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Whistleblower Law Blog

Topic: Whistleblower Protection Act (WPA)

Whistleblower Awarded $462,500 for Alerting U.S. Coast Guard of Major Pollution Violation

Baltimore, Maryland U.S. District Judge Marvin Garbis has awarded Salvador Lopes, the ship’s third engineer, $462,500 for blowing the whistle on Greek ship manager Efploia Shipping Co. and Denmark-based Aquarosa Shipping. In January, both shipping companies pled guilty to violating the Act to Prevent Pollution from Ships (APPS) by intentionally releasing oil and plastic waste in the port of Baltimore. Lopes could receive an additional $462,500 if the judge dismisses Efploia’s argument that Lopes should have notified company officials before complaining to the U.S. Coast Guard.

Officials state that Lopes provided the Coast Guard valuable information leading to this verdict, which include a handwritten note detailing illegal dumping of oil waste and garbage from the vessel Aquarosa, copies of the ship’s log, and over 300 cell phone photos documenting the violations.  Lopes also showed the Coast Guard where to find the “magic pipe” that allowed the ship to discharge pollutants undetected by illegally bypassing pollution prevention equipment.

Judge Garbis has also ordered that Efploia and Aquarosa each pay $952,000 in fines and donate $275,000, as part of their community service, to the National Fish and Wildlife Foundation, which has a mission of restoring the Chesapeake Bay and other Maryland waterways.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

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Mayo Clinic Ordered by The Department of Labor to Reinstate a Courier Who Was Terminated After Complaining About the Clinic’s Vehicles

The U.S. Department of Labor last week ordered Minnesota-based Mayo Clinic to reinstate James Seehusen, a former courier. The clinic terminated Seehusen after he complained that it failed to repair a broken windshield on a vehicle, perform proper daily inspections on vehicles, and require drivers to obtain proper certification in order to operate the clinic’s shuttle bus.

The Mayo Clinic contends that it took immediate action to address Seehusen’s complaints, and that it terminated him for a disciplinary issue unrelated to his complaints. Department of Labor Administrative Law Judge Daniel Soloman ruled that the Mayo Clinic violated the Whistleblower Protection Act because it failed to prove that it would have terminated Seehusen regardless of his safety complaints.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

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Federal Times Quotes The Employment Law Group® Managing Principal R. Scott Oswald on Recent Lawsuit Filed by FDA Whistleblowers

R. Scott Oswald, Managing Principal of the The Employment Law Group® law firm, was recently interviewed by Federal Times, a weekly newspaper focused on providing insight into issues affecting U.S. government managers and other decision makers.

On January 25, 2012, six current and former Food and Drug Administration (FDA) employees filled a lawsuit in the U.S. District Court for the District of Columbia alleging that the FDA violated their constitutional privacy rights. The employees claim that the FDA monitored the employees’ emails sent from private accounts over a period of two years. The lawsuit also alleges that the employees were targeted for their whistle-blowing after they expressed concern to Congress that the FDA has approved purportedly unsafe medical devices.

The FDA terminated two of the employees and did not renew the contracts of another two following the whistleblowers’ decision to come forward and report the approval of medical products they believed were unsafe.

Responding to the FDA’s alleged intrusion into the whistleblowers’ private emails, Mr. Oswald told the Federal Times:

“I think the FDA went too far in its zeal to monitor these employees. Employers who access [and] retain emails or other electronic stored information from a third-party server risk violating an employee’s privacy interest.”

The article, “When Can Agencies Monitor Your Email? FDA Case Sparks Debate Over Policy”, appeared in the February 5, 2012 edition of the Federal Times.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation.

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KV Pharmaceutical Reaches Settlement with the Department of Justice for $17 Million

KV Pharmaceutical (KV), the parent company for Ethex Corporation (Ethex), this month agreed to pay $17 million to settle claims that Ethex of violated the False Claims Act when it allegedly reported false information to the Centers for Medicare and Medicaid Services (CMS).

According to the complaint filed by the Department of Justice (DOJ), Ethex falsified Food and Drug Administration (FDA) certifications of two products, Nitroglycerin ER and Hyoscyamine Sulfate ER, to CMS, thereby allowing the company to sell these unapproved drugs to Medicare patients.  The Food, Drug, and Cosmetic Act requires that all drugs must be approved by the FDA for safety and effectiveness before they can be marketed for mass consumption.  Neither drug has received FDA approval, which potentially places consumers at risk.  Ilisa Bernstein, acting director of the Office of Compliance for the FDA, outlined the seriousness of this violation, stating, “This settlement sends a strong message to those who seek to put the health of American patients at risk by distributing and promoting drugs which have not been approved by the FDA.”

To settle the case, KV has agreed to pay the federal government $10,158,695 and $6,841,305 to the state Medicaid Services.  The whistleblower who reported the company’s unlawful actions received $1,523,804 of the federal share and additional amounts from the state share.

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OSHA Sues Packaging Manufacturer for Whistleblower Violations

The U.S Department of Labor’s Occupational Safety and Health Administration (OSHA) is suing RockTenn Corporation, a consumer packaging manufacturer based in Norcross, Georgia for allegedly violating whistleblower protection laws at its Fernandina Beach plant.  The lawsuit alleges that an employee at the plant had repeatedly raised serious and credible safety concerns with managers, and that those managers ignored the employee’s concerns.

