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.
Protecting Whistleblowers in California
In California it is illegal to fire, demote, refuse to promote, harass, discriminate or retaliate against an employee who is in a protected class, or whose conduct is within a protected category, which includes persons who “blow the whistle” on improper or illegal activities. An employee is considered a “whistle blower” when he or she informs the government or a law enforcement agency that their employer is breaking the law. In some cases it is not required that a Government agency be contacted; it is enough to advise the employer of illegalities. This is especially true of “unsafe working conditions”, see California Labor Code 6310-11, et seq.
For example, it is illegal for an employer to fire an employee who reports racial discrimination. Also, it would illegal to fire or demote an employee who testifies in a proceeding against the employer for racial discrimination. This would be the basis for a lawsuit under numerous state and federal laws.
Keep in mind that “whistle blowers” are also good folks who report to government agencies illegal actions that cheat tax payers. We have litigated on behalf of (and served as partners with the Department of Justice) employees who report false claims information. Traditionally, this field has involved aerospace claims. In the last ten or so years, the number of inquiries we receive focuses on health care. These frauds may include false billings to the government, “unbundling claims” (where something included in a code for surgery is also billed separately), bills for medical services not medically necessary or charged at unfair prices, and other frauds. As part of the Obamacare Laws (“Patient Protection and Affordable Care of of 2010”), the false claims act was amended to provide for continued health care fraud coverage wherever federal programs are involved. Modeled on the Consumer Product Safety Act of 2008, anti-retaliation provisions for employees who blow the whistle on violations of Title I of that act are provided for.
Stephen Danz & Associates is California’s largest statewide law firm that’s dedicated to representing employees in disputes against their employers. Stephen Danz & Associates, based in Los Angeles, California, protects clients from retaliation, discrimination, and harassment involving dismissal, demotion, or denial of accommodation based on age, race, sex, religion, color, sexual orientation, marital status, association, physical or mental disability, or other legally protected classifications. Additionally we represent employees if they have not been paid the proper wages including overtime or minimum wage or given the proper meal breaks. If you believe that you are the victim of discrimination or retaliation because you are a whistle blower, contact our Los Angeles officeto setup your free consultation to discuss this matter with our lawyers. We take cases on a contingency basis and collect no attorney fees unless we win your case.
What is”qui tam” litigation?
If you believe in reporting illegalities, whether it be accounting, taxes, fraud on the public, customers, other entities, or violations of the Labor Code of California or the Federal Fair Labor Standards Act, then you are “committing the truth” and performing a valuable public service. Qui Tam legislation (“qui tam” is short for “pro domino rege quam pro se ipso in hoc pane sequitur” or, in English, “He who sues for the King sues for himself as well”), is designed to provide recovery of lost federal and state revenues through the use of citizens who know about fraud and report it. To encourage citizen reports through qui tam lawsuits, a recovery of between 10 and 30% of the amount recovered is provided as an incentive.
Is my employer likely to retaliate against me for reporting fraud and theft of public funds?
Each employer is likely to have a different reaction, but in our 30 years of qui tam representation, we can’t recall a single instance in which retaliation (however mild) by the California employer took place or in which the relator (that’s you, the person bringing the suit) reasonably believed he/she was being subjected to retaliation. Some common forms of retaliation are initiating an investigation against the whistleblower; resuscitating old personnel issues as if they “happened yesterday”; removing the whistle blower from a position of responsibility; moving the work location to one so remote that the employee considers quitting rather than long distance commuting, or making sure the employee is cut off from data and peer group relationships. These are all common tactics.Some employers have upped the ante by demanding psychiatric “fitness for duty exams”. Other employers have simply overloaded whistle blowers with meaningless work assignments, or unfairly dumping projects on their laps that were started and not finished by co-workers.It is rare that a whistle blower is subjected to any sort of physical violence. However, no one can ever forget Karen Silkwood. An employee of the Kerr-McGee Nuclear Facility in Oklahoma, Ms. Silkwood died after her car was run off the road on her way to a meeting with a reporter to discuss nuclear safety issues at her plant. Dr. Jeff Wignad of cigarette fame received death threats. It has been suspected by some whistle blowers that they have been assigned to toxic and/or radioactive “hot spots”More subtle, but none-the-less possibly devastating to their careers, employees have been laid off, demoted, black listed (“You’ll never work in this industry again”) and defamed in their job searches.
