Whistleblower Law Blog

The Seventh Circuit has held that the outcome of a False Claims Act retaliation claim does not preclude a plaintiff from filing a subsequent qui tam action.  In Lusby v. Rolls-Royce Corporation, Curtis Lusby filed a complaint against his former employer Rolls-Royce alleging that Rolls-Royce terminated him for raising concerns about the company’s misrepresentation of the quality of engine parts it sold to the U.S. military.  The retaliation claim was dismissed, and Lusby filed a qui tam action.  Rolls-Royce moved to dismiss the qui tam claim on the basis that the dismissal of his retaliation claim barred him from bringing a related qui tam action.  The Seventh Circuit reversed the district court’s dismissal of the qui tam action, holding that “the resolution of personal employment litigation does not preclude a qui tam action, in which the relator acts as a representative of the public.”  In reaching its decision, the Seventh Circuit concluded that the United States would be prejudiced by the dismissal of the relator’s qui tam action and thus, as a practical matter “ a private [retaliation] suit never precludes a qui tam action.”  The Seventh Circuit also clarified the pleading requirement for qui tam claims.  According to the court, a relator need not exclude all possibility of innocence in the complaint but rather, an employee must “show, in detail, the nature of the charge, so that vague and unsubstantiated accusations of fraud do not lead to costly discovery and public obloquy.”  Thus, the Seventh Circuit reversed the district court’s dismissal of the relator’s qui tam claim under section 3739(a)(1).  For more information about the False Claims Act and The Employment Law Group® law firm’s False Claims Act Practice, click here. 

Jason Zuckerman, a Principal of The Employment Law Group® law firm spoke at a D.C. Bar CLE event titled, “Changing Currents in Employment Law:  Recent Developments Update.”  Mr. Zuckerman provided an update on whistleblower protections, including the recently enacted whistleblower provision in the American Recovery and Reinvestment Act and the recent amendment to the False Claims Act Retaliation Provision.  To view the full presentation, click here. 

The Merit Systems Protection Board (MSPB) has vacated the Administrative Judge’s (AJ) decision in Miller v. Department of Homeland Security, holding that the AJ erroneously concluded that Miller’s disclosures were not protected under the Whistleblower Protection Act (WPA).  Miller, a Transportation Security Specialist for the Transportation Security Administration (TSA) alleged that he was retaliated against for raising concerns about the proposed changes in TSA’s standard operating procedures (SOPs) for explosives screening at airports.  In particular, Miller claimed that the agency violated the WPA by eliminating some of his leadership duties and proposing to suspend him for 14 days because he criticized the changes in the SOPs that he reasonably believed posed a substantial and specific danger to public safety.

The Board’s AJ held that Miller’s disclosures were not protected under the WPA because he did not have a reasonable belief that the proposed changes to the SOPs would make it easier to place explosive devices on an aircraft.  In reaching its decision, the AJ held that Miller’s claims were based on his work experience rather than specific education or training related to explosives and further, management officials did not agree with his findings.  The MSPB rejected the AJ’s conclusions, holding that the standard for determining the reasonableness of a complainant’s belief is “based on facts known to and readily ascertainable by him.”  Finding that Miller had relevant experience in attempting to pass explosive contaminants through screening, the MSPB held that Miller had sufficient experience to support a reasonable belief in the “fallibility of the [new SOPs].”  Accordingly, the MSPB vacated the initial decision denying corrective action to Miller and remanded the case to the AJ.

Scott Oswald and Nicholas Woodfield at The Employment Law Group® law firm are representing Mr. Miller.   For more information about the firm’s Whistleblower Practice and the Whistleblower Protection Act, click here. 

In an article titled, “Financial Anti-Fraud Act Advances For Final Approval,” Law 360 reports about the recently enacted Fraud Enforcement Recovery Act (FERA).The article discusses the ways in which FERA will assist the government in combating fraud.  The article quotes The Employment Group® law firm, which observed that “strengthening the whistleblower statutes will give the government a better shot at shutting down fraud in its earliest stages,” and that these “technical changes to the FCA will restore the original intent of the 1986 amendments, which have been the most effective tool in prosecuting fraud against government contractors.” 

