Whistleblower Law Blog
Department of Justice Settles Suit with Wells Fargo for $175 Million for Homeowners to Resolve Lending Claims
On July 12, 2012 the Department of Justice filed in the U.S. District Court for the District of Columbia against Wells Fargo Bank, subject to court approval, the second largest fair lending settlement in the department’s history. The Department of Justice alleges that between 2004 and 2009, Wells Fargo engaged in fair lending discrimination against African-American and Hispanic wholesale borrowers by offering them less favorable terms on loans than non-Hispanic white borrowers.
According to the complaint, between 2004 and 2008, Wells Fargo, the largest residential home mortgage originator in the United States, steered approximately 4,000 African-American and Hispanic borrowers into subprime mortgages while non-Hispanic borrowers with similar credit profiles were offered prime loans. Additionally, the Department of Justice alleges that between 2004 and 2009, Wells Fargo discriminated against approximately 30,000 African-American and Hispanic borrowers solely based on their race and national origin rather than their credit worthiness, and charged them higher fees and rates than their white counterparts. Furthermore, even after learning of its pattern of discriminatory lending, Wells Fargo failed to take sufficient and effective actions to correct it.
When the settlement was announced, Deputy Attorney General James M. Cole stated:
“The department’s action makes clear that we will hold financial institutions accountable, including some of the nation’s largest, for lending discrimination… An applicant’s creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for. With today’s settlement, the federal government will ensure that African-American and Hispanic borrowers who were discriminated against will be entitled to compensation and borrowers in communities hit hard by this housing crisis will have an opportunity to access homeownership.”
Of the $175 million settlement, $125 million will go toward compensating wholesale borrowers who were charged higher fees and rates as a result of the subprime mortgages offered to them because of their race and national origin, and any compensation offered to retail borrowers will be in addition to the $125 million. The bank has also agreed to provide $50 million in direct down payment assistance to the communities most affected by their discriminatory practices and which were hardest hit by the housing crisis. Wells Fargo will also conduct its own internal review of its retail mortgage lending practice.
The Employment Law Group® law firm is a leader in the field of whistleblower law and has an extensive nationwide whistleblower practice representing employees who have exposed illegal activity by their employer, including securities fraud and commodities trading fraud.
Cincinnati Christ Hospital Pays $1.8 Million to Settle Medicare Whistleblower Lawsuit Alleging that a Doctor Signed Off on Vascular Tests without Reading the Tests
Cincinnati, Ohio’s Christ Hospital has agreed to pay $1.8 million to settle a False Claims Act Qui Tam suit filed by former Medical Director of Vascular Lab Services Peter Podore.
Podore alleged that one of the Hospital’s doctors, John Paul Ruyon, was not only signing off on vascular tests for as many as 8,000 patients without properly reading and reviewing the tests, but he was fraudulently charging Medicare for these tests. When Podore alerted hospital administrators to Ruyon’s actions, they ignored his warnings.
Commenting on what prompted him to file a claim against Christ Hospital, Podore stated:
“Every hospital is going to have problem physicians, problem behavior… And every hospital has procedures to deal with these things. But my concern is that when a hospital elects to ignore their own internal procedures and in doing so puts patients at risk, that’s the problem that sort of forced me to file a claim”
As part of Podore’s reward for filing a False Claims Act Qui Tam suit, he will receive $286,000 of the $1.8 million settlement.
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.
Real Estate Management Company Agrees to Pay $45,000 to Settle OSHA Allegations of Illegally Terminating Maintenance Employee for Raising Safety Concerns Regarding Asbestos
Earlier this month, CMM Realty Inc., a real estate management company headquartered in Columbia, South Carolina, entered a consent decree with the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) to settle allegations that it violated the Clean Air Act’s whistleblower provision when it terminated a maintenance worker who raised safety and environmental concerns regarding asbestos at the work site.
On May 13, 2009, the employee reported asbestos exposure at CMM Realty’s Briargate Condominiums in Columbia to the South Carolina OSHA Program and the South Carolina Department of Health and Environmental Conservation. The same day after he made this report, CMM Realty told the employee that his services were no longer needed and five days later sent official notification of his termination.
As part of the settlement, CMM will pay the former employee $45,000, provide him with neutral references for prospective employers and will expunge all disciplinary actions from his personnel record. OSHA also permanently prohibited CMM from violating the whistleblower provision of the Occupational Safety and Health Act and ordered the employer to post an OSHA fact sheet regarding whistleblower protection in English and Spanish at the company’s facility.
