Opinion

Alison Frankel

Here’s what the government and judiciary think of serial whistleblowers

Alison Frankel
Oct 4, 2013 19:55 UTC

In a post earlier this week, I wrote about whistleblower lawyers’ concerns that unsuspecting tipsters will be misled into signing up with one of the many non-lawyer groups advertising on the Internet for Dodd-Frank whistleblowers. Unlike lawyers’ websites, ads by non-lawyers aren’t subject to state bar regulations. Nor are fee agreements between whistleblowers and non-lawyer agents. Lawyers who regularly represent tipsters told me that a proliferation of supposedly deceptive ads after the Securities and Exchange Commission implemented its whistleblower bounty program is one of the biggest problems in their business.

Repeat False Claims Act plaintiff Joseph Piacentile’s group, Whistleblowers Against Fraud, long predates the SEC program and is certainly not deceptive in representing its legal expertise online. WAF’s website says very clearly that the organization is composed not of lawyers but of former whistleblowers who want to “partner with our clients to develop the strongest case possible, recommend the right attorney for their case, and guide them through each phase of their case.” (As for fees, WAF says it takes a percentage of the whistleblower’s recovery but makes individual arrangements with each client.) Instead of legal advice, WAF sells its “experience and relationships,” which it says “are invaluable in developing large, successful whistleblower actions.” Government lawyers, the website says, have come to know and trust the (unidentified) principals of WAF, who have assisted the federal government and state authorities in recovering billions of dollars.

But relations between Piacentile and at least some of those government lawyers are decidedly frayed. On Sept. 30, U.S. District Judge Sterling Johnson of Brooklyn dismissed a False Claims Act case that Piacentile and a former Amgen sales representative brought against the pharma company, granting a motion by the U.S. Attorney’s office that claimed the whistleblowers’ information added little or nothing to the government’s $780 million settlement in 2011 of civil and criminal allegations against Amgen. Johnson’s opinion picked up the skeptical undertones of the government’s motion to dismiss. Like government lawyers in the U.S. Attorney’s dismissal brief, the judge cited Piacentile’s 1991 conviction for income tax evasion and conspiracy to make false Medicare claims, and said that after his conviction the former physician “gained notoriety as a repeat whistleblower.” Johnson’s dismissal of the suit effectively shuts Piacentile and his fellow Amgen whistleblower, Kevin Kilcoyne, out of any recovery because they previously rejected the government’s offer of a $1.8 million bounty from its 2011 settlement with Amgen.

Piacentile’s lawyers at Berger & Montague and Kilcoyne’s at Stone & Magnanini decried what they called the government’s unwarranted hostility toward Piacentile, who, according to a 2010 American Lawyer profile that dubbed him “The Professional,” has received at least $17 million in FCA bounties from his many forays into whistleblowing. Their response to prosecutors’ motion to dismiss Piacentile’s case complained of “unseemly ad hominem attacks,” “a personal animus” and “unfair and arbitrary treatment.” None of that makes sense, they argued, because Piacentile has helped the government considerably. According to the brief, his own qui tam actions have resulted in more than $1.4 billion in recoveries for the United States.

In the Amgen matter, they said, Piacentile was the second whistleblower to file an FCA suit, way back in 2004, and his initial complaint raised allegations of kickbacks and inflated Medicare pricing that no other Amgen tipsters previously asserted. Yet instead of appropriately rewarding Piacentile and Kilcoyne (who joined the complaint in 2007), the whistleblower lawyers said, the government insulted them by offering a mere $1.8 million bounty. When Piacentile and Kilcoyne refused to accept, according to their brief, they were cut out of the $780 million Amgen deal – “arbitrarily and unfairly excluded from any relator share arising out of the agreement,” in the words of their lawyers.

Appeals court restricts Dodd-Frank protection for whistle-blowers

Alison Frankel
Jul 18, 2013 18:59 UTC

If Khaled Asadi, a former GE Energy executive who lost his job after alerting his boss to concerns that GE might have run afoul of the Foreign Corrupt Practices Act, had sued his old employer in New York or Connecticut, things might have worked out differently for him. Several federal trial judges in those jurisdictions have ruled that whistle-blowers who report corporate wrongdoing internally are protected by the Dodd-Frank Act of 2010, even though the statute defines whistle-blowers as employees who report securities violations to the Securities and Exchange Commission. But Asadi, who worked in GE Energy’s office in Amman, Jordan, filed a claim that the company had illegally retaliated against him in federal district court in Houston. And on Wednesday, the 5th Circuit Court of Appeals – with hardly a nod to contrary lower-court decisions in other circuits – ruled that Asadi is not a whistle-blower under Dodd-Frank because he talked to his boss and not the SEC.

The 5th Circuit opinion, written by Judge Jennifer Elrod for a panel that also included Judge Stephen Higginson and U.S. District Judge Brian Jackson (sitting by designation), highlights the tension between whistle-blower provisions in Dodd-Frank and the Sarbanes-Oxley Act of 2002. SOX, as you recall, directs employees to report possible wrongdoing up the corporate chain of command. SOX whistle-blowers must exhaust administrative remedies before they can sue and may only recover back pay. Dodd-Frank, on the other hand, directs whistle-blowers to bring their concerns to the SEC and permits them to sue for double the pay they lost through corporate retaliation. You can see why employees would rather bring claims under Dodd-Frank than SOX: They can get to court without clearing as many procedural obstacles and can recover twice as much money. You can also see why defendants argue that employees who went to their bosses instead of reporting to the SEC don’t qualify as Dodd-Frank whistle-blowers.

The SEC tried to solve this problem in 2011, when it implemented its final rule on Dodd-Frank whistle-blowers. In the provisions that dealt with anti-retaliation protection, the commission incorporated a reference to Sarbanes-Oxley, holding that Dodd-Frank gives employees a private cause of action against their employers if they have suffered retaliation for reporting violations to the SEC, cooperating with an SEC investigation or “making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002.”

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