In an article titled, “Outcry on Exec Pay May Spur Rise in Whistle-Blower Suits,” Workforce Management reports on the widespread uproar about the scrutiny regarding executive pay and the potential impact that it may have on whistleblower litigation.  According to the article, experts have suggested that there will be an increase in whistleblower suits filed by employees alleging that they were discharged for opposing their executive compensation packages.  To support this theory, the article points to two recent lawsuits that were filed in March, a month after President Obama placed a cap on executive compensation. The article states in part: “Employees are feeling more empowered to report corporate fraud because they recognize the consequences of upper management ignoring fraudulent activity,” says Jason Zuckerman, a principal at the The Employment Law Group® law firm, a Washington-based firm that represents whistle-blowers. “If management hadn’t ignored employees’ efforts to blow the whistle, then the current economic crisis might not be as severe as it is today.” 

Yesterday Congress enacted the Fraud Enforcement Recovery Act of 2009 (S.386) to curb fraud in the financial services industry and strengthen the False Claims Act (FCA), a statute that was originally enacted in 1863 to deter fraud against the government.  Under the qui tam provision of the FCA, a whistleblower can bring a lawsuit on behalf of the government and is eligible to receive 15% to 30% of the government’s recovery.   Whistleblower disclosures under the FCA have led to the recovery of more than $14 billion in fraud.  In light of the Government’s substantial appropriation of funds to stimulate the economy, it is critical to protect taxpayer dollars against fraud.  The amendments to the FCA, which are designed in part to eliminate loopholes that courts have read into the statute, include:

• expanding FCA liability to include any false claim for government money or property, regardless of whether the claim was submitted directly to a government official or employee;
• removing the public disclosure bar as a jurisdictional defense and clarifying that the public disclosure bar applies only where “all essential elements of liability” are based on the public disclosure;
• extending liability to any person who knowingly conceals, avoids or decreases an obligation to pay money to the government;
• expanding the definition of “claim” to include any request or demand for money or property to a contractor or grantee where the government will pay any portion of the claim, regardless of whether or not the government has title to the money or property;
• authorizing the Department of Justice to share information obtained from a civil investigative demand; and
• amending the retaliation provision of the FCA by broadening the scope of protected conduct to include efforts to prevent a violation of the FCA and including contractors and agents in the class of individuals protected from retaliation.

For more information about the False Claims Act and The Employment Law Group® law firm’s False Claims Act Practice, click here.

The Merit Systems Protection Board (“MSPB”) has ordered the U.S. Agency for International Development (“Agency”) to pay backpay, including interest, and other benefits to a former investigator who alleged that he was retaliated against for blowing the whistle about agency personnel consuming alcohol while on duty.  The MSPB also ordered the Agency to cancel the former investigator’s reassignment and restore him to his former position as Inspector in Budapest, Hungary.  The order follows a 2008 decision in Drake v. Agency for International Development, where the U.S. Court of Appeals for the Federal Circuit held that the MSPB erred in concluding that Drake’s disclosures were not protected under the Whistleblower Protection Act (“WPA”) because he could not prove that the behavior he observed was a result of intoxication.  According to the court, the appropriate standard for determining whether an employee’s disclosure is protected under the WPA is “not whether [the employee] was able to prove [a violation], but rather could a disinterested observer with knowledge of the essential facts known to and readily ascertainable by [the employee] reasonably conclude that agency personnel were [engaged in] a violation.”   In applying this standard, the court concluded that Drake had a reasonable belief that agency personnel were intoxicated and thus, Drake engaged in protected conduct under the WPA.  The administrative judge had previously found in favor of Drake on the remaining elements of his appeal, that he was entitled to relief when he proved that his disclosure was a contributing factor in his reassignment and that the agency failed to prove by clear and convincing evidence that it would have reassigned him absent his disclosure.

Mr. Drake was represented by Scott Oswald and Nicholas Woodfield of The Employment Law Group® law firm.  For more information about The Employment Law Group® law firm’s Whistleblower Practice and the Whistleblower Protection Act, click here.