Cindy A. Coe, OSHA’s regional administrator in Atlanta, Georgia, said:
“OSHA is committed to security workers’ rights of protection from retaliation upon reporting workplace safety and/or environmental concerns.”
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.
Tennessee Mail Carrier Settles STAA Whistleblower Lawsuit after Terminating Driver for Complaining About Defective Vehicles
Heartland Transportation Inc., a U.S. Postal Service contract mail carrier based in Knoxville, Tennessee, has agreed to settle a lawsuit filed by the Occupational Safety and Health Administration (OSHA) alleging that the company violated the Surface Transportation Assistance Act (STAA) when it terminated an employee for complaining about defective vehicles.
In August 2009, the driver was assigned a trailer with a nonworking light to deliver a truckload of mail to customers in Pontiac, Michigan. When he realized the trailer had a nonworking light, the driver complained and the light was fixed before he made his delivery. However, the driver encountered and reported multiple other mechanical failures with the company’s vehicles. He informed Heartland that he would not drive trucks with mechanical failures. When the driver returned to the company’s facility after making his delivery in Michigan, he found that the company had removed his name from the driving schedule. When he inquired about this, Heartland informed the driver that it had terminated his employment. The driver then filed a whistleblower complaint with OSHA.
Following OSHA’s investigation, Heartland agreed to pay the former employee $31,200 in compensatory damages. OSHA also ordered the carrier to remove all records regarding the involuntary discharge from the former employee’s personnel records, and to provide a neutral reference to any prospective employers. Heartland has also agreed to post a notice informing employees of their rights under STAA.
Cindy A. Coe, OSHA’s regional administrator in Atlanta, stated:
“OSHA will continue to ensure that the whistleblower protection provisions of the STAA are property and thoroughly enforced, while always keeping open the opportunity for settlement negotiations.”
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.
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Department of Labor’s Administrative Review Board Reverses Administrative Law Judge’s Ruling in Favor of Nuclear Whistleblower and Client of The Employment Law Group®
The U.S. Department of Labor’s Administrative Review Board (ARB) recently issued a decision in favor of William Smith, a client of The Employment Law Group® law firm and whistleblower at a nuclear power facility in South Carolina. In the case, Smith v. Duke Energy Carolinas, LLC & Atlantic Group, d/b/a DZ Atlantic, Mr. Smith claimed that Duke Energy had terminated his employment because he reported a coworker’s alleged failure to comply with workplace safety regulations mandated by the Energy Reorganization Act (ERA).
The ARB’s decision reverses an earlier decision by an administrative law judge (ALJ) that held that Smith’s protective activity of bringing safety concerns in a nuclear plant to the attention of his supervisors was not the reason for his termination. In its recent decision, the ARB reversed the ALJ’s decision and remanded the case for further proceedings.
Background
In early 2007, Mr. Smith began working for DZ Atlantic – a contractor to Duke Energy – as a security office at the Catawba nuclear power plant. As part of his duties, Smith performed routine fire inspections in the power plant and recorded his signed observations in a company log. In February 2008, Smith arrived to work approximately 1 hour prior to the beginning of his shift and saw that a co-worker, Chris Borders, had already signed the inspection sheet for an inspection that had not yet occurred.
Smith told Borders that if she would not alter the inspection log entry he would report the ostensibly falsified log entry to their supervisors. Borders responded to Smith by saying that if Smith reporter her, she would then file a sexual harassment complaint against him. Later that week, Borders filed a sexual harassment complaint against Smith and, during an investigative meeting with HR following the complaint, Smith reported Borders’ incorrect entry in the inspection log. While the company found no evidence backing Borders’ sexual harassment claims, Duke Energy eventually terminated both Smith and Borders, citing Borders falsification of the inspection log and Smith’s failure to report the false entry in a timely fashion after learning of it.
The ALJ previously held that while Smith had engaged in protected activity by reporting his coworker’s failure to follow ERA guidelines, his employer, Duke Energy, had demonstrated that the decision to terminate his employment had been motivated by the company’s wanting to punish a lack of trustworthiness by employees and not because of Smith’s whistleblowing. Accordingly, the ALJ held that Smith’s protected activity had not been a contributing factor in Duke Energy’s decision to terminate his employment.
