OSHA issues new manual for whistleblower investigations

rr@whistleblowers.org (Richard Renner) — Mon, 19 Mar 2012 16:45:10 GMT

The Occupational Safety and Health Administration (OSHA) issued a new Whistleblower Investigations Manual last year. The new manual includes some improvements for whistleblowers, such as accepting oral complaints (which is particularly helpful in meeting the short 30-day time limits for environmental and Section 11(c) cases), using digital recording for interviews, and providing more guidance in determining if protected activity caused the adverse action. The manual, and OSHA's creation of its Office of the Whistleblower Protection Program (OWPP), leave intact the decision-making authority of the Regional Administrators (RAs). With the new administration in 2009, OSHA has increased the number of press releases it has issued about decisions in favor of whistleblowers. However, this manual does not provide information about a whistleblower's odds of winning a favorable determination.

Practitioners may find particular benefit in the OSHA policies for "non-public disclosure." Starting at page 1-16 (page 35 of the PDF file), this policy explains how parties should ordinarily receive information in OSHA's files upon request:

While a case is under investigation or appeal, information contained in the case file will be disclosed to the parties in order to resolve the complaint; we refer to these as non-public disclosures. Once a case is closed at the agency level, any and all records not otherwise protected from disclosure may be disclosed to the parties, upon their request. This non-public disclosure may also occur at any level after the investigative stage, through the course of any administrative or judicial proceedings, until the final disposition of the case, either through the administrative or judicial process.

For non-management witnesses, the policy explains how their statements can be kept confidential:

In taking statements from individuals other than management officials representing the respondent, the investigator must specifically ask if confidentiality is being requested, and must document the answer in the case file. ***

For trucker cases under the Surface Transportation Assistance Act (STAA) and Section 11 (c) cases under the OSH Act, the manual provides at page 4-5 (p. 94 of the pdf) that the staff must check with the Regional Solicitor of Labor (RSOL) before issuing a "merit" decision in favor of the whistleblower. Advocates in these cases, therefore, may wish to consider whether to reach out to the RSOL once the fact-finding portion of the investigation draws to a close.

This manual is a useful reference for whistleblowers and their advocates in understanding OSHA procedures and using them to make their best case.

Study by the Center for Public Integrity Finds State Governments at Risk for Corruption...Surprise Surprise

zkitts@cookkitts.com (Zachary Kitts) — Mon, 19 Mar 2012 14:27:39 GMT

Study by the Center for Public Integrity Finds State Governments at Risk for Corruption

An excellent study just released by the Center for Public Integrity finds state governments to be at risk for corruption -- you can check out a WaPo article on the topic here.

It is high time someone put a study like this together -- while the findings of this study come as little surprise, I find its methodology to be quite convincing.

It goes without saying that any form of government is susceptible to corruption, and the best anyone can do is to try to control it. State governments, however, tend to rely more on bureaucrats and those bureaucrats have on average less supervision that in a more complex system. For example, in the federal system, Congress serves as a check on the power of agency bureaucrats -- the idea of getting called before Congress for testimony is something most agency heads have nightmares about for sure.

So we have state governments relying on unsupervised bureaucrats -- certainly a recipe for corruption if there ever was one.

Take the example of Virginia. Here, most of the real power rests in the hands of the General Assembly, both by design and by tradition.

The design part is of course the Virginia Constitution, which firmly places the General Assembly in the drivers seat. In many states the Governor serves as a powerful check, but not in Virginia. In fact, because he or she is limited to a single term, the Governor is from day one a lame duck.

Unlike the United States Congress, the General Assembly is in session only 60 or 90 days each year. That gives the GA a crushing amount of work to do in such a short time, and it gives no time for supervising the agencies.

And as readers of this blog are aware, we have the less-than-wonderful tradition of the single term Attorney General. In many states the Attorney General serves as a powerful force to control corruption in state government agencies, but not here in Virginia.

Based upon my quick read of the article, the authors of this study seem to have left state false claims acts from their study, and I can see why.  Even an astute student of government might fail to see the connection between a state false claims act and government corruption. But there is a connection.

One of the things that contributes to state government corruption is that the corruption is what I call "a-typical corruption." What I mean by that is when we think of the word "corruption" in the government context, it typically implies favors being done for money or for other consideration in the legal sense.

In layman's terms, when we think of corruption we think of a person in government scratching the back of someone, and getting their back scratched in return.   It is worth noting also that most dictionary definitions of the term corruption include a reference to bribes, kickbacks, and other forms of payment.

But in our state governments (and also in the federal government) my experience has been that there is not actually much of the typical type of corruption; and when it does occur it is, relatively speaking, easy to catch. Transparency and other things will catch that type of corruption.

That's right ladies and gentlemen -- money is only part of the reason why human beings do what they do. State government agencies are also susceptible to flattery, salesmanship, and other things that show no monetary return for the individual.

The other type of corruption is a-typical corruption, and that involves a state agency person doing a favor for an outside party with no form of compensation or consideration coming back the other way.

There can be no question that a-typical corruption far outweighs typical corruption, and it is next to impossible to catch unless you have a state false claims act.

More on this to follow, but congrats to the Center on an excellent, timely, and needed study....

Copyright 2011 Zachary A. Kitts

Occupy EPA protest planned for March 30

rr@whistleblowers.org (Richard Renner) — Thu, 15 Mar 2012 20:27:12 GMT

Occupy EPA is marching again. On Friday, March 30, 2012, at 12 noon, they will march from Franklin Square Park (13th & I Sts NW in Washington, DC) to the headquarters of the U.S. Environmental Protection Agency (12th & Pennsylvania Ave., NW, Federal Triangle, Washington DC). There, at 1:00 pm, they will lead a rally with EPA whistleblowers, Dr. Marsha Coleman-Adebayo, Dr. Margaret Flowers and Susan Morris. Dr. Helen Caldicott will also address the rally. Protecting environmental whistleblowers has been a constant theme of Occupy EPA protests, and the speakers are sure to call on the EPA to stop retaliating and start protecting its employee whistleblowers. Follow this link for a flyer for this event. Perhaps this can be a spark for the American Spring.

Washington Post's Joe Davidson asks federal managers to respect whistleblowers

rr@whistleblowers.org (Richard Renner) — Wed, 14 Mar 2012 15:22:44 GMT

The commissioned corps of the Public Health Service (PHS) and the National Oceanic and Atmospheric Administration (NOAA) work on the cutting edge of federal research and policy on diseases, medical devices, public health, global warming and our environment. Yet, they fall into an exclusion from the Civil Service Reform Act (CSRA) that denies them any of the protections of the Whistleblower Protection Act (WPA). The WPA protects only civilian federal employees. Reference 5 U.S.C. § 2101(1). They also have no coverage, and no protection, from the less effective Military Whistleblower Protection Act, 10 U.S.C. § 1034.

