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DOJ withdraws appeal in criminal tax whistleblower case; whistleblowers to obtain US$12.9 million award

WASHINGTON, D.C. | MARCH 29, 2018—The U.S. Court of Appeals for the District of Columbia Circuit today will dismiss an appeal filed by the U.S. Department of Justice (DOJ) and Internal Revenue Service (IRS) challenging the right of whistleblowers to obtain a financial reward based on disclosing information that results in the criminal prosecution of tax evaders. The case concerned a major international financial institution that was sanctioned for illegally assisting U.S. citizens in evading taxes. The IRS had initially denied an award to the two whistleblowers.  The whistleblowers challenged the denial in Tax Court and prevailed.  However, the DOJ and IRS challenged this finding in the Court of Appeals. Today, at the request of DOJ, that appeal will be dismissed, and the two whistleblowers will become the first persons to obtain a whistleblower reward based on a criminal tax prosecution.

Continue Reading Historic Win for Tax Whistleblowers at International Financial Institutions

In Digital Realty Trust v. Somers the Supreme Court issued a destructive decision that will have far-reaching consequences for whistleblowers. Seemingly unaware of the practical consequences of its decision, the Supreme Court unanimously ruled to leave whistleblowers who report internally without critical protections under the Dodd-Frank Act.

Writing for Law 360, NWC Executive Director Stephen M. Kohn explains that employees now take grave risks in using internal compliance programs. In light of the Supreme Court’s decision, whistleblowers should hire an attorney and take their complaints directly to the Securities and Exchange Commission (SEC).

Continue Reading National Whistleblower Center Executive Director Explains Why Supreme Court Decision in Digital Realty is Disastrous for Internal Compliance Programs  

Washington, D.C. November 28, 2017. Rejecting arguments by Senator Charles Grassley, the Securities and Exchange Commission (“SEC”) and numerous representatives from the whistleblower community, during today’s oral argument in Digital Realty Trust v. Somers (No. 16-1276), the U.S. Supreme Court Justices expressed support for stripping internal whistleblowers of protection under the Dodd-Frank Act (“DFA”).

Continue Reading Supreme Court Poised to Eviscerate Internal Reporting

The fate of corporate whistleblowers and compliance programs is on the line as the U.S. Supreme Court reviews the case of Digital Realty Trust V. Somers. At issue in this case is whether whistleblowers who report potential violations within their organizations, as opposed to reporting directly to the U.S. Securities and Exchange Commission (SEC), are protected under the Dodd-Frank Act (DFA).

Continue Reading Wall Street’s War on Corporate Whistleblowers Reaches Supreme Court

This morning, the U.S. Supreme Court heard oral arguments in State Farm Fire and Casualty Company v. U.S. ex rel. Rigsby. Having suffered a 758-thousand-dollar jury verdict for defrauding the Government following Hurricane Katrina, State Farm is now attempting judicial gymnastics to avoid paying the judgment.  State Farm is asking the Supreme Court to automatically dismiss False Claims Act cases where whistleblowers violate the FCA’s seal provision (31 U.S.C.S. § 3730(b)(2)), instead of using a balancing test—which courts in the United States have historically employed when seal violations occur—to determine the appropriate course of action.

Justice Elena Kagan honed in on a very important question during today’s argument, “…. given that the government is the beneficiary of this [seal] provision, why shouldn’t we give very significant discretion to the government?” Continue Reading UPDATE: Today U.S. Supreme Court Heard Oral Argument in State Farm Ex Rel. Rigsby

Today, the National Whistleblower Center filed an Amicus (friend of the court) brief in State Farm Fire and Casualty Company v. U.S. ex rel. Rigsby. Having suffered a 758-thousand-dollar jury verdict for defrauding the Government following Hurricane Katrina, State Farm is now attempting judicial gymnastics to avoid paying the judgment.