The Administrative Review Board’s (ARB) Reversal and Remand
The central issue on appeal to the ARB was “whether Smith’s protected activity was a contributing factor in [Duke Energy’s] decision” to fire him. The ARB reversed the ALJ’s decision, citing Marano v. Dep’t of Justice, an appellate case involving a Drug Enforcement Agency (DEA) agent who reported misconduct his workplace which led the DEA to undergo a reorganization of his office. While the DEA agent was not found to have engaged in any wrongdoing, as a result of the office reorganization, he ultimately lost his job. The Federal Circuit held that but for the agent’s reporting of the misconduct he would not have been terminated and, therefore, the Court held that the agent’s protected activity was indeed a contributing factor in his termination.
In this case, the ARB found the Marano case to be analogous to Smith, holding that Smith’s blowing the whistle on the inspection log entry was a contributing factor to his termination because Duke Energy would never have fired Smith had it not known that Smith failed to make his report in a timely manner. The ARB held that Smith’s report was “inextricably intertwined” with the investigatory process that led to his termination and that his protected activity was a contributing factor in his termination. With this reversal of the ALJ’s decision, the ARB remanded the case for further proceedings and held that the burden of proof will now fall on Duke Energy to prove that it would still have terminated Smith even in the absence of Smith’s protected activity.
Significance for Whistleblowers
The ARB’s decision in Smith is important for whistleblowers because its holding supports the proposition that when an employer admits that the reason it took action against an employee is that individual’s protected activity, this is sufficient to demonstrate causation without further analysis.
The ARB’s decision should also put employers on notice that when management decides to make a so-called ‘clean sweep’ – terminating all employees who might be tainted with wrongdoing – that it cannot terminate the employee who disclosed the wrongdoing, as this would constitute terminating the employee because of his or her protected disclosure.
The Employment Law Group® law firm has substantial experience representing employees and whistleblowers in the nuclear industry in proceedings before the Department of Labor (DOL) and Nuclear Regulatory Commission (NRC).
Related articles
- Sarbanes-Oxley Compliance Journal Publishes Article by The Employment Law Group Managing Principal, R. Scott Oswald (employmentlawgroupblog.com)
- Law360 Quotes R. Scott Oswald, Managing Principal of The Employment Law Group on Recent Pro-Whistleblower Decision from the Department of Labor’s Administrative Review Board (ARB) (employmentlawgroupblog.com)
R. Scott Oswald and David Scher, Principals of The Employment Law Group®, Publish Article on Expanded False Claims Act Liability for Improper Healthcare Kickbacks under The Patient Protection and Affordable Care Act (PPACA)
R. Scott Oswald and David Scher, principal attorneys of The Employment Law Group® law firm, recently published an article in Westlaw’s Health Care Fraud Journal entitled “Health care law expands False Claims Act liability under Anti-Kickback Statute”.
In the article Oswald and Scher provide an outline of the various provisions of the Anti-Kickback Statute and illustrate how violations of the law can subject violators of the statute to liability under the False Claims Act (FCA).
Expansion of Liability
The Patient Protection and Affordable Care Act (PPACA), passed in 2010, has given the Anti-Kickback Statute “more teeth than ever before,” according to Oswald and Scher. “Now violations of the statute are per se violations of the False Claims Act. This means that even unintentional violations of the statute can be grounds for fraud liability.”
Additionally, even unwitting and non-benefiting parties who are within the stream of a reimbursement claim to Medicaid or Medicare may now have liability for fraud if unlawful kickbacks are part of the claim. As a means of enforcing this shift in the law, as of January 1, 2011, all drug, medical device, and medical supply manufacturers covered under the various federal health care programs have been required to keep records of “all transfers of value.” Failure on the part of these entities to keep record of these transfers of value now opens up the possibility of fraud litigation.
Measure of Damages
In such situations, the measure of damages for fraud claims under the Anti-Kickback Statute is, “the full value of the services provided,” even if the patients in question receive the medical benefits claimed. Any funds received from the federal government will now be forfeited in the presence of any unlawful kickback as the inappropriate kickback now renders physicians and other healthcare providers ineligible under federal programs. Notably, physicians who submit claims for reimbursement tainted by kickbacks may now be individually liable for violations of the FCA.