In today's Washington Post, page B4, columnist Joe Davidson picks up their cause. He decries how their "fine work" does them no good if they become whistleblowers. He laments how the law has so far failed to protect PHS whistleblower Paul T. "PJ" Hardy. He was fired after raising concerns about the Food and Drug Administration (FDA) approving breast cancer detection devices without adequate proof of safety and effectiveness. The Office of Special Counsel (OSC) sought a stay on his behalf. The Merit System Protection Board (MSPB) concluded it had no power to act because of the PHS and NOAA exclusion from the CSRA. "This loophole doesn't make any sense," Special Counsel Carolyn Lerner told Davidson. "It undermines public health and safety and should be addressed through legislation. There really are no statutory protections."

Attorney Stephen M. Kohn is Executive Director of the National Whistleblowers Center (NWC) and is representing Hardy. "We are going to push as aggressively as possible for the protection of all federal employee whistleblowers to be free from targeted monitoring," he told Davidson. Hardy and other PHS whistleblowers have filed a lawsuit in federal court to challenge how managers targeted them for surveillance. Targeting certain employees because of their protected whistleblowing violates the freedoms of the First Amendment. Hardy also challenges his dismissal as a violation of the First Amendment. When no federal statute provides a remedy for these violations, the First Amendment should apply to protect the victims of unlawful retaliation.

The National Whistleblowers Center has now issued an ACTION ALERT. Follow this link to call on legislators and HHS Secretary Kathleen Sebelius to reinstate Hardy and close the CSRA loophole.

Davidson calls on all government agencies to appreciate that "an otherwise legal search can become illegal if it's conducted in retaliation for whistleblowing" (quoting Kohn). Davidson also agrees with Senator Charles Grassley's letter that, "denying or interfering with employees' rights to furnish information to Congress also is against the law." Here, here!

FRSA Protects Injured Workers From Medical Treatment Interference

charlie@trainlaw.com (Charlie Goetsch) — Tue, 13 Mar 2012 01:14:04 GMT

In a major decision clarifying the scope of the FRSA, OSHA confirms that a railroad's denial, delay, or interference with an injured employee's medical treatment constitutes adverse action recoverable under FRSA Section (a)(4). Section (a)(4) protects employees from adverse action due to the reporting of a work-related injury, and OSHA now recognizes that a railroad's interference with an injured employee's medical treatment is a form of impermissible adverse action prohibited by Section (a)(4).

Vinny Ruffolo is a laborer at Metro North Railroad's Harmon Diesel Shop. After he reported a cut finger injury, Metro North interfered with his medical treatment, assigned him duties contrary to his medical restrictions, and harassed him for following the orders of his treating doctor. Despite the fact no discipline was involved, OSHA nevertheless ruled Metro North violated Section (a)(4)'s prohibition against adverse action related to the reporting of an injury. The words of OSHA are worth quoting:

The evidence suggests that Metro North's actions were motivated, at least in part, by a desire to minimize the injury because by doing so, Metro North could avoid reporting the injury and any lost time to the Federal Rail Administration (FRA). . . . Metro North's actions here send the message to this employee and all other employees that they are better off not reporting injuries at all. Such actions, if they successfully dissuade an employee from reporting an injury, result in the skewing of information provided to the FRA and potentially jeopardize employee safety.

OSHA went on to note that such conduct demonstrates "a reckless disregard for the rights of its employees to report a work-place injury," and "demonstrates this was not a random act but rather an extension of an entrenched culture to retaliate against employees who report work-related injuries. . . . the Facilities Director's deliberate actions were intended to chill the workforce and dissuade employees from reporting future accidents, and calls for the imposition of punitive damages."

Bottom line? Even in the absence of any disciplinary action, the FRSA protects employees who report work-related injuries from interference with their medical treatment. For the full OSHA Decision in Ruffolo v. Metro North Railroad, click here.

DC Circuit Judges understand Convertino's appeal

rr@whistleblowers.org (Richard Renner) — Mon, 12 Mar 2012 19:19:07 GMT

Attorney Stephen Kohn today presented oral argument on behalf of former federal prosecutor and whistleblower Richard Convertino (pictured). Convertino is seeking reversal of an order issued last year by Chief U.S. District Judge Royce Lamberth in Washington, DC. That order dismissed Convertino's claim that an official of the Department of Justice willfully released private information about a pending investigation against Convertino to punish him for criticizing the Bush administration's tactics in the war on terror. Judge Lamberth held that allowing Convertino to pursue discovery of the source of the leak would be "futile."

During oral arguments today before the Court of Appeals for the District of Columbia Circuit (DC Circuit), Judges David Tatel, Judge Karen LeCraft Henderson and Judge Judith Rogers asked detailed questions about how Convertino's attempts to obtain disclosure of the source could proceed against the Detroit Free Press and its reporter. Kohn explained how a federal judge in Detroit was just waiting for the DC Circuit to rule and could then proceed to compel the paper to disclose its records and reveal what it knows about the source. A posting in The Blog of Legal Times, says that Judge Tatel, "expressed concern about the potential lack of evidence on which [Judge] Lamberth made his finding about the futility of keeping the case going." Judge Tatel noted how the Detroit Free Press still has not answered under oath about what it knows. During the argument of government attorney, Samantha Chaifetz, Judge Tatel obtained an admission that if Judge Lamberth had no evidence in the record to show that further discovery would be futile, then that finding would be an abuse of discretion. Judge Rogers said this would have been a different case if the discovery was before Judge Lamberth who could rule on the issue, but it is not. Judge Henderson stated directly that Kohn's affidavit was not conclusory and it met the requirement for providing detailed information about how the additional discovery could make a difference. The judges allowed attorneys on both sides to exceed their 15-minute limits to answer all their questions. We can be hopeful that the Court's opinion will stand for the value of allowing whistleblowers the time needed to prove their cases when they face protracted resistance.

IRS resists using whistleblowers

rr@whistleblowers.org (Richard Renner) — Thu, 08 Mar 2012 20:07:25 GMT

Whistleblower disclosures have helped the federal government make some of its biggest recoveries from fraudsters. In the Obama administration alone, the government recovered over $21 billion thanks to whistleblowers using the “qui tam” procedure under the False Claims Act (FCA). The government also recovered many additional billions through criminal fines and penalties.

Erika Kelton, an attorney in the Washington, DC, whistleblower law firm of Phillips & Cohen, wrote an article in last week's Forbes magazine that explains how the Internal Revenue Service (IRS) is losing out on the opportunity to develop its own income stream from whistleblower tips. In December 2006 Congress enacted a law similar to the FCA to reward whistleblower who informed the IRS of tax frauds and violations. Many whistleblowers have filed claims under the new IRS whistleblower program.

Kelton says the IRS however, has squandered opportunities to recover billions of dollars in revenue with the information submitted by whistleblowers. Dozens of whistleblower submissions concerning losses over $100 million in tax fraud were reportedly received by the IRS Whistleblowers Office. Another thousand concerning tax underpayments over $2 million were also reported. However, the IRS has paid only one whistleblower reward during the program's first five years.

Clearly, there is a problem here. The problem, according to Kelton, does not lie within the laws implemented by the program in 2006, but with the IRS itself and institutional resistance within the IRS to rewarding whistleblowers.

