by Stephen Kohn
The Inspector General for the Intelligence Community approved procedures for adjudicating whistleblower complaints under PPD/19. Issued on May 15, 2014, the “IC IG External Review Panel Procedures Pursuant to Presidential Policy Directive-19 vest the “department or agency head” with authority for making all final decisions in whistleblower cases. In other words, the head of the agency that retaliated against the whistleblower is the final judge and jury over the whistleblower case, with no rights to appeal. Finally, someone in the federal bureaucracy read Franz Kafka and Lewis Carroll.
Two years later Congress passed the Intelligence Community Whistleblower Protection Act, covering the CIA, Defense Intelligence Agency, National Geospatial-Intelligence Agency, National Security Agency, Office of the Director of National Intelligence, National Reconnaissance Office, and “any executive agency or unit thereof,” “determined by the President,” to “have as its principal function the conduct of foreign intelligence or counterintelligence activities.” This law established whistleblower rights that are controlled by presidential appointees, and mirrors the procedures in PPD/19. The post-Snowden legal protections for national security whistleblowers flatly states that the President of the United States “shall provide for the enforcement” of this law. So much for independence.
The FBI Whistleblower Protection Act is somewhat stronger than the intelligence agency law. Judicial review is not explicitly prohibited (although the few courts to consider the issue have denied any review) and the statute requires the President or Attorney General to establish procedures consistent with those afforded other federal employee whistleblowers —including a confidential investigation into the merits of a case, and an opportunity for a hearing. FBI whistleblowers must file their cases with the Department of Justice Office of Inspector General or Office of Professional Responsibility. The hearings are conducted within the Justice Department, and the authority to issue final decisions was delegated to the Deputy Attorney General, a political appointee.
As explained in Rule 14, using the prepublication review process to have an agency (and thereafter a federal court) approve the public release of whistle-blower disclosures is still the best method for intelligence agency employees to make the public aware of abuses within these agencies.
Federal Laws that Permit Access to Federal Court. A number of federal laws covering whistleblowers provide for direct filings in federal court and/or permit whistleblowers to have their cases independently heard by a judge and jury after they exhaust administrative remedies. The antiretaliation provisions of the Securities Exchange Act and Commodity Exchange Act permit whistle-blowers to file directly in federal court, without having to make any filings before the Department of Labor or the SEC. Title VII of the Civil Rights Act permits employees who claim retaliation because they opposed discriminatory practices (or disclosed evidence that their employers engaged in discrimination) can file claims in federal court after exhausting remedies before the Equal Employment Opportunity Commission. Other antiretaliation laws that permit direct access to federal court (or access to court after exhausting administrative remedies) are the Fair Labor Standards Act, the DOL-administered laws referenced above, banking sector antiretaliation laws, and laws covering government contractors who expose waste, fraud, or abuse. All Americans can also use the Privacy Act to obtain access to federal court. The Privacy Act also prohibits federal agencies from collecting information on the First Amendment activities of Americans.
State Laws. More than one-half of the states have qui tam laws modeled on the federal False Claims Act. In these jurisdictions, if state or local taxpayer monies are being ripped off by corrupt contractors, whistleblowers can use the state qui tam laws to obtain independent access to the courts. This permits whistleblowers who use the state laws to avoid or minimize federal political interference with their cases.
In addition to the state False Claims Acts, most states permit whistleblowers to challenge a wrongful discharge under their local laws. As explained in Rule 5 and Checklist 3, some states have enacted Whistleblower Protection Acts that usually permit employees to file cases in court. Also, a large majority of states recognize a “public policy” exception to the termination-at-will doctrine, permitting whistleblowers to file common law breach of contract or tort (personal injury) cases in state courts.
Conclusion
When deciding whether to take the risk and blow the whistle it is important not only to learn whether or not you are protected by law, but also who has been delegated the authority to protect you. Is it a judge or jury? Is it a federal bureaucrat? Is it the President of the United States or one of his/her appointees? Is the process independent, or is it subject to overt political pressure?
RULE 30Never Forget: Whistleblowing Works
One of the hardest dilemmas facing employees who want to blow the whistle is a nagging doubt that they are powerless. Why blow the whistle if nothing will get better?
It is impossible to judge the actual impact of the thousands of employees who blow the whistle every year. How can one quantify the environmental protections obtained from the numerous whistleblowers who exposed violations of the Clean Air Act? Or the health and safety benefits obtained for workers under the OSHA, Surface Transportation, and Mine Safety whistleblower laws? Or the savings to investors that have been, or will be, achieved under the Dodd-Frank and Sarbanes-Oxley whistleblower laws?
But one area of whistleblower law can be objectively judged. The False Claims Act has been actively used by whistleblowers since 1986. Because the United States must pay whistleblowers who prevail in these claims a percentage of the monies actually recovered by the government from dishonest contractors, the U.S. Department of Justice keeps accurate statistics of every FCA recovery. The DOJ, down to the penny, has calculated the monies obtained as a direct result of whistleblower disclosures. The results are stunning. Whistleblowing does work.