Last week, the House passed S.386 (“Fraud Enforcement Recovery Act”) to curb fraud in the financial services industry and to protect taxpayers’ dollars.  While the bill focuses primarily on potential fraud and misuse of economic stimulus funds, it also includes significant changes to the provisions of the federal False Claims Act (“FCA”).  In particular, the bill amends the FCA to restore legislative provisions and address recent court decisions narrowing its reach.  Examples include: 

• Eliminating the requirement that false claims be presented to the government;
• Expanding FCA liability to include any false claim for government money or property regardless of whether the claim was submitted directly to a government official or employee;
• Expanding the types of conduct that can trigger FCA liability;
• Extending liability to any person who knowingly conceals, avoids or decreases an obligation to pay money to the government; and
• Expanding the definition of “claim” to include any request or demand for money or property whether or not the U.S. government has title to the money or property.

The House also included an amendment to the retaliation provision of the FCA, which would expand the prohibition against retaliation to contractors and agents.  For information about The Employment Law Group® law firm’s Whistleblower Practice under the False Claims Act, click here.

The Department of Labor’s Administrative Review Board (“ARB”) has affirmed an Administrative Law Judge’s (“ALJ”) decision to award back pay and compensatory damages to a whistleblower for violations of the retaliation provision of the Safe Drinking Water Act (“SDWA”).  In Collins v. Village of Lynchburg, Ohio, Michael Collins alleged that his former employer, the Village of Lynchburg Ohio retaliated against him for making a disclosure to the Ohio Environmental Protection Agency (“OEPA”) about an alleged violation of the SDWA.  In particular, Collins alleged that his employer was using an improper procedure to test Lynchburg’s water supply.  The employer asserted that Collins did not engage in protected conduct because his disclosure was motivated by personal animus against his supervisors.  The ARB expressly rejected this argument, concluding that “even if [an employee] were motivated by a retaliatory intent in making [a disclosure] to OEPA, a complainant’s motivation in making a safety complaint has no bearing on whether the complaint is protected.”   According to the ARB, an employee’s disclosure is protected so long as the complainant “reasonably believe[d] that a violation of the act occurred,” when he made his disclosure.  Finding that Collins satisfied his burden of proof and that his former employer failed to provide a legitimate non-discriminatory reason for terminating Collins’s employment, the ARB affirmed the ALJ’s decision in favor of  Collins.  For more information on whistleblower protection laws and The Employment Law Group® law firm’s Whistleblower Practice, click here.  

A new report released by the Center for Public Integrity (CPI) reveals that the number of DoD referrals to the Justice Department for contracting fraud and corruption cases have decreased drastically since 1993.  According to the report, the Justice Department has received 76% fewer cases in fiscal year 2008 compared to fiscal year 1993, despite the upsurge in defense contracting ($200 billion in 1993 compared to nearly $400 billion in 2008).  The CPI attributes the low number of referrals to a number of factors, including shifting priorities, workload increases, and the declining manpower and expertise in the DoD Office of Inspector General (OIG).  According to the report, these problems are not unique to the OIG.  The number of prosecutions of cases involving defense contracting fraud has also decreased since the Clinton administration due to the lack of “personnel to detect, investigate, prosecute and deter criminal activity impacting DoD.”  The good news is that the existing problems are being addressed.  Efforts to increase oversight and accountability in the DoD and Justice Department, include:

• Examining the government’s work in combating fraud and determining whether it is sufficient to catch and deter wrongdoing;
• Reviewing and improving government contracting rules;
• Improving coordination among government investigators; and
• Providing specialized training for agents and prosecutors on procurement fraud.

For more information about procurement fraud and The Employment Law Group® law firm’s Whistleblower Practice, click here.