After leaving the IRS and joining a white-collar law firm to defend companies from the IRS, former IRS Chief Counsel Donald Korb expressed anti-whistleblower opinions. In a 2010 interview with Tax Notes, he revealed an astonishing mindset. He stated: “The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules; they forced on it by the Congress.”

The IRS Office of Chief Counsel (OCC) interpreted the laws set by the program in such a way that discouraged many whistleblowers from reporting information and lowering the whistleblower 's potential for success.

The OCC guidance appear problematic, Kelton says, as it:

Narrowed the sources of recovery that are the bases of whistleblower awards.
Imposed unprecedented withholding requirements on whistleblower awards.
Created roadblocks to IRS interactions with whistleblowers such as the 2008 “one-bite” rule (now relaxed) that limited receipt of information to an initial meeting.
Defined “planners and initiators” of the tax scheme – who by law receive only a reduced award (if any) – in a manner that could block employees whose involvement is far form the true architects of a scheme.

It can be frustrating to see the unwillingness of the IRS to use the assistance and information given by whistleblowers. Employees see tax frauds occurring from the front seat and hold all the information necessary for the IRS to take action. Kelton says their assistance, contemplated by the 2006 law, could be permissible without violation of confidentiality restrictions with the use of special confidentiality agreements known as “6103(n) contracts.”

Most of the claims submitted to the IRS have been going nowhere. Kelton reports that the IRS has failed to give whistleblowers and their lawyers’ status updates on their claims. Unlike the attitude by the IRS, the Securities Exchange Commission (SEC) has taken a more positive approach to its new whistleblower program. The SEC is actively welcoming help from whistleblowers.

An SEC enforcement official told Kelton that whistleblower information has been of immense help to the SEC saving them six to twelve months of investigative time. Unfortunately, time saving whistleblower information like this is what the IRS has been failing to use.

Whistleblower reports have reportedly been dropping in number according to statistics in the IRS Whistleblower Office’s 2010 report to Congress. Seeing that their reports are being ignored, set aside and not put into action, we can see why whistleblowers are now thinking twice of about reporting fraud and placing their own livelihood at risk.

The IRS is weakening its whistleblower program, pushing aside these tools given to them by Congress. Kelton argues that if they took advantage of these tools, they would be able to narrow the annual $450 billion gap between what is owed in taxes and what is paid. Ultimately, the IRS' present course will only hurt taxpayers and the federal Treasury.

This blog post was written by intern Laura Berumen.

D. Mass. Dismisses FCA Claims Against Drug Manufacturer and Distributor

agiuliana@kelleydrye.com (Antonia F. Giuliana) — Thu, 08 Mar 2012 18:51:14 GMT

A recent case in the District of Massachusetts provides a good illustration of the application of the False Claims Act’s public disclosure and first-to-file bars in health care fraud cases. See United States ex rel. Bartz v. Ortho-McNeil Pharmaceutical, Inc. et al., Civil Action No. 11-10316 (D. Mass. March 2, 2012). In 2005, the relator, a former sales compensation manager for a drug manufacturer, filed a qui tam suit pursuant to the False Claims Act against the manufacturer, a distributor, and various related entities. The amended complaint asserts three broad categories of alleged fraudulent conduct – the manipulation of Medicaid rebate amounts, false reporting of AMP and best price for certain drugs, and the payment of kickbacks to nursing home drug purchasers. At the core of the relator’s allegations is the claim that the defendant pharmaceutical distributor took kickbacks from the manufacturer as an inducement to purchase the anti-psychotic medication Risperdal Consta. In 2008, the United States declined to intervene. As of the date of the court’s opinion, no State had moved to intervene.

The defendants moved to dismiss the amended complaint pursuant to the public disclosure and first-to-file bars of the FCA. Defendants characterized the relator’s amended complaint as a “hotchpotch of stale allegations that were previously presented in dozens of complaints and other public disclosures.” Defendants included a lengthy list of prior lawsuits and various news articles and government reports making similar allegations. The court held that as a matter of law, the information in these previously filed complaints and news reports are “public disclosures” for purposes of the barring rule of the FCA:

A comparison of these disclosures with the allegations made by Bartz demonstrates that all of the “essential elements” of Bartz’s claims – the allegedly false AMP and Best Price arising from free goods and hidden discounts and the “kickbacks” in the form of discounts and payment of administrative fees to promote particular pharmaceutical products—were in the public domain prior to Bartz’s various Complaints through the AWP Litigation, the Massachusetts Litigation, the LaCorte, Pauly, Montana, City of New York, and Commonwealth of Pennsylvania lawsuits, and general news reporting. Although these materials did not specifically reference the ASP and non-FAMP reporting, their allegations regarding AWPs, WACs, AMPs, and Best Prices were more than sufficient to place the government on notice of J&J’s alleged reporting fraud.

The court rejected the relator’s claim that the public disclosure bar should not apply because he provided additional information and analysis in his allegations:

Regardless of the value to the government of these elaborations on what was already known, the public disclosure bar’s focus is on notice and not detail. Allowing such a suit would allow potential qui tam plaintiffs to avoid the public disclosure bar by pleading their complaints with more and more detailed factual allegations slightly different from more general allegations already publicly disclosed. Given that the purpose of the qui tam action is to prosecute fraud of which the government is unaware, such a result would not advance Congress’ purpose and would only multiply the number of parasitic qui tam actions pursued by plaintiffs.

The court also rejected the relator’s assertion that the public disclosure bar did not apply because he was an “original source.” The complaint alleges, in relevant part, that “the allegations set forth in the Complaint are based upon the direct and independent knowledge of the relator, a former insider of the J&J defendants….This lawsuit is based solely on information and knowledge obtained by Relator in his position as a J&J insider.” The court concluded that relator failed to demonstrate that he was an original source because the complaint did not provide any supporting details that would corroborate his status as an original source, but rather parroted the statutory language.

Alternatively, the court held that the suit was precluded by the FCA’s first-to-file bar because the “identicality of elements with the prior-filed complaints is fatal to Bartz’s claims.”

DC high court says there is no "safe harbor" for retaliation

rr@whistleblowers.org (Richard Renner) — Thu, 08 Mar 2012 17:21:14 GMT

In a long-awaited ground-breaking decision, the District of Columbia Court of Appeals today held that an employer engages in unlawful retaliation when it adds a new demand for a release as a condition for concluding a consulting agreement. The case is Propp v. Counterpart International and LeLaulu, No. 07-CV-988 (D.C. Mar. 8, 2012).

Counterpart International is a nonprofit development organization. Brian Propp worked for Counterpart from 1995 to 2004. In 2001, Propp was promoted to General Director of Counterpart's Humanitarian Assistance Program (CHAP). His duties included fundraising. He also led the Counterpart Communities initiative which became known as his "brainchild." Lelei LeLaulu became Counterpart's President and CEO in 2002.

