Five years after she filed her 2002 claim, a civil jury held that she had been illegally retaliated against and was due compensatory funds. Senator Grassley’s complaint stems from the fact that the FBI’s appeal is still bouncing around the Department of Justice to this day. “Any reasonable person would agree that 9 years is extreme and unacceptable,” he concluded.

Robert Kobus blew the whistle on timecard fraud in the FBI’s field office in New York, and in 2007 the Office of Inspector General found that the FBI had illegally retaliated against him for his report. Much like Jane Turner, Kobus has jumped through all of the hoops required for a speedy decision, but Senator Grassley pointed out that, “Mr. Kobus’ case has now languished in bureaucratic red tape for approximately 4 years.”

Attorney General Holder once testified that he would, “ensure that people are given the opportunity to blow the whistle and they will not be retaliated against, and then to hold accountable anybody who would attempt to do that.” Senator Grassley has long been a steady supporter of whistleblowers, and advocates this same view. However, in his letter, the Senator contrasts his true commitment with the Attorney General’s lip service: “Whistleblowers are key to unlocking many of the secrets hidden deep in the closets of the federal government. Allowing a case to sit in limbo for more than nine years shows a lack of commitment to resolving issues for these courageous people.”

The delays that Senator Grassley and The Washington Times have discussed are indeed a major systemic problem. These unnecessary hassles are the icing on the case for brave employees who risk their careers for the public interest.

*Intern Regan Moore contributed to this posting

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Since the Internal Revenue Service (IRS) instituted a new whistleblower program in 2006, only one award has been made to a whistleblower, according to Mike Hudson from iWatch News. In yesterday’s article, “Red tape, old guard slow whistleblowing on corporate tax cheats,” Hudson explains why the IRS has been so disinclined to give monetary awards to whistleblowers. The primary reason, it seems, is a bureaucratic avoidance to receive help from whistleblowers in the IRS.

A law passed in 2006 requires the IRS to pay a reward of 15 to 30 percent for whistleblowers who report cases of unpaid taxes totaling at least $2 million. However, the lone person to receive an award under the new program is an “accountant of a Fortune 500 firm.” The only reason we know of this award is because attorney Eric Young issued a press release announcing his client’s award of $4.5 million for reporting approximately $20 million in unpaid taxes.  The lack of announcement by the IRS may underscore their reluctance to work with whistleblowers.

However, an aversion to whistleblowers may not be agency-wide. The IRS Whistleblower Office “is widely praised by attorneys representing whistleblowers.” Dean Zerbe, NWC Special Counsel, agreed. “The Whistleblower Office is great,” said Zerbe. “But you obviously have people in the IRS and Treasury who, instead of trying to make this program work, wake up in the morning trying to put sand in the gears.” 

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The Associated Press is reporting that the IRS has issued a whistleblower reward to an in-house accountant at a financial services firm. This accountant became a whistleblower for the Internal Revenue Service (IRS), providing inside information about the firm's lapse in tax compliance. The tip resulted in the IRS collecting over $20 million in back due taxes, interest and penalties. The IRS awarded the whistleblower $4.5 million dollars (based on 22%), and issued a check for $3.24 million (after withholding).

Sen. Charles Grassley helped create the IRS Whistleblower Office in 2006. Referring to this award, he told the Associated Press that, "it ought to encourage a lot of other people to squeal." 

"Whistleblower programs have been incredibly successful in the arena of health care and defense spending, and now they are being tried as a weapon against tax cheats and Wall Street scoundrels," said Patrick Burns, president of Taxpayers Against Fraud.

This award follows a $1.1 million award the IRS issued last month. That award was under the prior discretionary program. The new award is the first under the mandatory reward program created in the 2006 law. In both cases, the whistleblowers chose to stay anonymous.

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Sen. Charles Grassley today released copies of his letters to 16 big pharmaceutical companies about their whistleblower policies. Bloomberg news service is also reporting on these inquiries. The letters review Sen. Grassley's efforts to strengthen the False Claims Act (FCA), and ask what the companies are doing to inform employees about the FCA, and then to protect employees who come forward with information about frauds. Sen. Grassley notes that since the 1986 amendments, the government has recovered $22 billion that had been obtained by fraud. He notes that Section 6032 of the Deficit Reduction Act (DRA) required contractors receiving over $5 million a year to issue written policies to employees about their rights under the FCA. The Bush administration then determined that this Section 6032 did not apply to pharmaceutical companies.  Sen. Grassley disagrees, but still wants to know if the 16 biggest pharmaceutical companies nevertheless have the policies that would be required by Section 6032. Of the $22 billion recovered, Pfizer paid $2.3 billion in one settlement. Pfizer's Chris Lodertold Bloomberg that it is responding to the letter and “shares the senator’s desire to detect and report any false claims that may lead to unnecessary costs to our health-care system.” Pfizer, he said, has invested “substantial resources” to “create a compliance program that consists of mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state health-care laws.” I wonder if Pfizer is more highly motivated since it paid that $2.3 billion.  Sen. Grassley letters are available in the continuation of this blog entry

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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.

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WBAL-TV of Baltimore reports that the Maryland legislature is moving forward with a bill to create a "Little FCA" in Maryland.  Modeled on the federal False Claims Act (FCA), and looking for the benefits of the Grassley Amendment, Little FCAs provide financial rewards to whistleblowers who file sealed complaints against fraud by government contractors. Under the Grassley Amendment, state and local governments with Little FCAs receive a higher percentage of the fraud recoveries in their states. The WBAL story reports that Virginia has recovered $228 million a year since adopting their Little FCA.

Who can say no to free money for the state treasury? WBAL reports that medical providers and the Chamber of Commerce have opposed the bill.  However, none would speak to WBAL.  What would they say? "We should be able to get away with fraud"? WBAL says critics have previously claimed that the reward provision would encourage frivolous lawsuit and put pressure on businesses to settle. The $228 million Virginia gets every year does not sound frivolous to me.  The pressure to settle, though, sounds pretty good. Indeed, the FCA's reward provision is the most effective tool ever in the detection and proof of frauds against the government.

The administration of Gov. Martin O'Malley said the bill is likely to be amended.  My suggestion: don't limit the bill to medical fraud. Maryland deserves to get the enhanced recovery for all frauds in the state.

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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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Here is an update to our earlier posting on S. 386.

The Office of Management and Budget issued a Statement of Administration Policy to the Senate on Monday, April 20th stating that the Obama Administration “strongly supports enactment of S. 386.”  The statement explained that the Fraud Enforcement and Recovery Act of 2009 (S. 386) would “benefit U.S. taxpayers by both addressing existing fraud and deterring waste, fraud, and abuse of public funds.”  It also pointed out that the bill would “amend the False Claims Act (FCA) in several important respects so that the FCA remains a potent and useful weapon against the misuse of taxpayer funds.”

Notably, the statement supporting the Fraud Enforcement and Recovery Act is the only statement the Office of Management and Budget has sent to the Senate since the beginning of the Obama Administration.

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