The question in this case is whether the harshest sanction available to a court to police its order sealing a case (i.e. dismissal) should be automatically applied, regardless of the intent of the party committing the infraction, harm caused to other parties, interest of the Government or nature of the violation itself.  In its amicus brief, the National Whistleblower Center argues against such an inflexible rule that is also contrary to Congress’s intent.

State Farm is asking the Supreme Court to read into the FCA a severe sanction for those who violate the seal provision (31 U.S.C.S. § 3730(b)(2)).  The 5th Circuit decision ruled against mandatory dismissal and in favor of a flexible balancing test that prioritizes the interests of the government, holding that a violation of the seal requirement did not warrant dismissal of this case since the government was not harmed by the disclosure and the whistleblowers did not act in bad faith. See United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d 457, 465 (5th Cir. 2015).

The FCA is America’s most important—and successful—anti-fraud law, and its seal provision was designed for the exclusive benefit of the Government. Mandatory dismissal would undermine the FCA and hurt taxpayers—the intended beneficiaries of the False Claims Act. The NWC’s Executive Director Steve Kohn noted, “This is another attempt by the Chamber of Commerce to undermine the False Claims Act and protect corrupt government contractors who rip off the taxpayers from accountability.  It is time to stop shooting the messenger.”

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Washington, D.C. June 22, 2016 – Today, the U.S. Department of Justice filed a Notice of Supplemental Authority in a pending False Claims Act case, U.S. ex rel. Westrick v. Second Chance Body Armor, et al., No. 04-0280 (D.D.C.), setting forth the DOJ’s official position on the impact of the Supreme Court’s unanimous decision announced last week in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. ___, slip op. No. 15-7 (June 16, 2016). In its filing today, the DOJ argues that the Supreme Court’s unanimous decision in Escobar discussion that a contractor’s “misleading half-truths” to the government “unequivocally supports the United States’ argument” in the Westrick case that Toyobo Co. Lt. and Toyobo America, Inc. (collectively Toyobo) “had a legal duty to disclose” its knowledge that the degradation of Zylon bullet-proof vests that it sold to the government “contradicted Toyobo’s misrepresentations about the superiority” of those vests. Continue Reading Justice Department’s First Public Statement on Supreme Court’s Unanimous Escobar Decision Slams Toyobo’s “Half-Truths” in Pending False Claims Act Whistleblower Suit

Supreme Court Unanimously Supports Whistleblower under False Claims Act

Washington, D.C. June 16, 2016. In a unanimous ruling issued today, the United States Supreme Court upheld a whistleblower’s claim in Universal Health Services v. U.S. ex rel. Escobar.  The Court, in an opinion by Justice Thomas, affirmed the “implied certification theory” of liability under the False Claims Act (FCA).  This theory permits contractors to be liable for fraud when they fail to disclose material non-compliance with regulatory requirements.  Continue Reading Big Win for Whistleblowers at Supreme Court

On April 19th I visited the Supreme Court to listen to oral arguments in Universal Health Services v. U.S. ex rel. Escobar, arising under the whistleblower provisions of the False Claims Act.  However, I was shocked at what I heard.

The hospital that was sued in this case actually asked the Justices to believe that: (1) it is not fraud for a hospital to bill Medicaid or other government insurance programs for a doctor’s services when it knows that a doctor did not perform any services; and (2) that companies and hospitals that are government contractors should be permitted “to pick and choose which regulations they comply with.” Continue Reading Government Contractors Ask Supreme Court for False Claims Act Loophole So They Can “Pick and Choose” What Regulations to Follow

The National Whistleblower Center recently filed an Amicus (friend of the court) brief in the case Universal Health Services v. U.S. ex rel. Escobar. The legal issue behind the case concerns the False Claims Act, America’s premier whistleblower law and its best defense against government contracting fraud. The question at hand asks whether a contractor can only be held liable for defrauding the government and the taxpayers if they violate the express terms of their contract, or if reasonable interpretations of the requirements can serve as the basis for enforcing against fraud as well. Continue Reading National Whistleblower Center presents original documents showing the intent of the False Claims Act