Following its loss in a California trial, J.M. Eagle, a large manufacturer of industrial pipe, is pushing back hard against its qui tam legal adversaries. [Daniel Fisher/Forbes, Plastics News] Earlier on the False Claims Act here and here.
The docket keeps expanding and Legal NewsLine is out with a story quoting me and others:
…“In recent years, you’ve seen some pushback from the business community, but given the record of congressional expansion, they’ll be doing pretty well if they can just keep Congress from expanding it further,” said Olson, who also founded and still runs the popular blog Overlawyered.com. …
The Department of Justice announced in December that it secured $3.8 billion in settlements and judgments from civil cases involving fraud against the government in 2013. According to the office, the amount represents the second largest annual recovery of its type in history and brings total recoveries under the False Claims Act to $17 billion since January 2009….
Olson explains that the business community’s growing discontent over the False Claims Act includes concerns over incentives for whistleblowers. In many cases, the whistleblower either participated in the misconduct, or knew about the misconduct but failed to inform their company.
He adds that in worse cases, whistleblowers intentionally ignored misconduct so damages would pile up and result in a “better bounty.”
“These are all incentives that are at odds with the wish that employees be ethical and loyal to their employers, and are also sometimes at odds with the object of minimizing fraud,” Olson said.
Much more, including more quotes from me, at the link; related Peter Hutt interview piece.
Much more rewarding to act as a government informant than to help the employer address the problem: “Allegations of wrongdoing within a company often surface in the compliance department, which often is involved in internal investigations and receives employee complaints. Like other employees, compliance staff can under various statutes submit information on potential wrongdoing for whistleblower awards or claim retaliation for raising concerns about alleged wrongdoing.” [WSJ via CompliancEX]
“According to CNN investigative reporter Drew Griffin, the White House is pressuring trade associations and insurance providers to keep quiet about the changes the Affordable Care Act is creating for some people’s health coverage plans. One industry official told CNN on the record that the White House is applying ‘massive pressure’ to combat the impression that the ACA is resulting in the cancellation of some plans.” [Mediaite]
This is not the first time, or the tenth, I’ve heard about regulated entities feeling pressure to shut up about things that might embarrass the regulators they answer to. These stories did not begin with the Obama administration and I don’t think they’ll end with it. Quite aside from whatever we think of ObamaCare itself, shouldn’t they disturb us? And can anything be done about it? Following media attention to the plight of “whistleblowers” in the workplace, lawmakers have created fairly elaborate procedures intended to identify and remedy cases of retaliation against federal employees who speak up about problems they notice, procedures that in some instances have also been extended to some private-sector employees. Should there be procedures aimed at unearthing and rectifying retaliation against regulated entities, too, when they blow the whistle? Or would that be too easily manipulated by regulated entities in search of profit, revenge, or point-making?
According to the retailers group [Illinois Retail Merchants Association], Mr. [Stephen] Diamond’s Chicago law firm, Schad Diamond & Shedden P.C., has filed no fewer than 238 lawsuits in recent years against retailers small and large, which in its view failed to collect said shipping-and-handling sales taxes. Since the suits have been filed under a “whistle-blower” section of law, the firm is entitled to as much as 30 percent of any recovered taxes as well as attorneys’ fees for its trouble. And because it’s often easier and cheaper for defendants to settle rather than continue to fight, Schad Diamond reportedly has pocketed millions of dollars.
The office of Illinois Attorney General Lisa Madigan says the whistleblower provisions were intended for use by insiders disclosing misconduct rather than by outsiders, while “Illinois Revenue Director Brian Hamer says [the wave of suits] ‘has given Illinois a black eye’ and victimizes those who have made only an ‘inadvertent’ mistake.” [Greg Hinz, Crain's Chicago Business]
By ratting on his employer and clients, the UBS informant greatly advanced Washington’s project of preventing Americans from squirreling assets out of reach of the U.S. tax and legal systems. So it’s no surprise that few in the federal establishment — even among longtime critics of what they deem excessive executive compensation — begrudge him the whopping payout. Among his defenders, of course, is Iowa Republican Sen. Charles Grassley, patron of the whistleblower program: “Need we add that Mr. Grassley’s longtime aide, who actually drafted the whistleblower law, now represents Mr. Birkenfeld and stands to collect an interesting percentage of the award Mr. Grassley so obligingly applauds? If one were rich, if one had a sense of history, one might well wish to move a part of one’s nest egg out of the way of Mr. Grassley and his ilk.” [Holman Jenkins, WSJ]
Or are you just glad to sue me? “A New Jersey appeals court … overturned a $3.6 million whistleblower award to a Wachovia worker who claimed he was fired for revealing corporate fraud rather than for passing around revealing photographs.” [Michael Booth, New Jersey Law Journal]
“A federal judge in Indiana ordered lawyers including the prominent firm of Motley Rice to pay ITT Educational Services almost $400,000 in legal fees for pursuing a ‘frivolous’ lawsuit the judge said was ‘based on a completely false story.’” In line with the reluctance of American judges to award Rule 11 sanctions, the judge awarded only a small fraction of the defendant’s actual outlay in attorney’s fees, which ran into many millions. Motley Rice is a chief beneficiary of the ongoing income stream of the tobacco litigation fees, which return $500 million a year to an assortment of plaintiff’s firms. [Dan Fisher, Forbes]
A fired Florida TV anchorman claims whistleblowing retaliation [Fort Myers News-Press]
Imagine how puzzling it must be to be an employee of the city of Montreal: the city “has set up a whistleblower hotline to encourage you to expose wrongdoings by colleagues but has also created an explicit policy forbidding you to blow the whistle and is threatening severe penalties if you do.” [Montreal Gazette]