Posts Tagged ‘whistleblowers’

New at Reason: Bigger bounties for tax tipsters

[cross-posted and slightly adapted from Cato at Liberty]

I’ve got a guest post up at Reason on how bounty-seeking informants are bypassing the Internal Revenue Service tipster-reward program in favor of selected state False Claims Acts, such as New York’s, which enable richer recoveries for disloyal employees and others who charge defendants with underpaying taxes. Excerpt:

Will the spread of a culture of informants sow distrust and disloyalty in the workplace, while encouraging dissident executives and their lawyers to shake settlements out of risk- and publicity-averse targets by seizing on doubtful, gray-area legal theories? That’s part of the game too. Lately hedge funds and litigation finance firms have moved in to bankroll the filing of likely “whistleblower” cases. …

…by getting pro-plaintiff laws through the legislature in just a few states—New York liberalized its law four years ago—advocates can set the stage for a nationwide informant push.

In Illinois, a single Chicago lawyer was reported in 2012 to have used that state’s whistleblower law to file at least 238 lawsuits against retailers, pocketing millions in settlements, over alleged failure to charge sales tax on shipping-and-handling.

Whole thing here.

P.S. More recent coverage of the runaway False Claims Act train: “Repeat whistleblowers reap millions of dollars in false-claims suits” [ABA Journal] David Ogden testifies for the U.S. Chamber on what needs to happen with the federal FCA [House Judiciary] “UK Commission Takes A Pass On U.S.-Style Whistleblower Bounties” [Daniel Fisher, Forbes]

State versions of the False Claims Act

The Chamber has been tracking this major engine of contingency-fee litigation as it jumps from federal practice to the realm of similar state laws vigorously lobbied for by the plaintiff’s bar. I have an opinion piece in the Baltimore Business Journal on the Maryland version, which 1) nearly passed this year, 2) would go further than the federal law in some vital respects, and 3) has become an issue in a closely watched primary contest.

Qui tam suit against Taiwan-owned pipe maker

Daniel Fisher at Forbes gives the manufacturer’s side of the story behind a massive whistleblower suit seeking billions from J.M. Eagle over its supply of plastic pipe to public water and utility systems. Qui tam lawyers Phillips & Cohen give their side of the story here. Here’s Fisher on the law firm’s success:

The firm was founded by John Phillips, who as a congressional staffer helped draft a 1986 law that made it easier to pursue whistleblower cases. He subsequently earned enough to become a major Democratic Party donor and now serves as the U.S. Ambassador to Italy.

Update: Phillips & Cohen writes to say that the above quotation “contains an error: John Phillips was never a congressional staffer.”

The state of False Claims Act litigation

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.

February 3 roundup

  • “Class counsel in Facebook ‘Sponsored Stories’ case seeks to impose $32,000 appeal bond on class-action objectors” [Public Citizen, Center for Class Action Fairness]
  • The best piece on bar fight litigation I’ve ever read [Burt Likko, Ordinary Gentlemen]
  • Casino mogul Adelson campaigns to suppress online gaming; is your state attorney general among those who’ve signed on? [PPA, The Hill]
  • Foreign Corrupt Practices Act (FCPA): “Anyone who values the rule of law should be alarmed by the ADM enforcement action.” [Mike Koehler]
  • New FMCSA rules on length of workweek make life difficult for long-haul truckers [Betsy Morris, WSJ via Lee Habeeb and Mike Leven, National Review and more]
  • “It takes a remarkable amount of nerve to cobble together publicly available facts, claim you’ve uncovered a fraud on the government, and file a lawsuit from which you could earn substantial financial benefits.” [Richard Samp, WLF] Whistleblower-law lobby tries to get its business model established in West Virginia [W.V. Record]
  • Pittsburgh readers, hope to see you tomorrow at Duquesne [law school Federalist Society]

“Whistleblowers coming from compliance departments”

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]

Fear of regulatory retaliation: ObamaCare and beyond

“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?

Banking and finance roundup

  • Employer mandate not the only impractical reg being postponed: “IRS Delays Implementation of FATCA” [Paul Caron; earlier]
  • Foreign banks whipsawed betwen U.S. terrorism-finance liability and privacy laws in home countries [Daniel Fisher]
  • “NY Fed Official: Let’s ‘Facilitate’ The Seizure Of Underwater Loans” [Kevin Funnell]
  • “If anything, the data suggest [home] ownership … inversely correlated with political stability and rule of law.” [Michael Greve]
  • Revisiting the Randy and Karen Sowers structuring case [Kathleen Hunker, Bell Towers; earlier]
  • “Can we improve payday lending?” [Andrew Sullivan]
  • When if ever should the SEC pay bounties to attorneys to snitch on their clients? [Prof. Bainbridge]