Monthly Roundup -- July 2014
Here is our look-back at the key whistleblower and fraud developments we have written about over the past month:
Featured Posts and Commentary
The House Judiciary Committee held a hearing yesterday with the innocuous title “Oversight of the False Claims Act.” At issue was a set of proposed changes to the law offered by the U.S. Chamber Institute for Legal Reform (“ILR”). According to the ILR, the amendments would be “modest” and focused on correcting “flaws” and improving the “effectiveness” of the False Claims Act. But testimony from others, including that of False Claims Act champion Senator Chuck Grassley (R-IA), warned that these proposals are nothing more than a wolf cloaked in a sheep’s skin. Click here for more.
It was only two months ago that the United Kingdom first made official its absolute rejection of US-styled whistleblower rewards. It came out of the response by the Department for Business Innovation & Skills to the “Call for Evidence” it put out last year soliciting comments on how to improve the country’s burgeoning whistleblower system. One of the key issues the UK teed up was whether it should adopt the financial incentives provided to US whistleblowers under the False Claims Act and Dodd-Frank Act. The Department came back with a resounding NO to adopting the financial bounty so integral to the US system. Yesterday, two more UK regulators piled on with their own strongly worded assessment that whistleblower rewards are a bad idea. Click here for more.
For those of you who missed it, yesterday was National Whistleblower Appreciation Day. Not a national holiday, but an officially recognized occasion nonetheless. It was passed last year by a unanimous resolution (S. Res. 202) of the US Senate to honor whistleblowers for the critical role they play in protecting the country against fraud and misconduct. July 30 is the celebrated day because it was on this day in 1778 that the country’s original whistleblower law was first inked. Click here for more.
For over a decade, the government has kept secret how it decides who should be included in the terrorist watch list system. That all changed yesterday when The Intercept, an Internet publication created by a group of intrepid journalists, published a 166-page set of guidelines, which finally unlocks the mystery behind how the government tries to catalogue suspected terrorists. The contents are sure to raise some eyebrows, but the message is clear: the government has made it relatively easy for anyone to be watch-listed and all but impossible to be removed. Click here for more.
In the ever-expanding market for high-octane energy drinks, 5-Hour Energy has been the standout success story. These two-ounce power surges are purchased 9,000,000 times a week for a total takeaway of more than $1 billion a year for the crafty vendors of this wonder blend. Sitting proudly and seductively at virtually every checkout counter in the country these days, 5-Hour Energy has been unstoppable in its consumer appeal and revenue return. Until now, that is. According to three states and counting, 5-Hour Energy’s undeniable success has a lot more to do with its fraud on the public than its magical “blend” of vitamins and nutrients. Click here for more.
Congress is opening an investigation of the Commerce Department’s Office of the Inspector General amid allegations that the agency’s watchdog mistreated whistleblowers. The probe is aimed at the very top, with allegations of misconduct focused on the inspector general, himself, Todd Zinser. And all signs point to the investigation going far beyond the OIG’s treatment of whistleblowers to deal with other possible issues of misconduct, such as Mr. Zinser’s hiring practices. Click here for more.
Despite the highly publicized Stanford study from two years ago, which concluded that there was little difference in nutritional content between organic and conventional produce, a new comprehensive review of 343 studies has found just the opposite – and more. Click here for more.
The level of government enforcement activity has never been greater. The DOJ and SEC appear to be on a spirited mission these days to go after all forms of corporate malfeasance, and to hold out for big payouts in the process. And the US is not alone in this newfound enforcement drive. But despite this groundswell of more aggressive enforcement activity, it seems that many corporations are greeting it with a big yawn, taking a “just business as usual” approach to this increasingly more challenging regulatory climate. At least that is the ultimate conclusion of the 13th Global Fraud Survey just released by Ernst & Young (EY). Click here for more.
In the wake of the Edward Snowden fiasco last year, many blamed the US government as much as they did the former NSA contractor for the leaks leading to one of the biggest national security failures in US history. That is because, for intelligence whistleblowers like Snowden, the government offered no protections, no incentives, no reasons of any kind to stay within the system. It was the one type of whistleblower the government made very clear it did not want to hear from. Well, this gaping hole in the US whistleblower regime may finally be plugged, at least partially, with President Obama’s signing into law on Monday legislation that offers protections for whistleblowers within the national intelligence community. Click here for more.
The 2014 FIFA World Cup has been for many fans a wave of ups (USA goalie Tim Howard’s amazing performance, the emergence of Columbia’s James Rodriguez as a global star) and downs (Brazilian children crying as Germany ran riot over the Brazilian team, Luis Suarez biting a competitor). And with the final match just days away, legions of soccer fans eagerly await to see which team will walk away champions. In the meantime, the CIPE Development Blog has decided the World Cup on grounds other than soccer fields (with a spin). They did this by asking the question: what if World Cup matches were decided not on goals, but on the country’s level of corruption. Using this metric, Switzerland, the home country of FIFA’s President, Sepp Blatter, is the least corrupt country and the big World Cup winner. Click here for more.
UNC is in the spotlight again after whistleblower Mary Willingham filed a retaliation lawsuit earlier this week against the university alleging she was demoted from her position as reading specialist for speaking out about academic fraud. She also alleges that UNC created a hostile work environment that ultimately drove her to leave her job in May. She filed her lawsuit on the same day that the NCAA announced that it was reopening its investigation into the scandal that has plagued UNC for the past few years. Click here for more.
In a shot heard round the business world, a DC district court judge in March denied attorney-client privilege protection to documents prepared in connection with an internal company investigation. The judge found the privilege did not apply because the investigation was mandated by government regulation and not simply an exercise in company discretion. The DC Circuit last week — in In re: Kellogg Brown & Root – found this to be a “false dichotomy” and granted the “drastic and extraordinary” remedy of mandamus to vacate the lower court’s ruling. Click here for more.
DOJ Fraud Settlements
The DOJ settled False Claims Act and other fraud allegations with Vascular Solutions, Lloyds Bank, BNP Paribas, Infirmary Health System, Citigroup, RE/MAX, and SunTrust, among others, for a combined recovery this month of more than $7.5 billion. Many of these matters were initiated by whistleblowers under the qui tam provisions of the False Claims Act.