In 2004, LeLaulu proposed to the Board that Propp be terminated due to a budget deficit in Propp's program in Muldova and CHAP's overall budget reduction. The Board approved of the termination. Propp was the only person laid off. Before anyone told Propp about his termination, Congress voted to give Counterpart $12 million. In a later meeting with Propp to tell him about his termination, LeLaulu offered him an opportunity to receive three months' severance pay in exchange for a release of all claims. Propp refused. Nevertheless, the parties agreed to have Propp continue working for Counterpart as a contractor. LeLaulu sent an email to all staff saying that Propp would now be working on Counterpart Communities and other initiatives, but not on CHAP. A week later, Propp's attorney sent Counterpart a letter asserting that Propp was opposing practices he believed were discriminatory. Counterpart and LeLaulu then became non-responsive to efforts to conclude the negotiations for a new contract. Instead, they insisted that Propp sign a release, and even gave him a 48-hour deadline to do so. Counterpart also abandoned the $12 million earmark from Congress. On October 7, 2005, Propp filed his lawsuit alleging discrimination and retaliation.

During discovery Counterpart admitted that “Defendants never engaged or otherwise permitted [Propp] to concentrate on Counterpart Communities and other strategic opportunities for the organization because [Propp] refused to sign a separation agreement and release.” The DC Superior Court still dismissed the lawsuit on summary judgment. Propp appealed only the decision that dismissed his retaliation claim. He argued that Counterpart and LeLaulu added the requirement for a release only after Propp opposed unlawful discrimination. Today, the DC Court of Appeals agreed that adding the requirement for a release was retaliatory and unlawful.

Initially, the Court agreed with Propp that his lawyer's letter was protected activity. It clearly opposed unlawful discrimination. Also, it mattered not that Propp declined to pursue the discrimination claim since he reasonably believed the employer's action was discriminatory. See Manoharan v. Columbia Univ. Coll. of Physicians & Surgeons, 842 F.2d 590, 593 (2d Cir. 1988).

Next, the Court said Propp must demonstrate that “a reasonable employee would have found the challenged action materially adverse which . . . means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Quoting Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 68 (2006). Counterpart argued that the “requirement that Propp sign a release of claims prior to entering into a consulting agreement was not based on any retaliatory motive,” explaining that it “simply wanted Propp to agree not to sue the organization before committing to a continuing relationship with him. This is not retaliation; it is prudence in action.” Counterpart’s brief also argued that the release requirement was always a prerequisite for a consulting position, even prior to Propp’s complaint of discrimination.

Propp did not argue that requiring such a release would be unlawful. What he objected to is being required to sign a release as part of his termination, a new condition precedent to negotiating a consulting agreement imposed after he complained of discrimination. The court, therefore, did not consider whether releases are generally lawful and enforceable. In footnote 15, the Court said that requiring a release of the right to file or participate in a discrimination case filed with the EEOC. in exchange for severance pay or some other generally offered benefit has been held to be “facially retaliatory” and unenforceable. Citing EEOC. v. Lockheed Martin Corp., 444 F. Supp. 2d 414, 418-19 (D.Md. 2006) (citing EEOC v. Bd. of Governors of State Colls. & Univs., 952 F.2d 424, 430 (7th Cir. 1992)).

On pages 16-17, the court explains how this case is different than normal situations in which an employer requires a release as part of a settlement agreement:

[O]ne need not question whether obtaining a release was a prudent course for Counterpart under the circumstances. It is enough if retaliation was “a substantial factor,” even if not the only factor. ... Accordingly, it is important to distinguish between requiring a release of claims as part of a negotiated consulting agreement, and imposing a release of claims related to Propp’s termination as a prerequisite for negotiating the consulting agreement that was contemplated when Propp was terminated. Stated otherwise, Propp’s claim is that, once he complained of discrimination, Counterpart refused to negotiate a consulting agreement as it had agreed to do when it terminated him, and effectively withdrew two of the termination options that did not include a release that had been offered before his complaint because he had complained of discrimination.

If proven, Counterpart’s refusal to negotiate with Propp for a consulting position, as it had previously agreed to do, unless Propp signed a release as part of his termination — a requirement imposed only after he complained of discriminatory treatment — would be an adverse action within the contemplation of the DCHRA’s retaliation provision. The Supreme Court has broadly defined what constitutes an “adverse action” to include (in addition to termination, denial of promotion, etc.) actions taken by employers which “a reasonable employee would have found . . . materially adverse, which . . . might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Burlington N., 548 U.S. at 77-78. Therefore, simply because Counterpart may have had a business-related reason (“prudence in action”) for conditioning negotiations for the consulting agreement on a release of claims, it could not require a release of claims in response to Propp’s complaint of discrimination. “The statute contains no safe harbor for otherwise lawful acts done for an improper retaliatory purpose.” Arthur Young, 631 A.2d at 367; see also Atlantic Richfield Co. v. District of Columbia Comm’n on Human Rights, 515 A.2d 1095, 1101 (D.C. 1986) (finding a threat to an employee that “she would never work in the District of Columbia again if she pressed her discrimination claim” to be retaliatory).

It was not necessary that Propp show that he would have received the consulting contract, or that he had any right to the consulting contract. It was enough that Counterpart created a "Hobson's Choice" in which he would have to either give up his discrimination claim, or give up hope of the consulting contract. That is enough to discourage others from standing up for their rights.

Judge Ferrell wrote a separate concurring opinion to explain that the case would have been more difficult if Counterpart had admitted that it reassessed its position in response to the letter from Propp's attorney. It could have argued that the lawyer's letter gave it a valid reason to require that Propp agree to a release as a condition for any consulting contract. Since Counterpart actually argued that it had required the release even before getting the lawyer's letter, and the evidence provides a basis for a jury to disagree, the Court had to reverse the summary judgment. The other judges did not join in this concurring opinion.

Overall, the Propp decision is a good example of how the Burlington Northern doctrine should be applied. Any action that might discourage employees from opposing discrimination should allow the victim to sue, even if it is a new demand for a release of claims.

Congratulations to DC attorney John Racin for representing Brian Propp in this landmark case.

Whistleblower Leyla Wydler suffered to bring Stanford to justice

rr@whistleblowers.org (Richard Renner) — Wed, 07 Mar 2012 17:01:50 GMT

Yesterday's conviction of Ponzi schemer Allen Stanford generated much news. Most of the coverage, however, is missing the role of whistleblower Leyla Wydler. Two weeks ago on Honesty Without Fear, I interviewed Eyal Press about his new book, Beautiful Souls: Saying No, Breaking Ranks, and Heeding the Voice of Conscience in Dark Times. We discussed his chapter about Wydler's resistance to Stanford's pressure to get clients to invest in his scheme. Eventually, Wydler concluded that it was a Ponzi scheme, and she reported it to the authorities. The Securities and Exchange Commission (SEC) ignored her warnings, and she lost her job with Stanford's company. She could not sue Stanford in court because of a forced arbitration agreement. The securities arbitrator not only rejected her whistleblower retaliation claim, but also ordered her to repay her $100,000 signing bonus. (Under the 2010 Dodd-Frank Act, whistleblowers like Wydler are no longer bound by forced arbitration agreements.)