On June 1, 2009 the employee called the local OSHA office and relayed his continued safety concerns regarding plant operations.  RockTenn suspended the employee on June 18 and then terminated him on June 23 for allegedly giving inaccurate and untruthful testimony during an internal investigation. OSHA concluded that the company had unlawfully and intentionally terminated the worker’s employment for engaging in activity protected by the Occupational Safety and Health Act.

Teresa Harrison, OSHA’s acting regional Administrator in Atlanta stated:

“Employees have the congressionally-mandated right to engage in safety-related matters at their workplace, including participating in accident investigations and contacting OSHA at any time.  We will hold employers accountable for limiting or deterring any employee who exercises these rights.”

The lawsuit asks the court to order remedies that include reinstating the employee; paying back wages and benefits; paying punitive and compensatory damages; and expunging the employee’s personnel records with respect to the matters at issue in the case.  The suit also requests a permanent injunction against future violations of this law by the employer.

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US Seeks Damages from Allied Home Mortgage for Alleged Lending Fraud

One of the nation’s largest privately held mortgage companies, Allied Home Mortgage Corporation (Allied), and two of its top executives, CEO Jim Hodge and Executive VP Jeanne Stell, are facing scrutiny for providing false loan certifications to the Department of Housing and Urban Development (HUD). Peter Belli, a former regional manager at Allied, filed suit against his former employer under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  The government, through U.S. Attorney for the Southern District of New York, Preet Bharara, joined Belli and others in claiming that Allied lied about its compliance with HUD regulations.

In the complaint, Belli asserts that Allied made many loans through various “shadow” branches that were not HUD-approved and lacked proper quality control. Allied would then “submit those loans to HUD using one of the unique branch identification numbers (“HUDIDs”) assigned to a HUD-approved branch.”  Then, “HUD endorsed these loans for insurance based on false certifications that the loans were originated in compliance with HUD requirements, including, most fundamentally, that the loans originated from HUD-approved branches.”   To maintain this ‘culture of corruption’ at Allied, the complaint states that Hodge and others threatened senior management with termination, aggressively monitored employees’ e-mail communications,  and even silenced former employees by threatening legal action.

The federal government claims that nearly 1 in 3 of the HUD-insured loans Allied made between 2001 and 2010 went into default because of Allied’s reckless lending practices. These defaults reportedly created more than $834 million in insurance claims and forced thousands of borrowers out of their homes while Allied earned millions of dollars. Another 2,509 loans underwritten by Allied are currently in danger of default, which may result in additional losses estimated at $363 million.

The government is seeking triple damages and civil fines for Allied’s alleged fraud and is seeking an injunction to stop Allied from making any further loans out of its undisclosed branches.

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Lawmakers Push to Add Stricter Reporting Regulations in Sexual Abuse Cases in Wake of Penn State Scandal

In wake of the child sexual assault allegations against former Penn State Assistant Coach Jerry Sandusky that have shocked the nation, lawmakers across the U.S. are moving quickly to tighten up rules on who must report the sexual abuse of a child.  State legislatures are likely going to debate whether new laws are needed to shore up vague guidelines and policies regarding child safety on campus. As the law currently stands, Pennsylvania educators aware of child abuse are merely required to report it to their workplace superiors.

Pennsylvania Gov. Tom Corbett, a Republican, stated:

“The assistant coach who in 2002 witnessed former Penn State assistant coach Jerry Sandusky allegedly abusing a child met the minimum obligation of reporting it up to head coach Joe Paterno, but the assistant did not, in my opinion, meet a moral obligation.”

Corbett also mentioned that within the next few weeks, state lawmakers would introduce bills to explicitly outline educators’ responsibilities if they witness or suspect child abuse.

Iowa, Maryland and New York are also considering tougher laws regarding the reporting of child abuse.

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TELG Principal Attorney Responds to OSHA Funding Request

Law360 quoted Nicholas Woodfield, a principal attorney at The Employment Law Group® law firm, regarding the U.S. Occupational Safety and Health Administration’s request for an additional $6.1 million to fund 45 more investigators for its whistleblower programs.   Mr. Woodfield stated:

More efficient investigations are among OSHA’s goals, but unless the workload for investigators gets lighter, there are still going to be substantial delays.

You can have the greatest systems in place, but if the demand for them is so great that you have to stand in line for a couple of years, you’re effectively denying the benefits to the populace.

OSHA’s commitment to bolstering investigator training is a positive sign, however, and could translate to a more consistent application of the law to cases.

OSHA is responsible for administering 21 whistleblower laws that prohibit employers from retaliating against employees who report violations of workplace safety, airlinecommercial motor carrierconsumer productenvironmentalfinancial reform, food safety, health care reformnuclearpublic transportationrailroad, and securities laws.

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Summary Decision Overturned for Whistleblower in Failure to Hire Case

In Hasan v. Enercon Services, Inc., the Department of Labor’s Administrative Review Board (ARB) overturned a summary decision order in favor of whistleblower Syed Hasan who alleges that Enercon Services, Inc. refused to hire him because he is a whistleblower.

