Whistleblower Law Blog

SEC Awards Whistleblower Maximum Possible Share of Settlement in Dodd-Frank Retaliation Case

June 05, 2015

On April 28, 2015, the Securities and Exchange Commission announced that it was awarding a whistleblower 30 percent of funds recovered in settlement of the Commission’s first retaliation charges brought under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

The whistleblower’s share will be more than $600,000. In deciding to award the maximum 30 percent, the SEC’s Claims Review Staff weighed heavily the “substantial evidence that the whistleblower suffered unique hardships as a result of reporting.”

In the Matter of Paradigm Capital Management, Inc. and Candace King Weir, File No. 3-15930 (June 16, 2014), the SEC charged the hedge fund investment adviser with retaliating against the whistleblower for reporting what the whistleblower believed to be misconduct to the SEC. The SEC found that Paradigm removed the whistleblower from the whistleblower’s then-current position, changed the whistleblower’s job function, and removed the whistleblower’s supervisory responsibilities, among other retaliatory acts.
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Middle District of Florida Affirms Use of Statistical Sampling in Qui Tam Actions

June 04, 2015

Allegations of fraud against Medicare, a frequent impetus for qui tam actions under the False Claims Act, often involve an enormous number of false claims as part of a larger scheme of fraud committed by an entity. These large numbers of claims present a practical problem in determining liability and calculating damages. In a recent case, United States ex rel. Angela Ruckh v. Genoa Healthcare, et al., the United States District Court for Middle District of Florida affirmed the use of statistical sampling to demonstrate liability in a qui tam action.

In Ruckh, the Relator alleges that a number of health care facilities defrauded the U.S. government by “upcoding” (billing for higher level services than the facility actually performed). The Relator alleges that the Defendants submitted false claims from fifty-three different health care facilities. Given the impracticality of analyzing each and every claim from the various facilities, the Relator sought to use statistical sampling, as well as expert testimony, to extrapolate the amount of overpayment and assess liability. The Defendants in Ruckh relied on a footnote in a 1993 district court case from Massachusetts, United States v. Friedman, No. 86-0610-MA, 1993 U.S. Dist. LEXIS 21496 (D. Ma. Jul 23, 1993), for the proposition that statistical sampling cannot be used to demonstrate liability and calculate damages.
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Whistleblower Not Obligated to Produce Evidence of Retaliatory Termination

June 03, 2015

On March 20, 2015, the Department of Labor Administrative Review Board (ARB) reversed and remanded a decision by the DOL’s Office of Administrative Law Judges (OALJ) that held a railroad employee had not proved that his report of a workplace injury was a contributing factor to management’s decision to terminate his employment.

Robert Powers reported to his employer, Union Pacific Railroad Company, that he injured his hand while operating a rail saw at work in May 2007. Over slightly more than a year, Powers saw several doctors who prescribed various treatments. His doctors also imposed a series of work restrictions, including limits on lifting and repetitive motions.

Union Pacific became suspicious about Powers’ reported injuries and resultant work restrictions. The company hired a private investigator who filmed Powers performing tasks around his property, including using a sledgehammer and carrying boxes of ammunition. After an internal administrative procedure that determined that Powers had violated the company’s dishonesty policy and had failed to stay within his medical restrictions, the company terminated Powers’ employment.
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SEC Awards $1.5 Million to Compliance Officer

June 02, 2015

On April 22, 2015, the U.S. Securities and Exchange Commission announced its second-ever whistleblower award to a compliance professional. The SEC’s award demonstrates that compliance professionals and other fiduciaries can be whistleblowers when the employer fails to take action to address misconduct reported by a fiduciary.

The complainant, in his role as a fiduciary, was statutorily required to disclose the suspected misconduct internally and then wait 120 days for the employer to investigate and take corrective measures before initiating an action under the SEC’s whistleblower award program. Here, the complainant did as required, and the SEC found that the employer did not take meaningful corrective action. The SEC held the financial award to the whistleblower was appropriate given the employer’s failure to remediate.

The SEC’s first ever award to a whistleblower was in 2014. The SEC releases limited information about whistleblower case as it is bound by the law to protect the confidentiality of whistleblowers.

ARB Rules Airline Workers Exempt From Arbitration

May 13, 2015

In Willbanks v. Atlas Air Worldwide Holdings, Inc. et al., the Administrative Review Board for the U.S. Department of Labor ruled that airline workers are transportation workers and thus exempt from the arbitration requirements of the Federal Arbitration Act. The ARB ruling reversed an Administrative Law Judge’s grant of a motion to stay proceedings pending arbitration,.