Yesterday, Eyal Press posted an article on Counterpunch and Middle East Online about Wydler and Countrywide whistleblower Eileen Foster. It is called Chilling Dissent on Wall Street. He contrasts the way the federal government has become hot to prosecute national security whistleblowers, but the concerns of financial fraud whistleblowers can be ignored. In Stanford's case, the SEC failed to act on Wydler's reports for years as Stanford continued to rake in money from more now-victimized investors.

As if being ignored is not bad enough, Press also notes how some members of Congress want to make it harder for whistleblowers to win their claims under the Dodd-Frank Law. The bill by Rep. Michael Grimm would require whistleblowers to raise their concerns with their employer before going to the SEC, and would require the SEC to disclose whistleblower claims to the company alleged to be violating the law. Really. How is tipping off the crook to the impending federal investigation a good law enforcement strategy? Follow this link to TAKE ACTION against the Grimm bill.

Bloomberg News reports on Wydler's role in reporting Stanford's scheme. Insurance Journal is reporting that Stanford's conviction will be a boost to several civil lawsuits seeking to hold attorneys and other responsible for covering up the fraud. Hopefully, with the new whistleblower protections and rewards for whistleblowers in the Dodd-Frank Act, schemes like Stanford's will become less common, and will be stopped more quickly when whistleblowers file claims with the SEC and CFTC.

OSHA's Whistleblower Protection Program Will Now Report Directly to Assistant Secretary of Labor, Signaling Increased Priority for Whistleblower Enforcement

Wed, 07 Mar 2012 14:20:53 GMT

The Occupational Safety and Health Administration (“OSHA”) announced on March 1, 2012 that its Office of the Whistleblower Protection Program (“WPP”) will now report directly to the Department of Labor’s Office of the Assistant Secretary, rather than to its Directorate of Enforcement Programs. The restructuring signals an elevated priority placed on enforcement of the whistleblower protection laws falling under OSHA’s jurisdiction, and suggests that the Agency intends to devote increased efforts and resources to this area in the future.

WPP Had Not Been Sufficiently Meeting Its Mission to Protect and Incentivize Whistleblowers

OSHA’s WPP is responsible for enforcing the various whistleblower protection provisions of twenty-one separate federal statutes. These include such laws as the Occupational Safety and Health Act, Sarbanes-Oxley, and the Affordable Care Act, and they offer protections to employees who bring to light violations of a wide variety of laws, including airline safety, environmental remediation, food safety, public transportation and railroad, maritime and securities laws. While some differences exist between the details of the particular statutes, in general they prohibit an employer from terminating or otherwise discriminating or retaliating against an employee who reports or provides information regarding a suspected violation of the law, either to internal audit personnel or to the government. The statutes vest OSHA with jurisdiction to investigate complaints of retaliation against whistleblowers, and to award appropriate relief which frequently includes reinstatement, attorneys’ fees and costs, compensatory damages, and in some cases even punitive damages.

A pair of Government Accountability Office audits in 2009 and 2010 had identified substantial problems with the WPP. In particular, an August 2010 GAO Report No. 10-722, titled “Whistleblower Protection: Sustained Management Attention Needed to Address Long-Standing Program Weaknesses,” found that “OSHA has done little to ensure that investigators have the necessary training and equipment to do their jobs, and that it lacks sufficient internal controls to ensure that the whistleblower program operates as intended.”

OSHA Revamp WPP to Increase Protection and Incentives for Whistleblowing Activity

Spurred in part by these findings, OSHA conducted an internal review of its program, part of an overall plan to fortify the WPP and its operations. In September 2011 OSHA issued an updated Whistleblower Investigations Manual, and as of the Fiscal Year 2012 budget OSHA has established a separate budgetary line item for its WPP. Announcement of the restructuring and new reporting lines marks yet another key milestone in OSHA’s revamping of the WPP. Assistant Secretary of Labor Dr. David Michaels, who heads OSHA and will now directly oversee the WPP, said that “OSHA’s internal improvement initiatives, including this realignment, demonstrate the agency’s steadfast commitment to strengthening a program that is critically important to the protection of workers’ rights.”

The restructuring strongly indicates OSHA’s intention to bring more resources to bear in its enforcement of the whistleblower protection statutes it oversees. Employers can expect to see a growing emphasis on the WPP as a tool in the government’s law enforcement efforts, and a continued vibrancy in this area of employment litigation

Congress Questions Federal E-mail Surveillance Policies

lmw@whistleblowers.org (Lindsey Williams) — Tue, 06 Mar 2012 22:24:33 GMT

Yesterday, Senator Charles Grassley and Representative Darrell Issa released a letter asking the Obama Administration for assistance in assessing the e-mail monitoring policies of all federal agencies. This letter was sent in light of Congressional and Office of Special Counsel investigations into the Food and Drug Administration's (FDA) illegal targeting of whistleblowers for highly-intrusive monitoring.

The Congressional investigations raised the "broader question about the policies and practices for electronic surveillance at other federal agencies" and asked the Obama Administration's Office of Management and Budget to conduct a survey of every federal agency's policy.

These investigations were sparked by a lawsuit filed by six FDA whistleblowers and documents released by the National Whistleblowers Center that show the FDA intercepted personal communications to Congress, including emails to House Oversight and Government Reform Committee.

You can Take Action by sending an email to the President, FDA officials, and members of Congress demanding that the six whistleblowers be protected and targeted surveillance be halted throughout the federal government.

U.S. Department of Justice and Qui Tam Attorneys Celebrate the 25th Anniversary of the Modern False Claims Act

Tue, 06 Mar 2012 15:23:37 GMT

Recently, Nolan & Auerbach, P.A. partners and nearly three hundred government and qui tam attorneys gathered at the United States Department of Justice, in Washington, D.C., to celebrate the twenty-fifth anniversary of the modern False Claims Act. This celebration included presentations by Attorney General Eric Holder, Assistant Attorney General Tony West, and congressional fraud-fighting champions [...]

Recently, Nolan & Auerbach, P.A. partners and nearly three hundred government and qui tam attorneys gathered at the United States Department of Justice, in Washington, D.C., to celebrate the twenty-fifth anniversary of the modern False Claims Act. This celebration included presentations by Attorney General Eric Holder, Assistant Attorney General Tony West, and congressional fraud-fighting champions Senator Patrick Leahy and Congressman Howard Berman. This special event also included a panel discussion that spotlighted the benefits of the False Claims Act’s public-private law enforcement partnership.

Since the False Claims Act was modernized in 1986, the federal government has used the Act to return over $30 billion to the US Treasury. Attorney General Holder noted that of that figure, $20 billion in recoveries were reported as the result of qui tam whistleblower actions, including Medicare fraud and Medicaid fraud.

Assistant Attorney General West highlighted the tremendous recent success of the Act, which was recently updated in 2009. Specifically, West noted that over 25% of all dollars recovered under Act have been realized since 2009. Notably, during this three-year span, 84% of the recoveries were the result of whistleblower-initiated False Claims Act actions.