Proof by Dollars and Cents
The FCA is the only law that has been actively used by employee whistleblowers for over thirty years and for which actual hard data exists that can quantify the impact of whistleblowers.
The statistics on False Claims Act recoveries published by the U.S. Department of Justice Civil Fraud Division speak for themselves. Between October 1, 1987, and September 30, 2016, the following recoveries have been obtained:
• By the DOJ Civil Fraud Division without the help of whistleblowers under the FCA: $15.347 billion;
• By the DOJ Civil Fraud Division based on FCA cases filed by whistleblowers: $37.685 billion;
• Rewards actually paid to whistleblowers under FCA: $6.352 billion;
• Since the False Claims Act was amended in 1986, whistleblowers are the direct source of 70 percent of civil fraud recoveries obtained by the United States.
“Most [civil fraud cases that result] in recoveries were brought to the government by whistleblowers” under the False Claims Act.
–U.S. Assistant Attorney General
The following are examples of the amounts of money actually recovered by the taxpayer under the federal or state FCA due to the risks taken by employees who blew the whistle:
• Amerigroup Insurance: $225 million for illegally denying Medicaid coverage to pregnant women;
• Armor Holdings, Inc., and Hexcel Corporation: $45 million for manufacturing and selling defective body armor;
• Bank of America: $1 billion for banking/mortgage fraud;
• Beverly Enterprises, Inc.: $170 million for charging to Medicare the salaries paid to nurses who worked on non-Medicare patients;
• Bristol-Myers Squibb: $515 million for illegal pricing and marketing of over fifty different types of drugs;
• Ciena Capital, LLC: $26.3 million for false certification of small business loan requirements;
• Cisco Systems: $48 million for overcharging and defective pricing;
• Citigroup: $158 million for mortgage fraud;
• Conoco Phillips: $97.5 million for under
payment of natural gas royalties on public lands;
• CVS Corporation: $37 million for overcharging Medicaid;
• Deutsche Bank: $202 million for defrauding HUD and the FHA;
• Eli Lilly & Co.: $1.415 billion for promoting drugs for uses not approved by the Food and Drug Administration;
• GlaxoSmithKline: $750 million for selling adulterated drugs;
• Hospital Corporation of America: $840 million for performing medically unnecessary tests, overbilling, “up coding” (using false diagnosis codes to increase payments), and billing for nonreimbursable costs;
• Lockheed Martin: $10.5 million for filing false invoices to obtain early payments;
• Los Angeles Department of Water and Power: $160 million for overcharging customers;
• Merck: $650 million for kickbacks and Medicaid Best Practice violations;
• Northrop Grumman: $191 million for fraudulent overcharging and selling defective equipment;
• Oracle: $200 million for price-gouging on computers;
• Pfizer, Inc.: $2.3 billion for illegal kickbacks and illegal marketing of numerous drugs, including Lipitor, Viagra, and Celebrex;
• Pratt & Whitney: $52 million for defective turbines used in fighter jets;
• Purdue Frederick Co.: $634.5 million for misbranding the painkiller Oxycontin;
• Schering Plough: $435 million for illegal sales and marketing of brain tumor, cancer, and hepatitis drugs;
• Science Applications International Corporation: $5.9 million for violations of conflict of interest rules in contract with the Nuclear Regulatory Commission;
• Shell Oil Company: $110 million for underreporting and underpaying royalties;
• Smithkline Beecham Clinical Laboratories: $325 million for charging government for tests that were not performed, “adding on” additional unnecessary tests to increase billable costs, paying kickbacks to obtain a doctor’s medical business, and double billing for dialysis tests;
• Tenet Healthcare: $900 million for Medicare billing violations, kickbacks, and bill padding;
• University of Phoenix: $67.5 million for violations of student loan regulations;
• Walgreens: $120 million for improper drug switching.
The list goes on and on and on: Abbott Labs ($400 million recovery for taxpayers); Bank of America ($187 million recovery for taxpayers); Bayer Corporation ($257 million recovery for taxpayers); Boeing ($54 million recovery for taxpayers); BP/Amoco ($32 million recovery); Chevron ($95 million recovery for taxpayers); ConocoPhillips ($97 million recovery); General Electric ($59.5 million recovery); Harvard University ($31 million recovery); Hercules, Inc. ($26 million recovery); Ingersoll-Rand ($3 million recovery); MCI/WorldCom ($27 million recovery); Mellon Bank ($16.5 million recovery); Office Depot ($4.75 million recovery); OfficeMax ($9.8 million recovery); Princeton Review ($10 million recovery); Roche Biomedical Laboratories ($325 million recovery); Rockwell International ($27 million recovery); State of California ($73 million recovery); Texaco Oil ($43 million recovery); the Scooter Store ($4 million recovery); United Technologies ($150 million recovery); University of Pennsylvania ($30 million recovery).
The “whistleblower program . . . has rapidly become a tremendously effective force-multiplier, generating high quality tips, and in some cases virtual blueprints laying out an entire enterprise, directing us to the heart of the alleged fraud.”