In an article titled, “ARB Upholds Bankrupt Firm’s SOX Liability But Recalculates Retaliatory Discharge Award,” BNA reports on the Labor Department’s holding in Kalkunte v. DVI Financial Services, Inc., ARB NO. 05-139 (February 27, 2009), where the Administrative Review Board (“ARB”) in a 2-1 decision, found substantial evidence to support a finding that Ms. Kalkunte’s whistleblowing activity, i.e. her disclosure that senior management had provided false information to lenders, board members, and the Securities and Exchange Commission was a contributing factor in her discharge from DVI Financial Services.  The article highlights the extent to which the burden-shifting framework under the Sarbanes-Oxley Act (“SOX”) is very favorable to employees. Finding that the stated reasons for Kalkunte’s discharge “were a pretext, and that the real reason for her discharge was her ongoing preoccupation with the status of the Arnold & Porter investigation” into her disclosures about financial improprieties, the ARB affirmed the Administrative Law Judge’s (“ALJ”) decision that DVI and APS were both liable for whistleblower retaliation.  The ARB also affirmed the ALJ’s award of damages for pain, suffering, mental anguish, and humiliation. 

Ms. Kalkunte was represented by R. Scott Oswald and Nicholas Woodfield of The Employment Law Group® law firm.  For more information about the firm’s Sarbanes-Oxley Whistleblower Practice, click here.

Law360 writes about the recent Sarbanes-Oxley (“SOX”) decision issued by the Department of Labor’s Administrative Review Board (“ARB”) in Kalkunte v. DVI Financial Services, Inc.  According to the article, this decision is significant because it is the first SOX case to survive an appeal to the ARB.  In Kalkunte, the ARB affirmed an administrative law judge’s opinion concluding that AP, a privately-held subsidiary of DVI Financial Services, was liable under SOX, even though it was not publicly traded.  In reaching this decision, the ARB looked to the Act’s statutory language which holds:  “any officer, employee, contractor, subcontractor, or agent” of publicly traded companies liable for terminating whistleblowers. 

Ms. Kalkunte was represented by Scott Oswald and Nicholas Woodfield of The Employment Law Group® law firm.  For more information about the firm’s Sarbanes-Oxley Whistleblower Practice, click here. 

The National Law Journal writes about The Employment Law Group® law firm’s recent win before the U.S. Department of Labor’s Administrative Review Board (“ARB”) in an article titled, “Labor Department Expands Whistleblower Protections to a Company’s Contractors.”  The article discusses this seminal case, Kalkunte v. DVI Financial Services, Inc., in which the ARB held that Section 806 of the Sarbanes-Oxley Act (“SOX”) imposes liability on publicly-traded companies as well as contractors of private companies.  The article quotes Nicholas Woodfield, a Principal at the Washington-based firm, who noted that “The decision is the first time the Labor Department’s administrative review board has upheld an administrative law judge’s decision in favor of a complainant filing a Sarbanes-Oxley whistleblower retaliation claim.” 

Principals Scott Oswald and Nicholas Woodfield of The Employment Law Group® law firm represented Ms. Kalkunte.  To learn more about the firm’s Sarbanes-Oxley Whistleblower practice, click here.

Jason Zuckerman, a Principal at The Employment Law Group® law firm will speak at a D.C. Bar Luncheon Program about the recently enacted whistleblower provision in the economic stimulus bill and additional whistleblower protections for employees of government contractors, including the False Claims Act.  The program will take place on Monday, April 6, 2009 from 12:00 PM – 2:00 PM.  For more information on this program including location and costs, click here.  To register for this program, click here.  

The Employment Law Group® law firm is a contributing author of the 2009 annual update on the whistleblower retaliation provision of the Sarbanes-Oxley Act of 2002, a copy of which is available here. This annual update is a project of the ABA Section of Labor and Employment Law Committee on Federal Labor Standards Legislation Subcommittee on the Sarbanes-Oxley Act of 2002.

Jason Zuckerman, a Principal at The Employment Law Group® Law Firm will speak at a National Whistleblower Assembly event, titled “Ending the Dark Ages, Turning on the Lights Together.”   Mr. Zuckerman will provide practical tips on how to successfully represent whistleblowers before the Department of Labor.  Other featured speakers include Senator McCaskill (D-Mo), author of the recently enacted McCaskill Amendment and Congressman Van Hollen.  The conference, which is hosted by the Make it Safe Coalition and co-sponsored by organizations such as Government Accountability Project, the National Employment Lawyers Association, and the Project on Government Oversight, takes place on March 8-11, 2009 at the UDC David A. Clarke School of Law.  For conference details including information about daily events, click here. The conference is open to the public and free of charge.  To RSVP email  shannad@whistleblower.org.

