Whistleblower Law Blog

Pennsylvania Pharmaceutical Company Agrees to Pay $56.5 Million to Settle Allegations It Engaged in Deceptive Marketing Practices

January 13, 2015

Pennsylvania-based pharmaceutical company, Shire Pharmaceuticals LLC, recently agreed to pay $56.5 million to resolve civil allegations that it violated the False Claims Act (FCA). Shire allegedly made false and misleading statements when marketing several drugs, including Adderall XR, the well-known drug used to treat attention deficit hyperactivity disorder (ADHD) in children and adults.

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OSHA Finds BNSF, Rail Company Owned by Berkshire Hathaway, Liable in Three Retaliation Cases and Awards Damages to Employees

January 13, 2015

The Department of Labor’s Occupational Safety and Health Administration found a railway company owned by Warren Buffett’s Berkshire Hathaway liable in three retaliation complaints brought by employees. OSHA ordered Berkshire Hathaway’s Burlington Northern Santa Fe Railway Co. (BNSF) to pay more than $272,000 to these employees, plus various non-monetary relief.

OSHA found that BNSF violated the Federal Railroad Safety Act (FRSA) when it reprimanded a conductor who missed work in accordance with a physician’s treatment plan. In addition to ordering BNSF to pay $12,000 in monetary damages ($2,000 in compensatory damages and $10,000 in punitive damages, plus attorneys’ fees), OSHA ordered BNSF to purge the employee’s personnel record of all disciplinary information, and to distribute whistleblower rights information to all employees.

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The ARB Reaffirms the Speegle Standard, which Requires an Employer to Show It would have Punished a Whistleblower Absent Any Protected Activity

January 13, 2015

In previous posts on May 15 and September 3, we discussed the Department of Labor Administrative Review Board’s new Speegle test—which places a tougher burden on employers to justify any adverse actions against whistleblowers. The ARB recently reaffirmed the Speegle standard in Cain v. BNSF Railway Co.

Cain involved the following facts: Shortly after an on-the-job traffic accident in January 2010, Christopher Cain filed a report to his employer, BNSF Railway, about minor injuries he sustained. A few weeks later, Cain’s symptoms had not disappeared, and he sought medical treatment. His doctors said his injuries were much worse than originally thought, including broken ribs and fluid around his lungs. Cain filed a second report about the more severe injuries, although his supervisors discouraged him from doing so. A short time after Cain filed his second report, BNSF opened an investigation into potential wrongdoing by Cain related to the accident. BNSF ultimately found that Cain violated its reporting rule by failing to report the full extent of his injuries in his first report. Cain then filed a complaint for whistleblower retaliation under the Federal Rail Safety Act of 1982 (FRSA).

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Virginia Attorney General’s Office Intervenes in $1.15 Billion Suit Against 15 of the World’s Largest Banks in an Action Under the Virginia False Claims Act

January 13, 2015

Like most states, Virginia has its own state statute that mirrors the federal False Claims Act and allows whistleblowers to collect rewards for bringing to light fraud against the state government. Virginia’s Fraud Against Taxpayers Act, like its federal counterpart, permits the state to intervene in cases brought by qui tam (false claims) relators. On September 16, 2014, Virginia’s Attorney General Mark Herring did just that, filing a 317 page complaint alleging that fifteen of the world’s largest banks knowingly misrepresented the financial stability of mortgage securities to the state’s retirement system in the years leading up to the financial crisis in 2007 and 2008.

The complaint alleges that as a direct result of the banks’ misrepresentations, the state’s retirement system purchased doomed mortgage securities and ultimately lost $383.91 million. The Commonwealth seeks $1.15 billion in damages from the banks (three times the amount of actual damages, as permitted by the statute), plus civil penalties for each violation. The relator was Integra REC, LLC, a financial modeling firm. This historic lawsuit demonstrates the price that can be paid for fraud against taxpayers and the government. And because the relator may receive between 15 to 25 percent of the ultimate settlement ($172.5 million to $287.5 million if the full $1.15 billion sought is awarded), it also demonstrates the incentives for whistleblowers to expose fraud.

DOJ Aggressively Pursues and Settles False Claims Actions Against Doctors and Clinical Labs for Kickbacks and Medically Unnecessary Testing

January 13, 2015

Over the past two years, the Department of Justice has announced several large settlements involving alleged violations by doctors and clinical laboratories of the False Claims Act and The Anti-Kickback Statute. Many clinical laboratories rely on referrals from physicians, hospitals, and other healthcare entities to obtain samples to examine –which is the crux of their business. However, as shown below, the relationships between clinical labs and physicians and other entities sometimes lead to unnecessary services, billing for more expensive services, and illegal kickback arrangements:

• In February 2013, Florida dermatologist Dr. Steven J. Wasserman, agreed to pay $26.1 million to resolve allegations that he violated the False Claims Act. The government alleged that Wasserman entered into an illegal kickback arrangement with a clinical laboratory and its owner, Dr. Jose Suarez Hoyos. Wasserman allegedly sent biopsy specimens for Medicare beneficiaries to the lab for testing and diagnosis; the lab then made it appear that Wasserman had performed diagnostic work. As part of the alleged kickback agreement, Wasserman substantially increased the number of skin biopsies he performed on Medicare patients, thus increasing referrals to the pathology lab.

• In August 2013, Bostwick Laboratories agreed to pay about $500,000 to resolve allegations it illegally paid physicians to induce them to enroll in a study sponsored by Bostwick. In October 2014, in a separate suit filed by a whistleblower against Bostwick, Bostwick agreed to pay $6.05 million to settle allegations that it made illegal payments to persuade physicians to use Bostwick’s services.