Implied False Certification Theory Now Obsolete
Prior to the passage of PPACA, the primary theory underpinning the interpretation of the False Claims Act as meaning that claims submitted as a result of Anti-Kickback Statute violations were false claims rested on the so-called ‘implied false certification theory’. Under this doctrine, a claim for payment is considered false when based on a false representation of compliance with a relevant federal law and such false certifications can be either express or implied.
In order to obtain reimbursements from Medicare and Medicaid, healthcare providers must certify that they are in compliance with all applicable laws, including the Anti-Kickback Statute. According to Oswald and Scher, “PPACA renders moot any reliance on a false certification theory for an Anti-Kickback Statute False Claims Act claim. In effect, the PPACA codifies as law more than 17 years of federal court decisions affirming fraud liability for Anti-Kickback Statute violations.”
Summary
Oswald and Scher summarize the effect of PPACA’s amendments to Anti-Kickback Statute as providing:
- Criminal penalties for physicians and other healthcare providers who engage in improper financial relationships involving kickbacks;
- A viable basis for False Claims Act liability for both parties that does not rely upon the controversial ‘implied-certification’ theory and the elimination of the requirement to demonstrate intent to defraud;
- That violations of the Anti-Kickback Statute are per se violations of the False Claims Act.
Finally, the authors note that while physicians have largely “stayed under the radar in terms of False Claims Act liability” this may “[have] less to do with legal hurdles” and is “more likely the effect of the government’s desire to prosecute only big, asset-rich violators”. This trend “may soon change”, Oswald and Scher surmise, with the PPACA amendments to the Anti-Kickback Statute eliminating the requirements to demonstrate intent for False Claims Act liability.
The Employment Law Group® law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.
Related Articles
- Accenture Whistleblowers Set to Receive a $14 Million Reward for Blowing the Whistle on False Claims Submitted to the Federal Government (employmentlawgroupblog.com)
- Citigroup Whistleblower Receives $31 Million Award as Part of False Claims Act Settlement (employmentlawgroupblog.com)
OSHA Orders Norfolk Southern Railway to Pay Whistleblowers Over $800,000 after Finding that the Company Terminated Them for Reporting Work Injuries
Norfolk Southern Railway, a railroad operator based in Norfolk, Virginia, has been ordered by the Department of Labor’s Occupational Safety and Health Administration (OSHA) to pay $802,168.70 to settle allegations that it violated the whistleblower provision of the Federal Railroad Safety Act when it terminated three employees who reported work injuries.
According to OSHA, this lawsuit, in part, stems from ongoing investigations into allegations that Norfolk Southern retaliates against employees who report work-related injuries. This settlement addresses three concurrent investigations involving a laborer in Greenville, South Carolina, an engineer in Louisville, Kentucky, and a railroad conductor in Harrison, Pennsylvania. In these three cases, the individuals that reported the injuries to OSHA had themselves been injured on the job. OSHA’s investigations found that Norfolk Southern either began treating the injured employees less favorably or they alleged that the employees had falsified their work-related injuries.
In addition to paying over $800,000, Norfolk Southern has been ordered to remove all disciplinary records from the whistleblowers files, post a notice regarding employees’ whistleblower rights and provide employees with proper training regarding these rights.
Assistant Secretary of Labor Dr. David Michaels stated:
“Firing workers for reporting an injury is not only illegal, it also endangered all workers. When workers are discouraged from reporting injuries, no investigation into the cause of the injury can occur… To prevent more injuries, railroad workers must be able to report an injury without fear of retaliation. The Labor Department will continue to protect all employees, including those in the railroad industry, from retaliation for exercising these basic worker rights. Employers found in violation will be held accountable.”
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.
Accenture Whistleblowers Set to Receive a $14 Million Reward for Blowing the Whistle on False Claims Submitted to the Federal Government
Norman Rille and Neal Roberts, whistleblowers who in 2004 filed a qui tam False Claims Act lawsuit against Accenture LLP in the U.S. District Court for the Eastern District of Arkansas, are set to receive $14 million of the nearly $64 million Accenture agreed to pay in order to settle allegations that the company submitted or intended to submit false claims to the federal government.
Whistleblowers Rille and Roberts alleged that under a number of contracts with federal agencies, Accenture submitted false claims for payment for information technology (IT) services. Having authority under its contract to hire subcontractors and recommend IT firms to update and organize government agencies’ IT systems, Accenture accepted millions of dollars in kickbacks from IT companies which artificially inflated contract costs.
The Employment Law Group® law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.