Hasan is a structural engineer who was previously discriminated against by his former employer, American Electric Power Company, for reporting unsafe practices at the D.C. Cook Nuclear Plant to the Nuclear Regulatory Commission.

For Hasan to prevail on his whistleblower complaint under the Energy Reorganization Act of 1978 (ERA), he must show that his whistleblowing while at his former employer was a contributing factor in Enercon’s decision to not hire him.  Evidence of inconsistencies in an employer’s reasons for not hiring a whistleblower can support a finding of pretext by the employer.

The ARB ruled in Hasan’s favor, stating a summary decision was improper given the existence of a genuine factual dispute that requires an evidentiary hearing:

Hasan’s claim is not based on one application to one advertisement for one job vacancy whereupon his application was filed away and forgotten, as likely occurs to thousands of applicants each day across the county.  Rather, Hasan’s claim is that he repeatedly applied for positions at Enercon, and Enercon refused to hire him at any point at least partly due to his whistleblower activities.  Hasan’s letters to Enercon expressed that he was willing to work for Enercon “at any place, for any shift and for any salary” that Enercon deemed was reasonable.  Hasan sent more than one letter making this statement.  He sought employment with Enercon numerous times over the course of two years.  In a letter dated February 5, 2003, Enercon expressly told Hasan that it would keep his resume “on file and hope to identify a work opportunity in the future.”  Enercon admittedly hired more than a dozen civil/structural engineers after its February 5, 2003 letter to Hasan.  So Hasan’s claim is that Enercon repeatedly rejected him, and he believes it was because of his whistleblowing activities.

Recognizing Hasan’s claim as a claim of repeated rejections over a two-year period, there are sufficient documents and facts to allow (but not require) a factfinder to believe that Enercon’s proffered reasons are pretext or that Hasan’s protected activity was a contributing factor in Enercon’s failure to hire Hasan.  Enercon asserts that: (1) the jobs in its advertisements never materialized; (2) the advertisements were used to find former Scientech engineers; (3) the job vacancies were for the Germantown office; or (4) the advertisements never resulted in any hires.  Yet, the advertisements on their faces were for “immediate opportunities” throughout 2003 and 2004 and expressly described the “available positions.”  Enercon’s February 5, 2003 letter expressly told Hasan he would be considered for future opportunities.  The existence of future vacancies was repeatedly confirmed by the dozen engineers hired in 2003 and 2004.  The advertisements only expressed a preference for “local candidates” and had no reference to Scientech employees.  This is not to say that Enercon’s reasons will not prove to be true or legitimate.  However, to choose Enercon’s assertions in its motions over its contradictory advertisements is to engage in factfinding without an evidentiary hearing.  These factual contradictions, even though created by Enercon’s own choices, must be resolved in an evidentiary hearing….

(citations omitted).

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Third Circuit Overturns Lower Court in Favor of Whistleblower Who Exposed Illegal Medicare Kickbacks

On June 30, 2011, the United States Court of Appeals for the Third Circuit ruled in United States ex rel. Wilkins v. United Health Group  overturned the decision of the lower court and held in favor of whistleblowers Charles Wilkins and Daryl Willis.  The whistleblowers allege that United Health Group (UHG) provided kickbacks to those physicians who switched patients to UHG’s services in violation of the Medicare Anti-Kickback Statute.   This statute provides that whoever knowingly and willfully pays a kickback in return for a referral for their health care services (paid for by a Federal Health Care program) are guilty of a felony.

Whistleblowers Wilkins and Willis began employment with United Health Group in 2007, Willis as a general manager for Medicare/Medicaid marketing and sales and Wilkins as a sales representative.  In April 2008, United Health terminated Wilkins’ employment in reaction to his complaints concerning what he perceived were United Health’s illegal practices. Similarly, at some point during 2008, United Health, after demoting Willis for his conduct in making complaints to his supervisors about what he perceived were United Health’s illegal practices, went further and terminated his employment.

On July 10, 2008, Wilkins and Willis filed a qui tam action under the Federal False Claims Act (FCA) alleging that United Health Group also violated the FCA by offering physicians illegal kickbacks and then charging the federal government’s Medicare program for services.

Under the False Claims Act, a private individual with knowledge of fraud committed against the federal government may sue on behalf of the government to recover losses caused by the fraud.  To encourage whistleblowers to come forward and expose fraud on the government, the FCA awards whistleblowers 15% to 30% of the government’s recovery.  The FCA also prohibits any action taken by an employer which has a negative effect on the terms, conditions, or privileges of employment of the whistleblower. This includes termination, demotion, suspension, harassment, and other forms of retaliation.

The Third Circuit, adopting the majority viewpoint among the Federal Appellate Circuits, applied the implied certification theory of liability under the FCA.  This theory of liability is favored by whistleblower advocates because companies defrauding the government can be liable under the FCA without having explicitly stated they were in compliance with applicable laws such as the Medicare Anti-Kickback Statute.  This ruling is a victory for whistleblowers who report corporate or government agency fraud.

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