–Chairman, Securities and Exchange Commission
Of the $37.685 billion recovered as a result of whistleblower-initiated FCA cases resolved as of 2016, whistleblowers themselves obtained $6.352 billion in rewards. The government only pays these rewards because the whistleblowers, who risked their careers to expose the frauds, were the key to the successful prosecution. Some examples of extraordinarily large whistleblower rewards include the share relators obtained in cases against Medco Health Solutions, United Technologies Corporation, and Northrop Grumman, where the whistleblowers obtained rewards of $23 million, $22.5 million, and $27.2 million, respectfully. In the massive case against Hospital Corporation of America, Inc., the whistleblowers collectively obtained $154 million in rewards.
None of these rewards were paid for by the taxpayer. The company that fired or harassed the whistleblowers had to pay the bill. Although the average reward paid is approxtimately $1.5 million, the astronomically large rewards create a powerful incentive both for employees to blow the whistle and for companies to ensure that they are impeccably honest in their use of taxpayer money.
These numbers are simply staggering.
From the shop floor straight into the highest corporate offices and into the courts, whistleblowers make real change.
The size of FCA judgments sends the shockwaves necessary for entrenched corporate traditions to change. These judgments create the most powerful incentive known under law for ensuring honesty in the use of government monies. The large rewards grab headlines, advertise the existence of the FCA within the government-contractor community, and encourage an extremely reluctant workforce to come forward and protect taxpayers. These recoveries directly result from the contribution that whistleblowers made to the public interest. These whistleblowers placed their careers and reputations on the line. They won their cases. Taxpayers obtained billions of dollars in recoveries, and the whistleblowers were rewarded for having the courage and integrity to stick their necks out (using the ostrich metaphor) to serve the public interest.
The FCA simply offers the best concrete example of the power behind employee whistleblowing. Under this law, the impact of whistleblowing is measured in dollars and cents. Now that Congress has created four new qui tam laws, for the Internal Revenue Code, the Securities Exchange Act, auto safety, and the Commodity Exchange Act, the massive savings and recoveries obtained under the FCA are being duplicated. Additionally, older whistleblower reward laws that have received minimum publicity, such as the Act to Prevent Pollution from Ships, the Lacey Act, and the Endangered Species Act, are now being used to hold polluters and people who traffic in endangered species accountable.
A great example of how the new rewards laws are being used is the Bradley Birkenfeld case. The IRS has admitted that the information provided by Birkenfeld concerning illegal U.S. taxpayer accounts held in secret Swiss banks has already led to unprecedented monetary recoveries and the crippling of the entire “undeclared” offshore Swiss-U.S. banking industry. How the Birkenfeld disclosures triggered more than $13.7 billion in recoveries for the taxpayers is explained in the Anticorruption Toolkit. As the first major whistleblower to obtain a reward under the 2006 IRS whistleblower law, Birkenfeld’s case made international headlines. After some initial mishaps the IRS paid Mr. Birkenfeld $104 million as a result of his successfully filing a proper whistleblower claim under the IRS tax laws. Given the critical role whistleblowers play in holding large institutions accountable, over time many more such awards will be paid. The long-term benefits to the public interest will be incalculable. Whistleblowing does work.
Beyond the False Claims Act
Outside of corruption in government contracting, the anecdotal evidence of how whistleblowers have saved lives, held government officials accountable, or accurately warned of disasters that would rock the largest institutions in the world provides additional ample evidence that whistleblowing works. Whistleblowers have rightly embarrassed (and consequently changed) many cherished institutions. Highly popular elected officials from both major political parties have been exposed by truthful whistleblower disclosures.
Whistleblowers tried to warn the officials about the financial, security, and safety concerns that led to the collapse of the corporate giant Enron, the tragic explosion of the Space Shuttle Challenger, and even the early detection of the terrorists who would fly jetliners into the World Trade Center towers. Whistleblowers exposed the illegal beatings of inmates in Iraq’s Abu-Ghraib prison and the massive illegal domestic searches of U.S. citizens by the National Security Agency. Indeed, two pre
sidents were held accountable by whistleblowers: President Richard Nixon resigned from office in large measure due to the disclosures of a whistleblower code-named “Deep Throat.” President Bill Clinton was debarred from the practice of law due to the secret tape recordings of Pentagon employee whistleblower Linda Tripp. Supervisory Special Agent Frederic Whitehurst forced the FBI to admit that its internationally respected crime lab was contaminated. His allegations compelled the FBI to agree to outside oversight for the first time in its seventy-year history, and resulted in freeing innocent people from jail. Environmental Protection Agency scientist David Lewis singlehandedly took on an entrenched EPA bureaucracy and forced the agency to abandon its policy of promoting the use of human waste byproducts on farmland. This list could go on for pages.
The Power of the Truth in a Whistleblower Case
The final rule for whistleblowers is to fully understand the power of the truth. Whistleblowers should never underestimate the impact of their initial disclosures. They cannot lose sight of why they placed their job on the line. Obviously in a qui tam case, the truthfulness and provability of the whistle-blower allegations are all-important. If an employee can prove fraud against the government or violations of the securities or tax laws, the employee can win his or her case.
