In Service of Justice – The Importance of Whistleblowers
Whistleblowing takes courage. Whistleblower matters also require patience to file and wait, often several years, to see if the government will intervene and then pursue a matter. There is rarely much transparency, so the whistleblower remains somewhat in the dark and can feel a lack of control. Retaliation for speaking up in the workplace is a significant concern. Yet the interests of justice are served by those brave people who identify and report fraud at the risk of great disruption to their lives. Given these realities, one may ask: Do real-life whistleblowers agree that justice was served in their own matters?
An interesting article in the Washington Post by David Nakamura hits upon some of these issues in connection with the recent Booz Allen settlement over fraudulent practices in government procurement. Whistleblower Sarah Feinberg alleged violations of the False Claims Act, which allows private individuals to bring lawsuits on behalf of the government for fraud against the government. In essence she claimed that Booz Allen engaged in accounting fraud by lumping government and commercial projects together in “cost bands” allowing the company to bill the Pentagon more than was allowable under the law. She reported the scheme to her leadership and separately to Warren Kohm, Booz Allen’s director of financial analytics and strategy, who she alleges told her that the federal government auditors were “too stupid” to figure it out.
Ultimately the U.S. government settled with Booz Allen for $377 million, $209 million in restitution and the balance in penalties. Feinberg and her lawyers received nearly $70 million under the qui tam provisions of the False Claims Act, which reward successful whistleblowers with up to 30 percent of the government’s recovery. But does she feel justice was served? Not necessarily. She apparently feels the government settled on the cheap; that DOJ should have been seeking closer to $1 billion. Her concern seems to be that given the scale of the alleged fraud, the settlement for Booz Allen served as “an interest-free loan, not a penalty.”
Feinberg, a former marine, has strong conviction and ideas of what justice served means. She has a point – a good one – that corporations must feel the pain to deter the behavior. Feinberg’s estimation at the time she left the company in protest of the alleged overcharges to the Pentagon were approximately a quarter billion dollars. So, while restitution in full was likely made to the federal coffers, the lack of deterrent question remains. On the flip side, the government has a difficult analysis as well. They must prove their case. That takes resources and substantial funds and quite frankly is far from a sure thing. So, perhaps the truth lies somewhere in the middle. Significant punitive damages should be assessed, but the government also needs to be able to extract a settlement, or they risk litigating the case and dealing with the unpredictable results of a judge or a jury.
We commend Feinberg in her heroic efforts to curb government fraud. This was one of two notable successful government contracting settlements in July initiated by whistleblowers under the False Claims Act. The other was a case against government contractor KBR. In that case, KBR agreed to pay over $108 million to settle a False Claims Act claim alleging that KBR improperly charged the government for unnecessary property and materials supplied to U.S. troops in Iraq. Constantine Cannon represented the whistleblower in this matter, along with two other firms. The KBR settlement was the largest recovery to date related to allegations of fraud during the Iraq War. Former KBR employees Geoffrey Howard and Zella Hemphill Anderson will receive roughly $31.5 million. The KBR whistleblowers received an even higher percentage of the settlement than Feinberg because, unlike the Booz Allen matter, the government did not intervene in the KBR case, leaving it to the whistleblowers and their lawyers to prosecute the case on their own. Learn more about the KBR case here: Press Release
In the end, the proper punishment versus sufficient deterrent debate will continue, but one thing is indisputable: courageous whistleblowers are crucial in the fight to curtail government fraud, which costs all of us in the end mightily.
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