Employer Fraud

A recent decision out the 6th Circuit reinforces that former employees are protected from retaliation under the False Claims Act – even when the retaliatory conduct happens after they are fired or leave the company.

In the lawsuit, an employee alleged he was “marginalized” for insisting on compliance with the law during his employment and then “blacklisted” in his industry after being fired. He filed an FCA case that the hospital where he had been working was providing illegal kickbacks to physicians in exchange for referrals – conduct that would clearly violate the False Claims Act. The employee applied to nearly 40 different companies and alleged the hospital’s retaliatory conduct kept him from successfully securing new employment.

The anti-retaliation provision of the FCA provides that any employee, contractor, or agent shall be entitled to all the relief necessary to make them whole if they are a) discharged, b) demoted, c) suspended, 4) threatened, 5) harassed, or 6) in any other manner discriminated against regarding the terms and conditions of their employment for acts done to stop violations of the FCA.

According to the 6^th Circuit, these protections are broad and far-reaching – even so far as to reach former employees: “the anti-retaliation provision of the FCA may be invoked by a former employee for post-termination retaliation by a former employer.”

In making the decision, the Court noted that the purpose of the FCA’s anti-retaliation provision is to encourage the reporting of fraud and facilitate the federal government’s ability to stop fraudulent conduct by protecting those who assist in its discovery and prosecution. The Court further said: “If employers can simply threaten, harass, and discriminate against employees without repercussion as long as they fire them first, potential whistleblowers could be dissuaded from reporting fraud against the government.”

Employees are entitled to significant damages when their employees retaliate against them in violation of the FCA. In fact, they are “entitled to all relief necessary to make that employee whole.” Most notably, and unlike many other employee protections, current and former employees may receive double back-pay damages under the FCA. This amount can be large, especially when an underlying FCA case may go on for years while the government litigates the matter. Employees may also be entitled to reinstatement, front pay, emotional distress, other special damages, and their attorneys’ fees and costs.

The 6^th Circuit decision is controlling authority in the states of Michigan, Ohio, Kentucky, and Tennessee. The 10^th Circuit has ruled that the FCA does not cover former employees. This ruling applies in Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah. Other circuits have not yet taken a position on this issue, but this new ruling will make the argument more compelling in circuits that haven’t yet decided.

For many current or former employees facing retaliation after reporting fraudulent conduct or insisting that their employer follow the law, their rights are now more strongly protected. If this situation applies to you, you should contact an experienced attorney with deep knowledge of the False Claims Act and employment law. At Halunen Law we have both.

Download a PDF of the 6th Circuit Decision

Having recovered millions of dollars on behalf of whistleblowers in both employment retaliation cases and qui tam whistleblower lawsuits under the False Claims Act (FCA), attorney Nathaniel F. Smith is relentless in his pursuit of justice.

Here are some things you should know before stepping forward as a whistleblower.

1. Whistleblowing can be a challenging and lengthy process

Whistleblower cases often take years, and the consequences of blowing the whistle can upend your life and that of your family. Your integrity can be attacked, your reputation can be smeared, your livelihood can be impacted, and your employability can be adversely affected. Laws exist to protect, reward, and vindicate whistleblowers, but litigating under those laws and enforcing your rights is a challenge as well.

2. Whistleblowing can be a rewarding, fulfilling process

Nothing’s worth having if it’s not worth a fight. Whistleblowing can be immensely rewarding, even though sometimes difficult. Whistleblowers are often driven by a devotion to courage, a desire for a clear conscience, and concern for the public good. Financial rewards may be available to compensate whistleblowers for their efforts and injustices. And even when whistleblower cases do not result in a financial reward, they often bring about improvements and important changes in the offending company’s behavior. They also allow whistleblowers to sleep peacefully at night and look in the mirror without regret, knowing they did their part in uncovering and pointing government officials to misconduct that harms all of us.

3. There are several whistleblowing statutes, not one, all-encompassing law

More than 50 federal laws and a myriad of state and local laws protect whistleblowers from retaliation. Your rights and level of protection depend on the type of misconduct you are reporting, the procedures of the law(s) most applicable to you, what you disclose, when, and to whom. Before making the call, learn about which law fits your situation and gives you the fullest possible protection. The best way to do that is to talk with an experienced False Claims Act / qui tam attorney.

4. Public agencies and public policy endorse whistleblowing

Federal and many state legislatures recognize the vital contributions whistleblowers make in detecting corporate crimes and have enacted anti-retaliation and reward statutes. Many government agencies have special agencies to investigate reports by whistleblowers. Don’t rely on media stereotypes. Those who understand the importance of rooting out illegal conduct, understand that the courage of individuals like you is critical to the well-being of our communities. That is why laws exist to protect you.

5. Do not expect to remain anonymous

Some whistleblower statutes allow you to keep your identity secret indefinitely. Others, like the federal FCA and many state counterparts, begin with the case under seal, or not publicly available, for a period of time. However, the case will eventually be unsealed.  And sometimes companies under investigation can figure out a whistleblower’s identity by the nature of events underlying the case or by the kinds of information the government requests. In nearly every case, the case becomes unsealed, or publicly available, after the government notifies the court whether it will intervene. In short, prepare to be identified as a whistleblower.

