D.C. Legislation Would Extend False Claims Act Treatment to Taxes

On February 5, 2013, D.C. Councilmember Mary M. Cheh (D-Ward 3) presented the “False Claims Act of 2013” to the Committees on Finance and Revenue.  This bill would extend the current False Claims Act which fails to apply to violations of the tax code.

The False Claims Act of 2013 would enable whistleblowers to receive a reward for providing the District with non-public information that assists the District of Columbia in collecting tax funds that it is owed.   Under the proposed law, tax fraud whistleblowers would be eligible for a reward only if the D.C. Government succeeding in recovering the owed tax payments.

The propose law would allow the government and whistleblowers to file a tax-based claim under the False Claims Act if the tax fraud in question exceeded  $350,000 and if the entity or taxpayer has an income in excess of $1 million.

The introduction of this bill in D.C. is significant as is part of a broader trend of states and local jurisdictions considering extensions of local whistleblower statutes.  If D.C. passes this bill, it would join the State of New York, which recently passed a False Claims Act statue allowing qui tam recoveries for those who report significant tax fraud.

The Employment Law Group® law firm regularly represents IRS, SEC, and CFTC whistleblowers.  Our whistleblower lawyers recently published an article, “Rewarding Whistleblowers for Disclosing Tax Violations to the IRS” for The CPA Journal.

Oracle Agrees to Pay U.S. $199.5 Million to Resolve False Claims Act Lawsuit

According to a Department of Justice Press Release, Oracle Corp. and Oracle America Inc. have agreed to pay $199.5 million plus interest for failing to meet their contractual obligations to the General Services Administration (GSA).

This settlement relates to a contract Oracle entered into in 1998 to sell software licenses and technical support to government entities through GSA’s Multiple Award Schedule (MAS) program.   The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly used commercial goods and services.  To be awarded a MAS contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.  The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Oracle knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Oracle knowingly made false statements to GSA about its sales practices and discounts.

Tony West, Assistant Attorney General for the Civil Division of the Department of Justice sates:

“Companies that engage in unlawful or fraudulent practices to secure government business undermine the integrity of the procurement process and create an unfair advantage against the majority of companies that are playing by the rules.  Resolutions like this one – the largest GSA false claims settlement in history – demonstrates our commitment to ensure taxpayers are not overpaying for the products and services they receive.”

The settlement resolves a lawsuit filed on behalf of the U.S. government by former Oracle employee, Paul Frascella, who will receive $40 million as his share of the recovery in the case.   Under the whistleblower provisions of the False Claims Act, private citizens can bring lawsuits on behalf of the United States and share in any recovery obtained by the government.

TELG Principals Publish Authoritative Article on D.C.’s Amended Whistleblower Protection Act in Bureau of National Affairs

The Employment Law Group’s © Managing Principal R. Scott Oswald and former Principal Jason Zuckerman have published a whistleblower article in the Bureau of National Affairs, Inc. Daily Labor Report titled “D.C.’s Amended Whistleblower Protection Act: The Gold Standard for Public Sector Whistleblower Protection.”

The article highlights changes to Washington D.C.’s recently amended Whistleblower Protection Act (D.C. WPA); changes which make it the “strongest public sector whistleblower protection statute in the country” and a model for other states to follow. Messrs. Oswald and Zuckerman point out that in order “to encourage public sector employees to blow the whistle on waste, fraud, and abuse, states must provide robust whistleblower protections to employees.”

These changes were brought about after the D.C. Council investigated Harriette Walters, a former employee at the Office of Tax and Revenue, and discovered she had embezzled over $48 million over the course of 18 years. Her co-workers remained silent the entire time because they feared reprisals for blowing the whistle.

Now, “the D.C. WPA protects any current or former employee, applicant for employment, as well as employees of independent and subordinate agencies….[Furthermore,] authorizing actions against individuals is critical to deterring retaliation against whistleblowers.”

