Trillions of dollars are paid out every year through government programs. With this much money passing hands, it can be difficult to track where all this money goes, which can provide the opportunity for fraud. Laws like the False Claims Act ("FCA") and the Whistleblower Protection Act ("WPA") were implemented to help protect the government and prevent and prosecute fraud. The FCA enables the government to prosecute individuals or organizations that have committed fraud, and the WPA protects employees from retaliation for uncovering and disclosing illegal behavior within an organization. The WPA also provides substantial compensation for those willing to bring forth evidence of fraud.
Whistleblowers are an important asset in fraud litigation because they provide insider information that would not otherwise be available to regulators, law enforcers, and private attorneys. Because whistleblowers are so important, they are protected under statutes such as the False Claims and Dodd-Frank Act. Sometimes, this protection even supersedes the confidential and privileged communications restrictions that otherwise restrict what a whistleblower can divulge. In fact, when Bio-Rad Laboratories Inc. ("Bio-Rad") tried to block its former general counsel, Sanford Wadler ("Wadler"), from providing evidence, arguing it was privileged information, Chief Magistrate Judge Joseph C. Spero of the Northern District of California found the information admissible under the Sarbanes-Oxley Act ("SOX Act").
In the wake of the recent U.S. presidential election, lawyers for Julian Assange, editor-in-chief of WikiLeaks, have revealed that they intend to appeal incoming president Donald Trump to end an ongoing criminal investigation into their client.
Both sides agreed to walk away from a whistleblower complaint on April 7, claiming that neither party had made payments or admitted fault. A set of workers had alleged that shipbuilder, Austal USA LLC ("Austal"), had defrauded the U.S. government by billing for higher salaries than it paid out.
A company is obligated to disclose to shareholders anything within its knowledge that could affect its stock price. Failure to do so, could result in potential liability. For example, a class of shareholders filed a securities lawsuit against HCA Holdings Inc. ("HCA") alleging that prior to its $4.3 billion initial public offering ("IPO"), HCA failed to disclose an ongoing internal investigation of unnecessary cardiac procedures after a complaint made by a whistleblower. Schuh v. HCA Holdings, Inc., et al. No. 3:11-cv-01033 (M.D. Tn. 2011).
As discussed in a previous SFMS blog, whistleblowers can be employees, suppliers, contractors, clients, or any individual who becomes aware of illegal activities - including attorneys. Although whistleblowers are often incentivized to come forward with information about legal violations, attorneys should be aware of specific restrictions before blowing the whistle. Recently, New York State Judge Joan A. Madden dismissed a case because the whistleblower, who was an attorney, broke ethics rules.
The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") is one of many laws that protect consumers from fraudulent acts committed by corporations. In order to increase transparency and expose organizations that engage in illicit activity, Dodd-Frank includes a "whistleblower program" that incentivizes individuals to come forward with information regarding possible securities law violations. If the information is original and leads to a Securities and Exchange Committee ("SEC") enforcement action in which more than $1,000,000 in sanctions is ordered, the SEC is authorized to provide monetary awards between 10 to 30 percent of what it collects to the individual.
Just one week ago, the Hebrew Homes Health Network, Inc., along with its former president and executive director, came to an agreement with the authorities: They would pay $17 million to close the False Claims Act case against them.
U.S. businesses are required to follow and abide by various legal rules and regulations. Many of the laws that govern U.S. business activities are in place to protect consumers and the environment. Additionally, regulatory measures have been enacted to ensure for the safety and wellbeing of employees as well as to safeguard against unfair and deceptive business practices.
Washington D.C. ("D.C.") public schools have reached a $19.4 million settlement with Chartwells, a food contractor that is a subsidiary of Compass Group USA Inc. The D.C. school district alleged that Chartwells violated the United States False Claims Act by overcharging schools when providing its meal programs for children. Specifically, the complaint alleged that Chartwells was "obligated to purchase food 'at the lowest possible price'" but the company "used a corporate affiliate to purchase foods from 'companies that manufacture highly processed foods and charge higher prices.'" Additionally, the whistleblower, Jeffery Mills, ("Mills") who was previously Director of Food and Nutrition for D.C. public schools, alleged that Chartwells delivered food late, often spoiled, and frequently in inadequate amounts. Providing nutritious and quality food for students is especially important in D.C., where "a majority of students are poor, and many rely on the school nutrition program for meals."