Government Whistleblowers Deserve Payouts Too

Like private sector employees, feds should be allowed to share in contractor fraud settlements.

The Justice Department’s increasing reliance on the False Claims Act to rein in fraud by government contractors demonstrates just how valuable a tool it has become. The government recouped $3.8 billion in settlements and judgments in 2013 alone. The effectiveness of the law and the fraud afoot in the federal contracting industry requires incentivizing individuals to come forward and provide information to the government.

The traditional qui tam suit under the False Claims Act involves the employee of a private company uncovering fraud by his employer against the government. The employee files a lawsuit on behalf of the government seeking to recoup the fraudulently obtained funds. The employee, also called the relator, is then entitled to a share of the government’s recovery. Qui tam provisions serve as the carrot, incentivizing workers to disclose acts of fraud by their company.

The same should apply if the relator is a government employee.

But employees whose job is to uncover and disclose fraud are jurisdictionally prohibited from receiving a share of any settlement proceeds. Some argue that giving government employees the right to share in qui tam rewards would be rewarding them for simply doing their jobs.

The law’s purpose is to incentivize individuals to come forward with information not already known by the government. This public disclosure bar precludes individuals from, for example, filing claims regarding fraud they have seen detailed on television, read in the newspaper, or even learned about as a result of a criminal or civil trial. The law also bars claims based on information that was publically disclosed in a congressional, Government Accountability Office, or other federal report, hearing, audit or investigation.

Some argue that any information known by a government employee is, by definition, known to the government—a position first debunked by the 11th Circuit Court of Appeals in United States ex rel. Williams v. NEC Corp., and recently by the Fifth Circuit in Little v. Shell Exploration & Prod. Co. Each of these cases makes clear that government employees obtain a wealth of information outside of federal reports, hearings, audits or investigations. An all-encompassing prohibition because of this public disclosure bar is contrary to the plain language of the statute.  The real question is whether the government employee participated in an investigation and whether he learned of the fraud as a result.

The False Claims Act states that before filing a qui tam, the relator must have “voluntarily provided” information to the government to qualify as an “original source” of the information. Courts have construed this to mean individuals whose job duties include investigating and reporting fraud are prohibited from filing qui tam actions (e.g., U.S. ex rel. LeBlanc v. Raytheon Co.). The rationale is that an employee whose job duties require him to report fraud cannot voluntarily provide information related to fraud.

Government employees, much like their private sector counterparts, face pressures that militate against disclosing fraud. Imagine a low-level federal employee who becomes aware of fraud committed by one of his agency’s largest contractors. The company has a multimillion-dollar contract with the agency and has for years. Is the government employee really in a position to start questioning the contractor who has developed a long-standing relationship with the agency? Is the government employee’s fear of reprisal any different than that of a private sector employee?

Granted, statutes like the Whistleblower Protection Act provide relief to government employees who are retaliated against for making a disclosure, but they do not provide an incentive to come forward in the face of opposing pressures.

The qui tam mechanism and participation of private sector employees in False Claims Act litigation has been instrumental in helping agencies collect money that otherwise would have been lost to private sector fraud. It makes little sense to not provide similar incentives to government employees who take the very same risks.

David Scher is an attorney who focuses on qui tam and whistleblower retaliation cases in California, Maryland, Washington, D.C., and  R. Scott Oswald is the managing principal of The Employment Law Group, based in Washington.

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