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Supreme Court of Hawaii: Arbitration Clause Is Unenforceable

November 19, 2014

On October 31, 2014, the Supreme Court of Hawaii held that arbitration clauses that give employers “sole discretion” to select an arbitrator violate the “fundamental fairness standard” and are thus unenforceable.

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Supreme Court Revisits the Scope of SOX

November 14, 2014

What does a fisherman’s criminal destruction of undersized fish have to do with the scope of federal whistleblower laws? The U.S. Supreme Court will soon tell us, after hearing oral arguments last week in Yates v. United States.

In deciding whether a fish is a “tangible object” as that term is used in the Sarbanes-Oxley Act (SOX), the justices will again signal how broadly they’re willing to apply SOX — a topic they last visited in March in Lawson v. FMR LLC, a sweeping decision that turned one section of SOX into something like a general-purpose whistleblower protection law.

Passed in 2002 in the wake of the Enron scandal, SOX sets strict standards for financial behavior by publicly traded companies. Its whistleblower provision, Section 1514A of the U.S. Code, protects employees of many companies — both public and private — against retaliation for blowing the whistle on various types of fraud.

Yates concerns Section 1519, the law’s criminal provision against destruction of evidence. The case stems from an incident in 2007, when a Florida official inspecting John Yates’s fishing boat suspected that 72 red grouper in his catch were too small to meet the legal limit. Mr. Yates was issued a citation and ordered to bring the fish to port the next day for seizure by federal officials. Instead, the government charged, he directed his crew to toss the undersized fish overboard and replace them with fish that met the legal limit.

Unusually, Mr. Yates was charged and convicted under SOX, which penalizes anyone who “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object” to impede a federal investigation. As with the civil whistleblower provision in Section 1514A, the text of Section 1519 isn’t obviously limited to Enron-style wrongdoing — and indeed, the government argued on November 5 that it’s a broad law limited only by the literal meaning of its words.

Congress deliberately used broad language (“any … tangible object”) because it intended to create a general law against evidence destruction, argued Roman Martinez, an assistant to the U.S. Solicitor General, stressing that Congress was trying to close loopholes in federal law.

No, argued Mr. Yates’ lawyer John Badalamenti: Congress was primarily concerned with the type of document-shredding at the center of the Enron scandal. In that context, he said, “tangible object” must mean only a device used to record information, such as a computer hard drive or a digital camera. A broader interpretation would make Section 1519 much too far-reaching, he said.

The Court balked at Mr. Badalamenti’s proposed limits, however, foreshadowing a Lawson-type decision in favor of Section 1519’s broad scope. For example, Justice Ruth Bader Ginsburg warned that under Mr. Badalamenti’s interpretation, a suspected murderer could be indicted under SOX for destroying a letter written by his victim — but not for destroying the murder weapon.

Justice Ginsburg also noted that Congress could have written Section 1519 to cover any “tangible object used to preserve information,” if that’s what it meant. That it did not, she said, suggests that Congress contemplated  no such limitation.

Justice Kennedy saw practical issues with Mr. Badalamenti’s approach, too, suggesting that it creates “more problems with determining what [Section 1519’s] boundaries are than the government’s test.”

In the end, most justices seemed unwilling to narrow the scope of Section 1519, agreeing instead that it is a broad statute that should never have been used against Mr. Yates. “What kind of a mad prosecutor would try to send this guy up for 20 years?” asked Justice Antonin Scalia. The maximum sentence for destruction of evidence under SOX is 20 years, although the judge in Mr. Yates’s case sentenced him to 30 days.

None of the justices could offer a limitation on Section 1519 that would stop prosecutors from applying it for trivial offenses, but Lawson indicates that the Court will trust lower tribunals to apply discretion. The Lawson majority conceded that “overbroad applications” of Section 1514A were possible, too, but essentially said that the text of the law can’t be denied.

A similar decision seems likely in Yates, and will be further proof of the Court’s reluctance to apply limits to SOX.

Justices Balk at Regulatory End Run Around the WPA

November 04, 2014

NOTE: A version of this post first appeared on Law360.com. The author, R. Scott Oswald, is managing principal of The Employment Law Group, P.C.

Here’s the problem with telling the justices of the U.S. Supreme Court that they’re wrong: They always get the last word.

And the last word in Department of Homeland Security v. MacLean — based on today’s oral arguments in the case, at least — now seems likely to be a rejection of the Obama Administration’s contention that federal agencies may strip employees of their rights under the Whistleblower Protection Act of 1989 (WPA) simply by issuing regulations that forbid certain types of disclosure.

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Supreme Court Weighs Scope of Whistleblower Protection Act

October 29, 2014

The U.S. Supreme Court next week will hear arguments in Department of Homeland Security v. MacLean, a case that could determine whether government officials are free to punish whistleblowers who disclose information that’s been labeled as “sensitive” — even if the information was never listed for protection by any law.

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FINRA Warns Firms Not to Bar Employee Whistleblowing

October 17, 2014

The Financial Industry Regulatory Authority — a self-policing arm of the securities industry — reminded its member firms not to ask their employees to sign confidentiality agreements that forbid reporting possible wrongdoing to FINRA itself, or to industry regulators such as the U.S. Securities and Exchange Commission.

FINRA may discipline firms that add such provisions to agreements with their employees, it said in a new regulatory notice. FINRA also said that any language that bars employees from sharing certain documents outside their firm can’t stop employees from giving the same documents to regulators.

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