The decision to become a whistleblower is a personal one that only you can make. Contact an experienced whistleblower attorney at Halunen Law for a free consultation to discuss the rewards and risks of a whistleblower case to help you decide.

As an attorney with Halunen Law’s FCA Practice Group, Nathaniel Smith is determined to bring fraudulent conduct to light, and to justice. Having recovered millions on behalf of whistleblowers in both employment retaliation cases and qui tam whistleblower lawsuits under the False Claims Act (FCA), he is relentless in his pursuit. Learn more about Nathaniel F. Smith.

It is unusual for any plaintiff or relator to achieve a summary judgment ruling in its favor in any type of case. But in U.S. v. Dynamic Visions Inc., DBA Dynamic Visions Home Health Services, et al., — F.3d —, 2020 WL 4914069 (D.C. Cir. Aug. 21, 2020), the D.C. Circuit affirmed such a ruling in a False Claims Act (FCA) case, alleging that a home health care company submitted false claims for reimbursement to the D.C. Medicaid program. The Circuit’s opinion shows how a relator can succeed on summary judgment and provides other useful discussions on evidence, civil contempt, piercing the corporate veil, and the proper calculation of damages in a Medicaid FCA case.

The defendant, Dynamic Visions, utterly failed a routine government audit of its operations. A review of 25 randomly selected patient files revealed a lack of the required “Plan of Care” (POC) for patients. The files either contained no POC or had deficient POCs (e.g. lacked a physician signature, contained untimely or forged signatures, or authorized fewer hours of care than claimed in bills to Medicaid). Id. at *1. The federal government executed a search warrant at the business and the residence of the owner and company president, Isaiah Bongam. The ensuing investigation revealed Bongam’s funneling of money from the company into private accounts (including offshore in Cameroon). Id. at *2.

The government brought an action against Dynamic Visions and Bongam alleging FCA violations, and its complaint listed false billings for 25 patients that were not authorized by a valid POC. The defendants failed to cooperate in discovery, particularly in providing evidence that the patients had valid POCs, and claimed that the government had seized their documents, even though they had been given a disc containing searchable PDFs of all relevant documents. Id. at *2.

Because defendants produced no documents showing valid POCs for these patients, the government moved for summary judgment. When the defendants failed to challenge the government’s statement of facts, the court granted the motion. The defendants appealed. Id.

The D.C. Circuit affirmed, except it vacated a small subset of claims involving POCs that the government claimed were forged, and for which it found questions of fact remained. Id. at *3. Most useful in the opinion is the panel’s discussion of the sufficiency of the evidence showing—“beyond genuine dispute”—the knowing submission of false claims.

The government provided evidence showing how each file lacked the proper authorization. In response, the defendants offered only conclusory allegations that the files were adequately documented and generally referenced how they followed policies and procedures. The Circuit found that the defendants provided nothing on which a jury could decide in their favor; they did not even provide the claimed policy and procedure manual they referenced in their conclusory defenses. Focusing on the available “reckless disregard” standard for falsity, the opinion affirms the district court’s conclusion that  “‘even a cursory review’ of the files would have revealed the ‘rampant’ false claims,” thereby justifying summary judgment at least on reckless disregard grounds. See 31 U.S.C. § 3729(b)(1)(A)(iii). Id. at *4-5. Rejecting the defendants’ arguments that scienter could not be pieced together, the Court stated there was no need to aggregate individual knowledge because “any single person who looked at the patient files should have known that the company sought reimbursements unsupported by adequate POCs.” Id. at *5.

Practitioners may also find these additional discussions useful:

Civil Contempt: Citing a two-year history of discovery non-compliance, the Court affirmed the imposition of a contempt finding against defendants, precluding them from presenting evidence in their summary judgment opposition that they did not already produce in discovery. Id. at *6.

Piercing Corporate Veil: Besides evidence of a “unity of interest between the individual and the entity,” the opinion affirmed the district court’s conclusion that Bongam’s transfer of large sums of money to his personal accounts was compelling justification to pierce the corporate veil. This was particularly so because insulating the owner from liability here would be unjust. Id.

Damages and the Federal Share of Medicaid: The Circuit sent back the damages calculations because the district court had awarded damages based on the full amount of the unauthorized reimbursements, rather than the 70% share paid by the federal government. Id. at *7.

The defendant here may have had “dynamic visions” for its home health agency, but its failure to follow even basic protocols regrettably led it into the dark tunnel of FCA liability. The take-away for practitioners is the viability of relying on reckless disregard as a basis for seeking summary judgment on a proactive basis and the type of evidence that can result in success.

A Partner at Halunen Law, Susan Coler represents whistleblowers across the United States in many different industries who challenge illegal corporate conduct, including fraud against the government. As a Labor and Employment Law Specialist, Susan has also brought successful retaliation claims in connection with False Claims Act (FCA) /qui tam cases and as stand-alone actions. Learn more.