Changes to the D.C. WPA include:

  1. Broad Scope of Protected Conduct: The D.C. Whistleblower Protection Act protects an employee who lawfully discloses information which he or she reasonably believes evidences gross mismanagement, waste of public funds, abuse of authority in connection with the administration of a public program or the execution of a public contract, a violation of law, regulation, or contractual term, or a substantial danger to public health and safety. The D.C. WPA also protects and employee’s refusal to comply with an illegal order…. [Defined as] a directive to violate or assist in violating any federal, state, or local law, rule, or regulation.
  2. Protecting ‘Duty Speech’: The amended D.C. WPA also eliminated the “duty speech” loophole. Foreseeing the assertion of the “duty speech” defense from Garcetti v.Ceballos, the D.C. Council clarified that employees are protected even if their disclosure is made during the course of performing their job duties.
  3. Prohibited Types of Retaliation: The D.C. WPA forbids a wide range of retaliatory adverse actions, including “recommended, threatened, or actual termination, demotion, suspension, or reprimand; involuntary transfer, reassignment or detail; referral for psychiatric of psychological counseling; failure to promote or take other favorable personnel action.
  4. Causation Standard and Burden-Shifting Framework: The D.C.  WPA applies a causation standard and burden shifting framework that is mare favorable to employees than Title VII of the 1964 Civil Rights Act’s McDonnell Douglas standard. To prevail under the D.C.WPA, an employee must show by a preponderance of the evidence that her protected conduct was a contributing factor in the adverse employment action.
  5. Statute of Limitations and Right to Jury Trial: Under the D.C. WPA, a whistleblower may seek a trial by jury within three years after a violation occurs or within one year after he or she first learns of the violation, whichever comes first.
  6. Remedies: Remedies available to a whistleblower include injective relief, reinstatement to the same or equivalent position with all seniority rights and benefits, back pay, interest, compensatory damages, attorneys’ fees, and costs.
  7. Financial Incentive for Whistleblowing: The District is encourage employees to become whistleblowers by creating financial incentives while simultaneously prohibiting retaliation and holding those who participate in retaliation personally responsible for their acts. 
  8. Protection for Employees of D.C. Contractors: The District extends similar protections to the employees of District contractors and instrumentalities.

Messrs. Oswald and Zuckerman conclude that more states should adopt whistleblower protection statutes similar to the District of Columbia’s because strong whistleblower protection laws like the D.C. WPA will incentivize more people to come forward and blow the whistle.

Amendment to D.C. Whistleblower Protection Act Ruled Retroactive

In Winder v. Erste, Judge John D. Bates of the United States District Court for the District of Columbia ruled in favor of whistleblower Alfred Winder, holding that the 2009 amendment to the D.C. Whistleblower Protection Act should be applied retroactively to pending cases before the courts.  The amendment altered the governing statute of limitations period and specified that D.C. Code Section 12-309, which contains the notice requirement, no longer applied to any “civil action brought under this section.”

In 1999, Winder was hired as General Manager of the DCPS Division of Transportation where he oversaw the operation of transportation services for special education students in the District.  He was specifically brought in to assist the District in complying with several court orders.  Winder alleges he was fired while on medical leave, because of disagreements regarding compliance with those court orders.

Winder’s original complaint was dismissed for failing to meet this notice requirement.  Quoting Montgomery v. Dist. Of Columbia, this court wrote, “unless a contrary legislative intent appears, changes in statutory law which pertain only to procedure are generally held to apply to pending cases.”  As a result, Winder is allowed to pursue his original complaint alleging that the D.C. Public Schools violated his rights as a whistleblower under the D.C. Whistleblower Protection Act.

DC Whistleblower Protection Act Amendments are Retroactive on Procedural Matters

D.C. Superior Court Judge Todd Edelman ruled in Davis v. District of Columbia that procedural aspects of the 2009 amendments to the D.C. Whistleblower Protection Act (DC WPA) retroactively apply to cases filed before the amendments’ enactment. In particular, Judge Edelman held:

While substantive laws create or impair substantive rights, procedural laws generally only “relate to the modes of procedure or confirm or clarify existing rights.” Furthermore, while reliance interests generally militate against the retroactive application of laws, courts have recognized “diminished reliance interests in matters of procedure.” (Citations omitted).

…[A]pplications of new procedural rules are generally not considered impermissible retroactive applications of the law.

…[T]he application of new procedural laws applies not just to subsequently-filed lawsuits based on conduct that predated their enactment, but to cases pending at the time the new rules take effect. “Unless a contrary legislative intent appears, changes in statute law which pertain only to procedure are generally held to apply to pending cases.” (Citations omitted).

For more information about The Employment Law Group® and its Whistleblower Law Practice, click here.

DC Jury Finds Police Chief Retaliated Against Whistleblower

According to the Washington Examiner, a D.C. jury awarded Sean McLaughlin damages for retaliation in violation of the DC Whistleblower Protection Act.  McLaughlin alleged D.C. Police Chief Cathy Lanier, a district commander at the time, threatened police officers with “consequences” if they pursued their claims that the police department’s off-duty reimbursable overtime security detail at Gallery Place was illegal.

For more information about the firm’s Whistleblower Law Practice, click here.