Can I be sued by my employer for defamation if I go public?
It depends. If you are stating your opinion, that is generally protected by the First amendment. If you maliciously publish an opinion with no reasonable basis to believe it to be true, you could be sued. The safest course of action is to publish only what you file in court. For example, in California, Civil Code 47 protects anything filed in court (with limited exceptions having to do with malicious prosecution and abuse of process).Our firm has represented whistle blowers who have been sued as a result of their having filed termination and false claim lawsuits. Courts will dismiss and award mandatory attorney fees against an employer who cross complains or files a new lawsuit against their employee to prevent them from having filed in the first place. This is called a SLAPP lawsuit in California (Strategic Lawsuit Against Public Participation) and has prevented many employers from stopping their former employees from suing.
My employer promises an “in house” investigation if I don’t report him. Should I trust him?
Probably not! An in house investigation is designed solely to keep you from reporting to the authorities or your private attorney your concerns. The company clearly wants to prevent incurring the obligation to pay back the losses suffered by others, to minimize if not eliminate adverse publicity and to keep you from going public. In some cases, legislation does allow you to report internally and keep your right to recovery intact (Dodd Frank Wall Street Reform and Consumer Protection Act), but this is rare.It is a rare corporate investigator who does not feel a conflict of interest in reporting findings of misconduct and financial loss to the public. After all, he/she is hired by the company. The same pressure to find no fraud, to minimize any fraud discovered, or to lower the level of the corporate officers responsibility for the fraud, exists even if the investigator is a third party, such as “outside counsel” or an industry specialist.A final warning: Keep copies of all documents you give to your attorney or the inside corporate investigator. Do not take originals and do not take materials which the company might argue are propriety, trade secrets. It’s a tough line to draw, but at the end of the day, not having documents in your possession may make the case hard to prove. Especially so where courts require “time, date and place” allegations in order to allow the complaint to move forward.
I am active in social media. Should I be concerned about my privacy on line?
Yes! Be extremely concerned and protect your privacy. Assume that your employer will go on line to find everything and anything you’ve said, research the people on your Face book page, and print copies of everything you write. In a recent case we handled, the employer had printed out more than three inches of exchanges. Going through each posting was excruciating because we didn’t know if even one of those exchanges would have cast our client in a malicious light. Pointers: Set your privacy at the highest level available; know who you are friending and communicating with (friends of friends can be dangerous) If the person following you is unknown, delete their access asap. Do not post during business hours and never ever use your office account to email or open your Facebook.
Can I contact my attorney through my office e mail?
Not without waiving (or giving up) your attorney client privilege! This includes going on-line to find an attorney. Do it from home on your personal computer and don’t open it through your company email.
This page is not intended to give legal, only educational advice. Legal advice, germane to your situation can only be given by an attorney licensed to practice in your jurisdiction and intimately familiar with the complex law in this area and the facts of your case. We have offices throughout California and welcome your further inquiry.
Should I file a separate wrongful termination case apart from the federal false claim?
While the Federal False Claim Act, 31 USC 3729, provides for individual rights to be addressed, and while there is an advantage to doing this insofar as urging the court to lift the automatic seal on the qui tam action, so that the relator can start his discovery, we have found it best to file two separate lawsuits. Discovery can be conducted without tipping our hand if we use the state wrongful termination lawsuit to gather documents and take depositions which will later support the federal lawsuits’ Material Statement of Evidence. This is perhaps one of the most highly-individualized decisions which we must make, regardless of health care, aerospace, financial services or other frauds and wrongful terminations.If you feel that there is some basis for you to report your employer for any type of wrongdoing, contact our office BEFORE taking that first step. Stephen Can sit down with you to lay out a plan for gathering information and evidence that will not jeopardize its admissibility in future court hearings or settlement conferences. Schedule a free consultation by calling our toll free number (877) 789-9707 or using the contact form on our website.