Lebau & Neuworth

Whistleblowing

Overview

Employees, from senior executives to hourly employees, often learn of corporate actions that violate state and federal whistleblower laws. These laws are designed to encourage individuals to come forward to report misconduct. Often, the laws provide for protections for the "whistleblower" and allow for the reporting person(s) to obtain significant financial recoveries.

Lebau & Neuworth has represented numerous whistleblowers and are skilled at investigating and developing the facts necessary for a whistleblower to maintain a successful action.

Due to our limited practice areas, Lebau & Neuworth can devote significant resources and time to each and every whistleblowing case it accepts. Further, the Firm maintains good communications with the Department of Justice, U.S. Attorneys, whom can provide significant support to a whistleblower.

Any individual considering bring a whistleblowing claim should considering consulting with a lawyer at the earliest possible instance. This will allow for the person to become fully informed of the law and its protections, as well as inform him/her of the proof and evidence necessary to be successful on such claim.

The Federal False Claims Act

The most well-known and utilized whistleblowing law is the federal False Claims Act. The U.S. Department of Justice has stated that the False Claims Act has been "highly effective in ferreting out individuals and companies that commit fraud." The False Claims Act allows individuals to bring claims on behalf of the government to recover damages incurred by the government as a result of fraud. For pursuing the claim, the whistleblower can contain a portion of recovery for the fraud, if the person follows the proper procedure specified in the False Claims Act.

The False Claims Act also contains an anti-retaliation provision that makes in unlawful for an employer to fire. discipline or harass a whistleblowing employee. An offending employer may be forced to rehire and/or pay lost wages and benefits to a wrongly disciplined whistleblower.

The major provisions of the False Claims Act are:

who may bring the action and how - Either the federal government are the private individual can file suit under the False Claims Act. If brought by a person, that individual must first notify the federal government by providing it with a copy of a complaint and supporting evidence. The government that must decide within a certain time period whether to intervene in the action and take over primary responsibility for pursuing the claim. If the government declines to intervene, then the person has the exclusive right to proceed with the action.
triggering of liability -The False Claims Act imposes civil liability on any person who makes a false or fraudulent monetary claim to the U.S. Government. False claims are not just limited to false or inaccurate bills/invoices, but also encompass "all attempts" to improperly "cause the Government to pay out sums of money." The threshold question is whether the claim has the practical purpose and effect of inducing wrongful payment.
the possible recovery - If the federal government declines to intervene in an action, the whistleblower can obtain 25 to 30% of the total recovery. If the government intervenes, the recovery generally ranges between 15 to 25%.

There are also at least four significant pitfalls to an unwary whistleblower:

first person to file - First, under the False Claims Act, only the first person to file a claim may actually pursue the action. This is to encourage the prompt filing of false claims litigation. Also, a person must file before the government files a claim in order to protect that person's right to pursue the claim and obtain a recovery.
public disclosure - Second, a person, who was not the original source of the information that forms the basis of the claim, can only proceed if there has not been public disclosure of the relevant facts. Once facts of the possible misconduct are disclosed to the public either through the government or by the media, a person may not pursue a claim based on those facts. Hence, any potential whistleblower should promptly retain competent counsel and speak to no one else about the matter.
an original source - If facts concerning the possible false claim have been publicly disclosed, a person may still proceed with filing a compliant if s/he was an "original source of the information. The False Claim act defines "original source" as an individual who has "direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the government before filing an action."
the jurisdiction in which to file - Where you file the false claims suit may be critically important. This is an item that should be discussed with counsel.

The provisions and possible pitfalls of the False Claims Act are complex and technical. A whistleblower should make sure to retain competent counsel so that the proper process and procedures are followed. If they are not, the whistleblower may loose on his/her claim.

Other Whistleblower Statutes

Anti-Kickback Act - On the books since 1972, the federal anti-kickback law's main purpose is to protect patients and the federal health care programs from fraud and abuse by curtailing the corrupting influence of money on health care decisions. Straightforward but broad, the law states that anyone who knowingly and willfully receives or pays anything of value to influence the referral of federal health care program business, including Medicare and Medicaid, can be held accountable for a felony. Violations of the law are punishable by up to five years in prison, criminal fines up to $25,000, administrative civil money penalties up to $50,000, and exclusion from participation in federal health care programs. Also, many anti-kickback statutes can trigger the application of the False Claims Act which allows for even greater recoveries.

This Act may be violated as just one purpose of the reported conduct is "induce" the purchase or recommendation of a company's goods or services; it does not have to be the sole or even primary purpose. Further, payment of fair market value does not, by itself, immunize a transaction from the Anti-Kickback Act and there need not be proof of a contractual "agreement" to order, purchase or recommend medical items or services
Sarbanes Oxley - The Sarbanes-Oxley Act of 2002 ("SOX") contains significant protections for corporate whistleblowers. The SOX's whistleblower protection provisions are not limited to providing a legal remedy for wrongfully discharged employees. In addition to containing employment-based protections for employee whistleblowers, the law contains other provisions directly relevant to whistleblower protection. For example, the law requires that all publicly traded corporations create internal and independent "audit committees. Further, the SOX amended the federal obstruction of justice statute and criminalized retaliation against whistleblowers who provide "truthful information" to a "law enforcement officer" about the "commission or possible commission of any Federal offense." This provision of the SOX was not limited in its application to publicly traded corporations; it covers every employer nationwide.
State laws - Several states have enacted false claims laws which may be provide different rights and protections than those afforded by federal laws. Such states include Delaware, Virginia, California, Nevada, Massachusetts, Florida, Texas, Tennessee, Illinois and Louisiana. A false claims law has also been enacted in the District of Columbia.

Recent Cases, The Breadth of False Claims Litigation

In recent years, false claims litigation has taken an expanded role in stopping and correcting corporate malfeasance. Whistleblowers have reported false claims and obtained significant recoveries in the following industries:

defense contracting
homeland security
pharmaceuticals
laboratory testing
medicare/medicaid providers
health care providers
financial services
academia

Common types of reported fraud have included:

overcharging and/or inflating prices
performing services not needed or necessary
providing "kickbacks" in order to encourage the use of certain products or services
grant and program funding misrepresentations
false certifications
training fees

The breadth of the False Claim Act, and related laws like the federal Anti-Kickback statute is far-reaching. Even a remote or indirect effect on the cost or price of a product or service paid for by the government may be sufficient to establish liability and allow for a significant recovery.

Lebau & Neuworth has successfully represented whistleblowers, including the following recent examples

settlement for whistleblower who reported overcharging by government contractor on military bases
settlement for whistleblower who reported overcharging by medical practice groups
settlement for whistleblower who reported grant misrepresentations to the National Institute of Health.

Contact Us

If you think you may have a case or want additional information about whistleblowing, please email us your questions or matter description, or if you prefer you can call us or write us. Contact us.