OSHA Orders Alaska-Based Youth Treatment Provider to Reinstate Whistleblower Who Was Fired After Reporting Safety Concerns at the Facility
In a press release issued last week, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) announced that Anchorage, Alaska- based North Star Behavioral Health System has been ordered to reinstate and pay over $250,000 to an employee who was terminated in retaliation for reporting safety concerns regarding the facility’s water supply.
An investigation conducted by OSHA’s Whistleblower Protection Program found that the company violated the whistleblower provision of the Safe Drinking Water Act (SDWA) when it terminated an employee after he reported concerns about safe drinking water and a lack of appropriate licensing by a North Star manager who held certain regulatory responsibilities regarding the facility’s drinking water system. Following the employee’s complaint to state agencies, North Star not only ordered him to refrain from future contact with regulatory agencies but terminated him for allegedly sabotaging the facility’s water supply, allegations which OSHA determined by to be unsubstantiated.
In addition to reinstating the whistleblower, OSHA ordered that North Star must pay him nearly $60,000 in back wages, $75,000 in emotional distress damages, $100,000 in punitive damages, $2,018 in compensatory damages, and approximately $35,600 in attorney fees. Finally, North Star must post OSHA’s whistleblower protection fact sheet at its Anchorage facility.
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.
Citigroup Whistleblower Receives $31 Million Award as Part of False Claims Act Settlement
Sherry Hunt, a whistleblower who helped the U.S. government recover $158.3 million, will receive a $31 million portion of the False Claims Act settlement paid by Citigroup Inc. (Citi). Hunt filed a complaint against Citi on August 5, 2011 in the U.S. District Court for the Southern District of New York, alleging that Citi knowingly and wrongfully approved loans for government insurance that did not qualify under Federal Housing Administration (FHA) rules. The settlement was reached out of court one month after U.S. Attorney Preet Bharara in Manhattan agreed to join Hunt’s suit on behalf of the government.
In November 2004, Hunt started working for Citi as a vice president in the mortgage unit. She supervised sixty-five mortgage underwriters responsible for protecting the company from fraud and bad investments. Citi vouched for the quality of loans sold by investors or approved investors for government mortgage insurance products. For investors, this stamp of approval meant that if borrowers stopped paying, Citi stood behind the defaulted mortgages. But, according to Hunt, she began to notice a series of discrepancies by 2006. Hunt claimed Citi was buying mortgages from outside lenders with doctored tax forms, phony appraisals and missing signatures. Hunt identified and reported those defects in regular reports to her bosses.
Hunt believed that Citi incentivized employees to push faulty mortgages because their salaries depended upon a high percentage of approved loans. By late 2007, Hunt noticed that about sixty percent of the mortgages bought by Citi were missing some form of documentation. Hunt reported this to her boss, Richard Bowen III, and he sent an alert email to Citi executives in November 2007. However, his effort resulted in no noticeable changes, except that by April 1, 2008, after Hunt went public with her information, she had been transferred to the quality-control group where she went from overseeing sixty-five people to overseeing none.
While working at the quality control group, Hunt noticed further abusive practices. In November 2009, Hunt found a list of about 1,000 possibly fraudulent loans, some that had been in the queue for more than two years without any action by the quality control group. This group was supposed to investigate mortgages for fraud and within a month notify the FHA of any fraud found; no reports were sent to FHA until July 2011 when the U.S. Attorney’s Office in Manhattan issued a subpoena. Hunt also recalled an event in November 2010, when Ross Leckie, a senior director of CitiMortgage’s retail bank mortgage unit, sent an email ordering the quality control teams to drive down the defect rate on home loans by “brute force.”
Hunt reached her breaking point on March 29, 2011, when she officially filed a complaint with Citi’s human resources department and told them about the illegal activity she had uncovered. Subsequently, on August 5, 2011, Hunt filed a false claims complaint in the U.S. district court, which ultimately resulted in Citi agreeing to settle out of court.
The Employment Law Group© law firm focuses in the areas of employment law and whistleblower protection law, has helped many clients file suit against employers that fraudulently billed the U.S. government, and has established favorable precedents under the retaliation provision of the False Claims Act.
The Employment Law Group® law firm produces this blog to provide general news and information about the field of whistleblower law. The blog does not contain any legal advice upon which you should rely or act. Please read our disclaimer.
Editor-in-Chief
R. Scott Oswald
Contributing Editor
Laurence Hooper
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- Administrative Review Board (ARB)
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