Senator Leahy and Congressman Berman, co-sponsors of the recent False Claims Act Amendments of 2009, echoed their support for the Act’s public-private partnership. They encouraged the audience to continue the fight against government fraud, especially as the country faces mounting fiscal concerns.

More information for healthcare fraud whistleblowers is located at the Nolan & Auerbach, P.A. website.

This Week on Honesty Without Fear

lmw@whistleblowers.org (Lindsey Williams) — Tue, 06 Mar 2012 14:30:59 GMT

Tune in today at 1:00pm EDT to Honesty Without Fear on Progressive Radio Network.

From Sarajevo, Bosnia, Steve Kohn interviews Bojan Bajic, the head of the Centre for Responsible Democracy and co-founder of Association of Whistleblowers Against Corruption about the growing movement to increase whistleblower protections in Europe.

They discuss the special threats international whistleblowers face - especially in developing democracies such as Bosnia-Herzegovian and in nations that have no whistleblower rights. Bojan Bajic describes what Bosnian whistleblowers face, and how they are organizing themselves to fight-back and obtain rights.

You can take action to protect whistleblowers by signing the petition.

Submit Your Question to be asked on air during the show or call in to 1-888-874-4888.

Missed last week's episode?? You can listen to the podcast.

Dept of Labor Elevates Status of Whistleblower Office

charlie@trainlaw.com (Charlie Goetsch) — Fri, 02 Mar 2012 03:30:40 GMT

In an encouraging sign to whistleblowers, the Department of Labor has elevated the status of its Office of the Whistleblower Protection Program (OWPP) so it now reports directly to the Head of OSHA, Assistant Secretary Dr. David Michaels. This puts whistleblower protection on an equal footing with OSHA's health and safety enforcement, and increases the OWPP's access to the resources it needs to accomplish its mission. It means the new Director of the OWPP, Sandra Dillion, now has the ear of Dr. Michaels and the Solicitor of Labor, giving her the ability to quickly resolve issues that previously would languish in lower level limbo. And she will preside over one of the few federal programs set to grow, with President Obama calling for a 39% increase in the OWPP's budget and the hiring of 37 new whistleblower investigators.

By giving whistleblower protection a priority, the DOL is moving forward with its commitment to strengthen the voice of employees in the workplace. And it means more support for railroad workers who stand up and blow the whistle on rail management's culture of retaliation. For the DOL Press Release announcing this restructuring, click here.

FBI's PSA Excludes Key Information for Whistleblowers

lmw@whistleblowers.org (Lindsey Williams) — Wed, 29 Feb 2012 22:23:30 GMT

This week, the FBI released a public service announcement by actor Michael Douglas encouraging the public to report financial fraud. On its face this sounds like a good thing. However, the FBI left out some key information, namely other avenues of reporting that are likely better for whistleblowers.

There are robust financial incentives for filing a claim with the Securities Exchange Commission (SEC), the Internal Revenue Service (IRS), and the Commodity Futures Trading Commission. NWC General Counsel David Colapinto told the Washington Post if a whistleblower goes “to the FBI, they are probably going to get zero. The FBI’s not obligated to do anything for them.” The FBI’s rewards would be solely at the discretion of the Department of Justice. This is scary. Just take a look at how they treat their own whistleblowers.

As pointed out by the Huffington Post, the financial crisis has put financial fraud on more people’s radar. The SEC has seen an increase in securities fraud reports, despite the fact that nearly 70 percent of Americans are unaware of the SEC’s whistleblower program (see recent report by Labaton Sucharow).

If the FBI is truly interested in encouraging people to come forward and protecting those who do, they should not hide the ball. Give workers information about all their rights, including the much more robust financial reward programs at the SEC, IRS and the CFTC.

We always tell whistleblowers who contact us that is in their best interest to know their rights before they blow the whistle. Make sure you educate yourself and consult an attorney before you blow the whistle.

Supreme Court ducks conflict on Garcetti

rr@whistleblowers.org (Richard Renner) — Mon, 27 Feb 2012 17:03:48 GMT

This morning, the Supreme Court declined to hear two cases that raise a conflict among the circuits about whether the First Amendment protects government employees who refuse to make false statements. The Court denied petitions for certiorari by David Bowie, a former official of the District of Columbia (DC) Office of Inspector General (OIG), and by Matthew Byrne, Police Chief of Middletown, New York. Bowie had lost his First Amendment case in the District of Columbia Circuit. Meanwhile, the Second Circuit held that Byrne had to answer Jason Jackler's claim that he suffered retaliation for refusing to make false statements in an excessive force investigation. The Supreme Court's decision to avoid the issue means that public employees in New York, Vermont and Connecticut will have protection when they refuse to make false statements, but those in DC will not. The rights of public employees in other states remains undecided.

The outcome for David Bowie is particularly troubling. According to the Second Circuit, Bowie was the Assistant Inspector General of the Investigations Division at the OIG from November 1997 until his termination in August 2002. DC officials say they fired Bowie for performance problems. But Bowie says his termination was to punish him for supporting Emanuel Johnson, a subordinate whom the OIG fired over Bowie's dissent. Bowie and Johnson had worked together in a class action race discrimination lawsuit against the Federal Bureau of Investigation (FBI). Inspector General Charles C. Maddox, told Bowie that FBI Assistant Director Jimmy C. Carter had threatened not to "provide any assistance or cooperation with the [OIG] in investigative matters" if Johnson was involved. Maddox ordered Bowie to fire Johnson, and Bowie complied in 2000. After Johnson filed a race discrimination complaint, DC's attorney and the OIG's attorney ordered Bowie to sign an affidavit about Johnson's performance problems. Bowie refused, citing "misstatements of fact" and "language that would convey impressions that [he] would not agree with." The OIG attorney invited Bowie to prepare his own affidavit, which Bowie did. That affidavit cited one performance issue, called Johnson an otherwise "model investigator," and recounted how Bowie wanted to keep Johnson employed. The OIG decided not to use Bowie's affidavit in defense of Johnson's claim. Thereafter, Bowie's performance appraisal's dropped, he was removed from a high-profile investigation, and a subordinate was promoted to a superior position. Management criticized Bowie for "not stepping up to the plate" and for overprotectiveness toward his subordinates. Eventually, Maddox fired Bowie in 2002.

Bowie sued Maddox for retaliation under the Civil Rights Act, and for conspiracy and violation of the First Amendment. The judge allowed the Civil Rights Act claim to go to trial and the jury sided with management. Bowie appealed the dismissal of his conspiracy and First Amendment claim. In the appeal, Bowie did not have a lawyer. The DC Circuit appointed a lawyer for him. Last year, the DC Circuit dismissed Bowie's appeal by citing Garcetti v. Ceballos, 547 U.S. 410, 421, 126 S.Ct. 1951, 164 L.Ed.2d 689 (2006): "when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline." The DC Circuit noted that Bowie never tried to submit his affidavit directly to the EEOC or to Johnson. Bowie communicated his concerns about the draft affidavit only to the attorneys for his employer. All these communications were part of his duties, and conducted through official channels. Johnson also lost his retaliation claim after a bench trial. See Johnson v. Maddox, 270 F.Supp.2d 38, 43 (D.D.C.2003), aff'd 117 Fed.Appx. 769 (D.C.Cir.2004).