A report released by the Government Accountability Office (“GAO”) reveals that the Department of Labor’s (“DOL”) Occupational Safety and Health Administration (“OSHA”) lacks adequate resources for processing whistleblower complaints.  As a result, many whistleblower complaints are not investigated, while others fail to be recorded in OSHA’s database.  According to GAO auditors, nearly half of the whistleblower investigators lack the necessary equipment to meet the needs of their jobs such as a portable printer or laptop computer.  Additionally, the majority of whistleblower investigators have reported that they need more training to effectively address cases under some of the more complex federal statutes such as the Sarbanes-Oxley Act. 

To address the existing problems with the administration of the whistleblower program, GAO encourages DOL to take the following actions: 

• Establish a mechanism to ensure that the data in OSHA’s management information system is accurate; 
• Revise OSHA’s audit directive to clarify the criteria that regions must use in conducting focused and comprehensive audits;
• Develop interim audit milestones to ensure that audits are completed within specified time frames;
• Establish minimum standards for equipment and computer software that investigators need to conduct their jobs; and
• Improve the method in which the ARB tracks its appeals by directing the ARB to conduct routine, systematic and independent reviews of its case tracking system.

All recommendations are currently being considered by DOL.

On February 27, 2009, the United States Department of Labor’s Administrative Review Board (“ARB”) affirmed the Administrative Law Judge’s (“ALJ”) opinion in Kalkunte v. DVI Financial Services, Inc., where the ALJ held that a privately-held company acting as a contractor, subcontractor, or agent of a publicly traded company can be held liable for violation of the whistleblower provisions of the Sarbanes-Oxley Act (“SOX”).  SOX, also known as the Corporate and Criminal Fraud Accountability Act of 2002, was enacted to ensure that employees who report corporate fraud can do so without fear of employer retaliation. The Kalkunte decision is significant because it defines the scope of liability under SOX and because it is the first time that the ARB has affirmed an ALJ decision in favor of a SOX plaintiff.

In Kalkunte the complainant Sheila Kalkunte, a former Associate General Counsel of DVI Financial Services, Inc. (“DVI”), alleged that she was retaliated against for disclosing information to audit committee members and outside counsel about senior management’s alleged misrepresentation of statistical data in violation of securities laws.  In addition, Kalkunte alleged that DVI, a publicly traded company and AP Services, LLC (“AP”), a privately-held company were both liable for retaliation under Section 806 of SOX.  In its defense, AP argued that privately-held companies are not required to adhere to SOX.

In affirming the ALJ’s decision, the ARB held that a company cannot escape liability for violating the whistleblower provisions of SOX merely because it is not registered under the Securities and Exchange Act or required to file reports under the same act. 

The ARB awarded Kalkunte lost wages and compensatory damages based on its finding that there was substantial evidence supporting the ALJ’s ruling that both DVI and AP retaliated against Kalkunte because of her whisleblowing activity.

R. Scott Oswald and Nicholas Woodfield, Principals at The Employment Law Group® law firm (www.employmentlawgroup.com), represented Ms. Kalkunte and can be reached at 202-331-2883.

Senator Charles Grassley (R-Iowa) introduced S.458, the False Claims Act Clarification Act of 2009, which would extend whistleblower protections to employees in the legislative branch who disclose information about reasonably perceived violations of any law, rule, or regulation.  The bill also amends the False Claims Act (”FCA”) by:

• clarifying the definition of “claim” to include any request or demand for money or property whether or not the United States has title to the money or property;
• expanding protected conduct to include disclosures made to officers, employees, and agents of the United States; and
• extending the statute of limitations for filing a retaliation claim from 6 to 10 years.

For information about The Employment Law Group® law firm’s Whistleblower Practice under the False Claims Act, click here.

