Protecting Whistleblowers In California
Whistleblower claims are on the rise across the nation. Due in part to the fact that the IRS, Department of Justice and other federal agencies, along with various State agencies are cracking down, creating task forces and making the punishment of fraudulent practices by contractors a number one priority.
Employees report fraudulent practices on the part of their employers on a daily basis. These employee 'whistleblowers' are essential to the government's ability to stop the loss of trillions of dollars a year from illegal activities.Danz & Associates has represented whistle blowers in many industries, including health care, aerospace, finance, transportation, food manufacturing and service, trucking and aviation. (As a licensed pilot, this is an area of special interest to Steve Danz). We are proud to have had our complaint in the health care industry (which resulted in a multi-million dollar recovery to the US Government for health care fraud), chosen as the sample complaint for the Nationally-recognized Civil False Claims and Qui Tam Actions Handbook for other attorneys to follow.
A whistleblower is generally defined as an employee who exposes the wrongdoing or fraudulent practices of his or her employer. The illegal activity may be classified in many ways; for example, a violation of a law, rule, regulation and/or a direct threat to public interest, such as fraud, health and safety violations, and corruption. Whistleblowers may make their allegations internally (for example, to other people within the employer's company) or externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).
The idea of protection for whistleblowers dates back to the late 1700s. In 1778 the Continental Congress enacted laws to protect whistleblowers when Richard Marven and Samuel Shaw blew the whistle and suffered severe retaliation by Esek Hopkins, the commander-in-chief of the Continental Navy. The fledgling Congress declared that the United States would defend the two men against a libel suit filed against them by Hopkins. The Continental Congress also declared it the duty of "all persons in the service of the United States, as well as all other the inhabitants thereof" to inform the Continental Congress or proper authorities of "misconduct, frauds or misdemeanors committed by any officers in the service of these states, which may come to their knowledge."
Seventy-five years after the ratification of the Constitution, during the Civil War, Congress enacted one of the first laws that protected whistleblowers, the 1863 United States False Claims Act (revised in 1986), which tried to combat fraud by military suppliers. The act encourages whistleblowers by promising them a percentage of the money recovered or damages won by the government and protects them from wrongful dismissal.
The term 'whistleblower' was coined by Ralph Nader, a famed civic activist, in the early 1970s.
Today there is an enormous patchwork of legislation designed to protect whistleblowers from retaliation. One of the most common and the earliest of the Acts is the False Claims Act. Still in operation, though revised in the late 1990s, the FCA has resulted in recoveries of trillions of dollars against the fraudulent practices of employers and government contractors around the globe.
There are several types of fraudulent behavior on the part of employers that are subject to various whistleblower protections. Among them are:
- Defense Contractor Fraud
- Medicare and Medicaid Fraud
- Pharmaceutical Fraud
- Tax Fraud
Defense Contractor Fraud
According to a report prepared by the Department of Defense for Senator Bernie Sanders of Vermont, "Hundreds of defense contractors that defrauded the U.S. military received more than $1.1 trillion in Pentagon contracts during the past decade."
Senator Sanders stated, "The ugly truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money."
The report detailed how the Pentagon paid $573.7 billion during the past 10 years to more than 300 contractors involved in civil fraud cases that resulted in judgments of more than $1 million, $398 billion of which was awarded after settlement or judgment for fraud. When awards to "parent" companies are counted, the Pentagon paid more than $1.1 trillion during the past 10 years just to the 37 top companies engaged in fraud.
Another $255 million went to 54 contractors convicted of hard-core criminal fraud in the same period. Of that total, $33 million was paid to companies after they were convicted of crimes.
Some of the nation's biggest defense contractors were involved.
Defense Contractor Fraud can take several forms, i.e. cross charging, failure to comply with contract specifications, improper cost allocation, product substitution, and violations of the 'Truth In Negotiations' Act.
Defense contractor fraud has led to trillions of dollars being awarded to unscrupulous contractors each year. Whistleblowers in these types of claims can often recover millions of dollars as percentages of overall court ordered payments once contractors are held liable.
Medicare and Medicaid Fraud
Medicare and Medicaid fraud has been on the rise over the last several decades and is listed as one of the top priorities of The Department of Justice. This type of fraud can result in the loss of tens of billions of dollars every year. Stephen Danz has worked alongside DOJ attorneys using the False Claims Act to punish the perpetrators of this fraud and reward the whistleblowers who make the recovery possible. If you are aware of Medicare or Medicaid coverage or reimbursement fraud, it could be in your best interest to make a whistleblower, or "qui tam", claim.
Pharmaceutical Fraud involves activities that result in false claims to insurers or programs such as Medicare in the United States or equivalent state programs for financial gain to a pharmaceutical company. There are several different schemes used to defraud the health care system which are particular to the pharmaceutical industry. These include: Good Manufacturing Practice (GMP) Violations, Off Label Marketing, Best Price Fraud, CME Fraud, Medicaid Price Reporting, and Manufactured Compound Drugs. The Federal Bureau of Investigation (FBI) estimates that health care fraud costs American taxpayers $60 billion a year. Of this amount $2.5 billion was recovered through False Claims Act cases in FY 2010. Damages from fraud can be recovered by use of the False Claims Act, most commonly under the qui tam provisions which reward an individual for being a "whistleblower."
Tax Fraud or Evasion - The Internal Revenue service rewards whistleblowers with a percentage of the tax money and penalties recovered with the information provided. The Tax Relief and Health Care Act of 2006 pays whistleblowers up to 30% of any tax revenue recouped by the IRS as a result of a whistleblower's information.
