The Week in Whistleblowing

Tax day fell on April 18 this year, and law enforcers celebrated by announcing their wins in recent tax cases. Especially notable was a $40 million settlement unveiled by New York’s attorney general Eric Schneiderman — the largest-ever tax recovery under the New York False Claims Act, which was amended in 2010 to cover tax-related claims (as the federal FCA ought to be, too). A whistleblower brought the case against Harbert Management and related entities, alleging that Harbert helped its hedge-fund managers to declare income in Alabama, where Harbert is based, rather than in New York, where they worked under the leadership of Philip Falcone, a billionaire who’s currently barred from the securities industry after he admitted wrongdoing in a separate action by the Securities and Exchange Commission. The Harbert whistleblower’s name was redacted in this week’s settlement agreement, but he or she will receive a generous $8.8 million share of the recovery. Bragging rights go to Getnick & Getnick and Labaton Sucharow, the firms that represented the whistleblower.

The U.S. Office of Special Counsel (OSC) had a busy week with the Merit Systems Protection Board (MSPB), the tribunal to which many government employees appeal adverse actions — often without help from lawyers. After getting a civilian employee reinstated at least temporarily to his Navy job, from which he had been removed for reporting safety concerns, the agency further supported whistleblowers by filing amicus briefs in two other cases: Johnen v. MSPB at the U.S. Court of Appeals for the Ninth Circuit, in which OSC argued that employees need not cite precise legal details in order to claim unlawful retaliation; and Ryan v. Department of Defense at the MSPB, in which OSC noted that retaliation claims can be valid even if an employee blew the whistle partly for “interpersonal” reasons. Adjudications like Ryan currently are stalled at the MSPB because the board lacks a quorum, a problem that predates President Trump by a couple of weeks, but that must be resolved by him.

In other whistleblower news:

• AstraZeneca predictably got nowhere with its argument that a whistleblower case about its drug Seroquel could be defeated by the U.S. Supreme Court’s recent Escobar decision. As reported by Law360 (subscription), the pitch was rejected not only by the judge in U.S. ex rel. Zayas v. AstraZeneca Biopharmaceuticals Inc., but also in an emphatic letter from the U.S. government, which earlier had declined to intervene in the case.
• Two whistleblowers will share $2.3 million in the $9.9 million settlement of False Claims Act cases they filed against Walgreen Co., which they accused of billing both California and federal insurance programs for drugs without proper documentation. The whistleblowers are Loyd F. Schmuckley Jr., a former Walgreens pharmacist represented by Waters & Kraus, and Debbie G. Rinehart, a former Walgreens pharmacy technician represented by Berger & Montague.
• The scope of willful blindness in the Wells Fargo scandal became clearer, as an internal report by the Office of the Comptroller of the Currency — the nation’s main banking regulator — revealed that bank examiners knew back in 2010 of 700 whistleblower complaints about perverse incentives that could (and did) breed unethical actions by bank employees. According to the report, since-fired Wells Fargo executive Carrie Tolstedt told examiners that the high volume of complaints actually was a good sign.
• A whistleblower was awarded $1 million for drawing attention to Princess Cruise Lines’ use of a so-called magic pipe to dump untreated oily waste into the ocean. gCaptain, a fascinating Web site that’s new to us, has a good recap of the case.
• Per Crain’s, a new book identifies the whistleblower in the Volkswagen diesel pollution scandal as an American executive who took part in the wrongdoing.
• Sen. Chuck Grassley (R-Iowa) complained that, four months after President Obama signed a bipartisan bill upgrading whistleblower protection at the Federal Bureau of Investigation, the FBI continues to act like the law doesn’t exist.