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Southern Air, Inc. to pay more than $400,000 in lost wages, back pay, damages, and attorney fees to a flight crew member who alleged that he was terminated after raising concerns to management about inadequate rest breaks and work hours in excess of those permitted under the Federal Aviation Administration rules.  After its investigation, OSHA determined that Southern Air violated the whistleblower provisions of the Wendell H. Ford Aviation Investment and Reform Act (AIR21) when it terminated the flight crew member for raising legitimate safety concerns about the working conditions at Southern Air.  OSHA’s order is significant because it reminds employers that there is no tolerance for retaliation against employees who raise legitimate health and safety concerns.  For information about The Employment Law Group® law firm’s Airline Whistleblower Practice, click here.

Jason Zuckerman, a Principal at The Employment Law Group® law firm will speak at the Annual Whistleblower Symposium in Atlanta, GA.  The conference, which is scheduled to take place on March 4, 2009, will provide practical tips to employers and employees for successfully litigating whistleblower retaliation claims under the Sarbanes-Oxley Act.  To register for this event, click here. 

Jason Zuckerman, a Principal at The Employment Law Group® law firm will speak at March 17, 2009 webcast CLE titled, “New Whistleblower Protection:  The McCaskill Amendment to the Economic Stimulus Bill.”  The webcast will provide an overview of the recently-passed whistleblower protection provision in the Economic Stimulus Bill and its effect on whistleblower law and litigation.  In particular, the program will address the following questions:

• Will the whistleblower protections for employees of government contractors receiving stimulus funds apply to internal disclosures?
• Will contractor employees be able to recover compensatory damages in a jury trial?
• What is the scope of protected disclosures?
• Is the burden of proof favorable to employees?
• What defenses are available to employers to avoid liability?
• Will prevailing plaintiffs be entitled to attorney fees and litigation costs?
• Will the McCaskill Amendment preempt other statutory and common law remedies available to employees of government contractors?
• Will the new law result in an upsurge in whistleblower litigation?
• How will the McCaskill Amendment affect the interpretation of similar whistleblower protection laws?
• Does the new law completely eviscerate the “duty speech” defense and does the “duty speech” defense apply to other statutory whistleblower claims?
• What changes to other whistleblower laws are likely to be enacted by this Congress?
• What steps can employers take to avoid whistleblower retaliation claims?

For more information about this event click here.

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Union Pacific Railroad Company to reassign, reimburse, and pay compensatory damages to a former employee who alleged that he was retaliated against for requesting a lookout while performing work on adjacent railroad tracks.  After investigating the whistleblower complaint, OSHA concluded that Union Pacific violated the whistleblower provisions of the Federal Rail Safety Act (FRSA) when it eliminated the welder position and forced the employee to increase his daily commute by 131 miles.  The take away point for this case is that the whistleblower provisions of the FRSA prohibit all forms of retaliation, including the elimination of an employment position merely because an employee voices a safety concern.  The Employment Law Group® law firm routinely represents employees in whistleblower retaliation actions.  For more information about the FRSA and The Employment Law Group® law firm’s Transportation Whistleblower Practice, click here.

UBS has agreed to pay $780 million to settle allegations that it helped thousands of U.S. taxpayers defraud the Internal Revenue Service (“IRS”).  According to reports by the Department of Justice, UBS concealed billions of American dollars in accounts held overseas despite requirements to report IRS income and other identifying information for its U.S. clients to the IRS.  The U.S. Securities and Exchange Commission (”SEC”) also filed a complaint against the financial firm, alleging that UBS violated SEC rules by acting as an unregistered broker-dealer and investment advisor to thousands of U.S. citizens.  The settlement agreement includes payment for disgorgement, interest, penalties and restitution for unpaid taxes.  Other terms of the agreement include disclosure of the names of U.S. clients with UBS accounts.

This settlement is significant because it allows the U.S. government to pierce the veil of the Swiss bank secrecy and reminds companies that the penalties for participating in tax evasion schemes are severe.

The Employment Law Group® law firm routinely represents whistleblowers in disclosing federal tax fraud or underpayments.  For information about the IRS Whistleblower Reward Program, click here.