On January 5, 2006, probationary officer Jason assisted police Sergeant Gregory W. Metakes in the arrest and transportation of Zachary T. Jones in Middletown, New York. When Jackler arrived, Jones was handcuffed with his hands behind his back. Jackler opened the rear driver-side door of his patrol car, and Metakes placed Jones in the back seat. As Metakes closed the door, Jones yelled an insult at Metakes. Metakes immediately reopened the door and struck the still-handcuffed Jones in the face. At the station, police supervisors helped Jones file an excessive force complaint against Metakes. Jackler filed a report confirming that Metakes had reopened the car door to punch Jones after the insult. Police managers, acting on orders of Police Chief Matthew Byrne, met with Jackler to pressure him to withdraw his report and submit a new one that supported Metakes. Jackler refused. Byrne then recommended to the Board of Police Commissioners that it terminate Jackler's probationary employment. For the first time in the City's history, the Board did just that. At the same time, the Board authorized hiring four new officers.

A district court reluctantly dismissed Jackler's retaliation claim based on Garcetti and a Second Circuit decision called Weintraub v. Board of Education, 593 F.3d 196 (2d Cir.), cert. denied, 131 S. Ct. 444 (2010). On appeal, the Second Circuit considered that

"Exposure of official misconduct, especially within the police department, is generally of great consequence to the public." Branton v. City of Dallas, 272 F.3d 730, 740 (5th Cir. 2001); see Garcetti, 547 U.S. at 425 ("governmental ... misconduct is a matter of considerable significance"). The Fourth Amendment to the United States Constitution, which applies to the States through the Fourteenth Amendment, prohibits the use of excessive force by policemen in the course of an arrest, see, e.g., Graham v. Connor, 490 U.S. 386, 394 (1989), and it is a federal offense to deprive a person of his or her civil rights under color of law, see 18 U.S.C. § 242. Deliberate indifference to claims of such civil rights violations—tantamount to a custom or policy sufficient to support municipal liability under § 1983—may be inferred from a municipality's lack of appropriate response to repeated complaints of such violations.

The Court went on to note how it would have been a crime for Jackler to make a false statement that Metakes was innocent, and how such laws apply equally to government employees and civilians alike. Just as the managers could not force Jones to withdraw his complaint, or make a false statement, they also could not force Jackler to do so either. Jackler's status as a public employee had nothing to do with his duty to refrain from filing a false statement. The Court explained:

The government as an employer has broad discretion to manage its operations. But that discretion does not include authority to coerce or intimidate its employees to engage in criminal conduct by filing reports that are false in order to conceal wrongdoing by another employee or to conceal eyewitness corroboration of civilian complaints of such wrongdoing.

After the Second Circuit issued its decision for Jackler, the DC Circuit issued its decision on Bowie's petition for rehearing. The DC Circuit disagreed with the Second Circuit and said that the plaintiff's status as a public employee is more important to the Garcetti analysis than the civilian analog requiring that statements in official investigations be truthful.

While is outcome is a relief for Jason Jackler, the outcome is particularly disturbing for those of us who care about honest government operations here in DC. The federal appeals court is literally saying that it is more important that managers can control their employees than it is that employees can be honest in official investigations. This goes beyond what is required by the Supreme Court in Garcetti which is focused on the government's control of what its agents say on behalf of the government.

Congratulations to Chester, New York, attorney Stephen Bergstein who represented Jason Jackler. Bergstein has agreed to speak with me about this case for tomorrow's episode of Honesty Without Fear. Listen in at 1:00 p.m., eastern time on Tuesday, February 28, 2012.

The cases are Bowie v. Maddox, 642 F.3d 1122, 1134 (D.C. Cir. 2011), cert. denied, Sup. Ct. Case No. 11-670, and Jackler v. Byrne, 658 F.3d 225 (2d Cir. 2011), cert. denied, Sup. Ct. Case No. 11-517.

Government Leverages Three-Year Tolling Provision to Reach Actions from the 1990s

Mon, 27 Feb 2012 13:52:04 GMT

In 2009, after two decades of divergent readings of the False Claims Act’s statute of limitations provision, Congress considered adopting a straightforward 10-year statute of limitations period for all False Claims Act actions. Unfortunately, this amendment was removed from the legislation before it reached President Obama’s desk. Thus, courts continue to wrestle with the application [...]

Under 31 U.S.C. 3731(b), the statute of limitations for the False Claims Act provides that a civil action may not be brought more than six years after the date on which the violation is committed or more than three years after the date when facts material to the right of action are known or reasonably should be known by a Department of Justice official charged with responsibility to act, whichever occurs last.

Most of the confusion surrounding this statute of limitations language involves the application of the three-year tolling provision. This uncertainty recently played out in a Middle District of Tennessee courthouse, where the government attempted to use the tolling provision to reach actions from the late 1990s.

In this case, United States v. Carrell, No. 3:09-cv-00445 (M.D. Tenn. Dec. 19, 2011), the court denied a defendant’s summary judgment motion, for there were genuine issues of material fact as to when the government knew or should have known that eight cost reports from a home health management company were false or fraudulent.

Medicare reimburses the total amounts that a home health management company charges in cases involving unrelated parties, but for related parties Medicare reimburses only the management company’s actual costs, without profits. Here, the government alleged that the defendants submitted false and fraudulent claims in their 1999, 2000, and 2002 cost reports to Medicare because it failed to disclose the related party status of their home health agencies and the management company that provided services to those agencies.

The defendants maintained that the government’s related party allegations were known to it as far back as 1989 and were repeatedly investigated and pursued by government agents. For example, the defendants alleged, the fiscal intermediary received an anonymous letter in 1989 that raised the possibility of Medicare fraud with regard to the ownership and operation of their home health care agencies.

The court, in rejecting this argument, found that the material fact of which the government needs to be aware prior to taking any action was not simply the alleged related party relationship, but the filing of fraudulent and falsified cost reports that failed to disclose the relationship. According to the court, this information was not fully revealed to the government until the government’s fiscal intermediary conducted a comprehensive final audit of the cost reports and issued a written notice of program reimbursement (NPR). Here, the first NPR was not issued until 2004 and the remaining cost reports were not suspended until 2009. Thus, the court concluded that genuine issues of fact remained as to when the government knew or reasonably should have known that they were false and/or fraudulent.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

K&G Law Group Announces the Fourth Anniversary of Virginia Qui Tam Law.com

zkitts@cookkitts.com (Zachary Kitts) — Fri, 24 Feb 2012 15:11:38 GMT

Four years ago this month I started blogging here at Virginia Qui Tam Law.com -- I'll resist the urge to say something hackneyed and sentimental about the last four years, or maybe I will reserve that right for the end of the post.