In September 2012, the IRS Whistleblower Office awarded Bradley Birkenfeld $104 million as a whistleblower for his revelations that the Swiss bank UBS abetted tax evasion by 19,000 American clients. The award was the largest whistleblower payout in history, to either an individual or a group. The IRS explained its decision by citing Birkenfeld's “exceptional cooperation” and the “breadth and depth” of the information he provided, all of which led to “unprecedented actions” against UBS. The IRS and the U.S. Department of Justice used Birkenfeld's information to negotiate a $780 million settlement with UBS in 2009. Under that deal, UBS admitted to helping U.S. clients cheat on their taxes. The bank later turned over the names of nearly 5,000 U.S. clients suspected of tax evasion. IRS amnesty programs have since collected $5 billion from people who participated in UBS's illegal scheme based on the information provided by Birkenfeld.
As you can see, whistleblower claims, though often prompted by an employee's sense of civic duty, can result in substantial awards should they be prosecuted fully. Employee cooperation in these suits is essential if the government is to have any hope of stopping the illegal behavior.
Stephen Danz & Associates have extensive knowledge of and experience with the Federal False Claims act and in filing whistleblower claims across the state and the nation.
How does the process work?
Any person with knowledge of wrongdoing on the part of an employer can file a whistleblower complaint. There are cases where bringing the matter to the attention of your supervisor or the owner of your company will result in a satisfactory conclusion. In many cases however, you may not feel comfortable approaching someone inside your company and must therefore report the wrongdoing to outside authorities.
This is where Stephen Danz & Associates can help. Once you contact our office, we will sit down with you to discuss the wrongdoing and help you create a log of information and evidence that will be essential in bringing the claim to the attention of the authorities. We generally suggest that you report nothing at first. As the level of proof in the typical whistleblower action is quite high, you must prepare a comprehensive set of documents and other evidence to present to the agency to which you file the report. We will go over this process with you until you feel comfortable and are aware of exactly what you will need to do. We never suggest that you remove original copies of any documentation from your employer's place of business, as those are your employer's property. Making copies however, is generally permissible. In many cases, your case could face dismissal if you have not presented sufficient documentation to support your claims, including in many cases “time, date and place” allegations.
Once the agency receives your documentation it will review what you have provided. A lawsuit will be filed 'under seal.' A qui tam action must be confidentially filed under seal in federal district court in accordance with the Federal Rules of Civil Procedure. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the your possession, must be confidentially served on the US Attorney General and the US Attorney for the district in which the complaint is brought.
An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the employer. If you violate the provisions of the seal, your complaint could be dismissed.
You have the right, which we will assert to participate with the government in the prosecution of the case. In fact, if you are hoping to take part in the recovery you may be required to provide testimony and participate with the government's case, especially if individual rights are alleged. We generally include causes of action for retaliation if they are warranted. This allows for more active participation on your part as well as ours. In other cases, the government may decline to participate and you may then serve the lawsuit on the defendant and litigate it “in the name of” the government. All settlements are approved by the government. A little-known advantage of government declination is the higher attorney fee payable to the relator (person bringing the suit).
The firm regularly consults with other attorneys around the United States, attends numerous conferences involving federal false claims issues, and has contributed to the National Qui Tam Handbook. The firm is proud that one of their false claims complaints was chosen as the best example of all qui tam complaints filed and would be happy to share it with any attorneys of potential clients on request.
Unlike many other statutes, under the False Claims Act, an action must be filed within the later of the following two time periods: Six years from the date of the violation of the Act; or Three years after the government knows or should have known about the violation, but in no event longer than ten years after the violation of the Act.
Violators of the False Claims Act are liable for three times the dollar amount that the government is defrauded and civil penalties of $5,000 to $10,000 for each false claim. A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the Act, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough. You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.
There are advantages in choosing a single law firm to litigate both your wrongful termination and federal or state false claim matter. In some cases we have used the state wrongful termination discovery process to amass evidence for use in the federal qui tam case. In other situations it pays to consider alleging wrongful termination, back pay and reinstatement in the federal qui tam matter. This provides an opportunity to allow the relator to open discovery quicker, before valuable evidence is lost to time while the government continues to investigate.
Whether the company should be notified of the wrongdoing before a lawsuit is filed is not susceptible to a one-sized fits all response. Generally, new federal legislation has provided that a whistle blower is protected under some causes of action if the company is given a chance to correct their behavior.
Furthermore, when the state law requires - as does California--that the working conditions be outrageous such that an ordinary employee would feel compelled to resign, then asking for the company to right the wrong seems reasonable. Under Section 3730(h) of the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts by the employee in furtherance of an action under the Act is entitled to all relief necessary to make the employee whole. Such relief may include:
- Double back pay
- Compensation for any special damages including litigation costs and reasonable attorneys' fees.
You should be aware, however, that the scope of whistleblower protection under Section 3730(h) is an issue that currently divides the courts. Many states, like California, have wrongful discharge or other employment laws that may provide other remedies for such discrimination. The Statute of Limitation for filing a FCA retaliation case is different than that for filing a qui tam recovery case. A FCA retaliation case must be filed under the statute of limitation applicable to the most closely analogous state statute.
If you are aware of fraudulent activity on the part of your employer and are thinking of moving forward with a whistleblower claim, contact Stephen Danz & Associates today. Call our toll free number (877) 789-9707 or use the Contact form on our website. All scheduling is done through our Los Angeles Office but we have offices throughout California and can easily arrange to meet you at a location that is more convenient for you. Stephen and one of his associates will sit down with you to evaluate your potential case and advise you on the steps necessary to collect the proper evidence to present to the agencies responsible for oversight in your particular situation.
Put the experience of one of the most well respected employment law attorneys to work for you. Call Stephen Danz today.