- Corporate charter revocation, a goofy cause, naturally enjoys support of RFK Jr. [Bainbridge, more]
- Jury finds Arab Bank liable in terror finance lawsuit [Daniel Fisher first, second, third posts; Kevin Funnell first, second posts]
- “And since most cases do settle, the scope of the law is actually being determined by the DOJ rather than the courts.” [Thomas Vartanian, American Banker] “Lloyds settlement latest example of the shadow regulatory state” [James Copland, City A.M.]
- Gideon Kanner is covering the AIG trial that just started;
- Do the benefits of mandatory investor disclosures outweigh the costs? [Elisabeth de Fontenay, Regulation (PDF) via Matthew Feeney]
- Albany lawprofs on board with scheme to expropriate underwater mortgages through eminent domain and compensate just 60 percent of face value [SSRN, earlier]
- Transparency in whistleblowing: we’ll see what the SEC wants us to see [Daniel Fisher]
“The Justice Department has a suggestion for banks hoping to avoid criminal charges: Rat out your employees.” By agreeing to throw individuals under the bus, the company as a whole will qualify for valuable cooperation credits. [Ben Protess, New York Times “DealBook”] On a similar culture-of-informants theme, Eric Holder is proposing to further boost bounties for Wall Street informants into more massive contingency-fee territory: “Mr. Holder will urge Congress to allow bigger whistleblower rewards under the 1989 Financial Institutions Reform, Recovery and Enforcement Act…. Current law caps any Firrea whistleblower payment at $1.6 million.” [Wall Street Journal, earlier coverage and specifically]
We’ve occasionally taken note that relators stepping forward under whistleblower laws are not always the public benefactors implied by the term whistleblower. Now here’s this from a suit that a former contractor filed, teaming up with well-connected environmental group Food and Water Watch [Bloomberg]:
“BP never misrepresented — much less knowingly distorted what it was doing,” U.S. District Judge Lynn N. Hughes in Houston said today in a 10-page summary ruling, finding that the case was ultimately about “paperwork wrinkles” instead of engineering shortcuts.
Abbott and the environmentalists “have not blown a whistle,” he said. “They have blown their own horn.”
A successful whistleblower, he’s featured on the reality-TV show “Real Housewives of New Jersey” and one can only commend his pacific spirit, at least as regards physical combat:
I don’t fight. I think it’s stupid. I’m trained as an attorney. If I want to hurt you, I’m going to sue you. I’m going to leverage your house. I’m gonna give you three years of hell in a courtroom. I’m going to bleed you dry financially, and I’m going to humiliate you as I depose you for eight hours and make you my bitch.
[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. …
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]
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.
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.”
Win cash rewards! Under a proposed initiative in San Francisco, neighborhood snoop/informants could pocket 30 percent of fines and taxes imposed [David Kravets, Ars Technica]
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.