The FAA provides that arbitration agreements are valid unless grounds exist for revoking the agreement. But the FAA specifically exempts contracts for the employment of “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” In its ruling, the ARB acknowledged that the FAA should be interpreted liberally to favor arbitration, and that any exceptions should be viewed narrowly.
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Fourth Circuit Interprets ADAAA Broadly in Overturning Summary Judgment

May 12, 2015

The U.S. Court of Appeals for the Fourth Circuit, in a recent case on appeal from the Eastern District of North Carolina, interpreted the 2008 Amendments to the Americans with Disabilities Act (ADAAA) broadly and reversed the district court’s grant of summary judgment in favor of the defendant. The opinion contains a number of holdings favorable to ADA plaintiffs, including: 1) that the EEOC’s interpretation of what constitutes a “major life activity” under the ADA deserves Chevron deference from the courts; 2) that reasonable accommodations may include the restructuring of a plaintiff’s job, including the trading of some duties; and 3) that an employer’s retrospective addition of reasons for termination may bolster evidence of pretext on a retaliation claim.

In Jacobs v. N.C. Admin. Office of the Courts, a former deputy clerk at the courthouse in New Hanover County, North Carolina asked that her employer accommodate her social anxiety disorder by reassigning her from providing customer service at the front counter of the courthouse to a job which would require less personal interaction. The employer waited three weeks before acting on the request and then terminated the deputy clerk.
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Two Senators Launch Bipartisan Whistleblower Protection Caucus

May 12, 2015

In February 2015, Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Oregon) announced the Whistleblower Protection Caucus, signaling that whistleblower protection is a topic on which politicians on both sides of the aisle can agree. Grassley, a long-time advocate for whistleblower rights, initially announced plans to form the Caucus in April 2014.

The purpose of the Caucus is to bring together like-minded Senators who can shed light on the need for ongoing whistleblower protections. The Caucus will focus on enforcement of whistleblower protections and creating a culture that understands and respects the right to blow the whistle on wrongdoing.
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Home Health Care Fraud on the Rise

May 12, 2015

In February 2015, two Florida doctors and their spouses paid $1.13 million to settle allegations that they received kickbacks in exchange for home health care referrals. Drs. Alan Buhler and Craig Prokos hired their wives as “marketers,” and referred patients for home care services. The settlement will resolve the allegations brought by a relator under the qui tam provisions of the federal False Claims Act, which allows private parties to bring suit on behalf of the United States government to recover funds paid by the government based on false claims. The relator is entitled to a share of the settlement amount.

Home health care is an area of continuing and rising fraud. Fraudulent conduct has become part of a number of companies’ business plans. Some businesses view making a settlement payment a cost of doing business, knowing that the settlement will be only a fraction of the money they have fraudulently received. Often, though, criminal charges are also brought against the fraudster.
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ARB Affirms Dismissal of Standard-Setting Case

May 11, 2015

Although the Department of Labor’s Administrative Review Board affirmed the dismissal of James Speegle’s whistleblower retaliation complaint, his case cemented a new standard for employees to meet when they invoke the “same decision” defense. In previous posts on May 15, 2014, September 3, 2014, and January 13, 2015, we discussed the Speegle standard and the burden it places on employers. Under Speegle, when an employer uses the “same decision” defense (arguing that it would have taken the same adverse action against an employee in the absence of his protected activity), the administrative judge must examine the defense by excising both the protected activity and the entangled facts from consideration.

In Speegle, the complainant and other supervisors had expressed concerns about Stone & Webster’s use of apprentices to apply paint coatings in a nuclear plant. Stone & Webster fired Speegle, ostensibly for insubordination after his obscene outburst at a meeting. The case then moved back and forth between DOL’s Office of Administrative Law Judges (the ALJ), the ARB, and the Eleventh Circuit, eventually establishing the present standard.
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South Carolina Holds FCA’s First-to-File Rule Overcome by Previous Voluntary Dismissal

May 04, 2015

The United States District Court for the District of South Carolina held that the False Claims Act’s (FCA) first-to-file rule requires that another complaint must be pending. Thus, the voluntary dismissal of an earlier-filed complaint clears the way for subsequent complaints, and no comparison of content of the complaints is necessary to allow the later-filed case to proceed.

The FCA’s first-to-file bar provides that when a private person brings an FCA action, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”
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