When I started this blog, I set out some simple goals. However I neglected to mention my most important goal which was to create the sort of blog I was looking for, covering the kind of topics in which I was interested.

I couldn't find what I was looking for so I went ahead and created it.

I was also hoping to provide education and helpful information about the Virginia Fraud Against Taxpayers Act (and the federal False Claims Act) with an eye towards generating interest in those topics among the Virginia Bar. I think I can definitely say that I have had some successes in that regard.

Let me also say that I am not fooling myself -- it is highly probable that all of the VFATA developments that have taken place in the last four years would have taken place with or without this blog. For example, it was only a matter of time before someone like Attorney General Ken Cuccinelli stepped up to the plate and did what needed to be done to protect the taxpayers of the Commonwealth.

Whether or not it made a difference I can't say for sure, but I would like to think it helped.

In February of 2008, there was little to no interest in the VFATA and few people outside the health care world even knew what it was. There were only two reasons why health care profession knew about VFATA, and those reasons were in no particular order (1) the award-winning Medicaid Fraud Control Unit in the Office of the Virginia Attorney General and (2) the ground-breaking work of then-United States Attorney John Brownlee in the Western District of Virginia.

That same month, I worked with the Fairfax County Bar Association to create and host the first every Continuing Legal Education seminar on the VFATA. A fair number of people showed up, but more importantly that seminar led to a second one in Richmond later that year in the Office of the Attorney General, and just under 100 people showed up.

I blogged endlessly trying to put the Virginia Fraud Against Taxpayers Act on the radar of every candidate for Virginia Attorney General in the 2009 Attorney General primary and then in the general election, and I think we can say that it worked.

More importantly we can say that Attorney General Ken Cuccinelli, who was elected to that office in November of 2009 (well, really he was elected in May of 2009 when he defeated two formidable candidates at the Republican Convention) has vigorously enforced VFATA cases and has garnered well-deserved accolades from many different corners of the Commonwealth.

In November of 2008, I settled the first non-healthcare non-intervened case under the VFATA, and it made the front page of Virginia Lawyers Weekly.

Since that time, the VFATA has graced the front pages of the Washington Post, the Wall Street Journal, the New York Times...it would take me forever to list the newspapers, so it suffices to say that every major news outlet in the USA and some abroad have covered the Bank of New York Mellon case.

Along the way, I have blogged while on vacations, from my office, from home, while sitting in coffee shops all over the USA, and so many other places I can scarcely recall them all.

I have blogged from Richmond (where we worked to obtain passage of the 2011 amendments to the VFATA) and from Annapolis (where we were unsuccessful in our fight to enact a real Maryland False Claims Act).  I have also had the privilege of working with state legislators from across the country who are eager to replicate Virginia's success.

I have traveled (always on my own dime) to other state capitals at the invitation of state AGs and legislators to carry the message that Virginia's success can be replicated in other places. And I hope that other state legislators and AGs who think I can be of assistance will ask in the future. We still have roughly 25 states to go in our battle to obtain a state FCA in each of the several states.

And I would be negligent if I didn't mention all of the great people I have met from across the Commonwealth (and in other states) through this blog. You know who you are, so I won't mention you here.

But that is all in the past -- what lies ahead? I have some plans for where to take this blog over the next four years, and they will be revealed in due time. One thing I plan to incorporate and weave into this blog is more Virginia legal history...

There is a term (which escapes me at the moment) for those people who can grow a blog -- its the blogging equivalent of a "green thumb" for gardeners. I suppose that after four years I can say I have it -- but I am always looking for ways to make this blog better over the next four years and beyond.

Thank you all for reading and for indulging my hobby -- now lets get to work!

Copyright 2011 Zachary A. Kitts

IRS Misses Golden Opportunity in Refusing to Modify Tax Whistleblower Rule

Tue, 21 Feb 2012 21:43:43 GMT

In a controversial decision today, the IRS squandered an opportunity to help close the tax gap by attracting more whistleblowers with significant information about large tax schemes. The public will suffer as a result.

Stubbornly, the IRS rejected calls for a common sense approach to rewarding tax whistleblowers, as it refused to modify a proposed rule that narrowly defines the categories of cases that should justify awards to whistleblowers.

At issue is what Congress meant by the term "collected proceeds"--an undefined phrase in the 2006 tax whistleblower law. This law unquestionably sought to expand the number and variety of whistleblower claims presented to the IRS.

Before Congress acted decisively to expand the tax whistleblower program in 2006, the Treasury Inspector General for Tax Administration (TIGTA) had confirmed the usefulness of the pre-2006 IRS rewards to persons who had provided information about tax violations. TIGTA’s findings included the following: “The Informants’ Rewards Program Has Aided in the Recovery of a Substantial Amount of Revenue at a Minimal Cost.” TIGTA cited a 1999 Treasury report that “estimated the IRS incurred slightly over 4 cents in cost (including personnel and administrative costs) for each dollar collected from the Informants’ Rewards Program (including interest), compared to a cost of over 10 cents per dollar collected for all enforcement programs.”

Senator Charles Grassley responded to TIGTA’s findings by proposing legislation to “overhaul the current IRS program that rewards individuals who blow the whistle on big tax cheats”:

Today’s TIGTA report validates everything I’ve been saying about the benefits of an
effective program to encourage whistleblowers as well as the need for Treasury and the IRS to overhaul the current IRS program that rewards individuals who blow the whistle on big tax cheats.

My investigations into tax fraud have made it clear. Without a whistleblower to give you a road map, you can quickly get lost fighting tax schemes and shelters.

The TIGTA report notes that the audits and exams based on whistleblower information are nearly twice as productive as normal IRS examinations. Even the IRS’ own internal findings show that rewarding whistleblowers is one of the best ways to fight tax cheats.
The resulting IRS Whistleblower amendments in 2006 dramatically modified IRC section 7623, principally by doubling rewards to whistleblowers, who now can receive 15-30% of the amount recovered; creating a legally enforceable right to a whistleblower reward, subject to review in Tax Court; and establishing the first IRS Whistleblower Office.

As my colleague Richard Rubin and I pointed out in comments to the IRS, Senator Grassley modeled changes to this tax whistleblower law on the dramatically successful False Claims Act, the nation's major whistleblower law. That law has returned some $30 billion to the Treasury by rewarding whistleblowers who help unearth fraud against taxpayers, and helps deter future fraud.

Today, Senator Grassley saw that some in the IRS want to undermine his efforts and ignore Congress's plain intent--essentially supplanting Congress's role as lawmaker.

When I spoke at a May 2011 IRS public hearing to urge changes to this proposed rule, the critical point was--and remains--the following:

In amending IRC section 7623 to attract more tax whistleblowers, Congress gave no hint of any suggestion that the “new” IRS rewards program it mandated should in any way be narrower--or more restrictive--than the “old” system. Neither the broad changes to the statute, nor its legislative history, reveal anything but the plainest intention by Congress to broaden the IRS “informant” program to attract a greater number and variety of tax whistleblower claims.

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