If April showers bring May flowers, then May is going to be a veritable hurricane of whistleblower-related fines (and also pollen). Our first three items come to us from the SEC, with awards and fines galore, most notably the $1M+ whistleblower award to a compliance officer, followed by several stories from the medical industry. We continue with a story from my very own backyard, Georgia, before covering stories from around the world.
Compliance Officer Gets $1M+ Whistleblower Award
The SEC awarded an internal compliance officer more than $1M for helping the agency bring an enforcement action against the whistleblower’s company. According to the SEC, the whistleblower had a “reasonable basis” to believe disclosure was necessary in order to prevent substantial financial harm to the company or investors. It’s the second time the SEC has paid a bounty to a compliance officer for reporting wrongdoing. In a statement, Enforcement Division head Andrew Ceresney said the payout came after the officer reported the misconduct to company managers who “failed to take steps to prevent it.” “When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” he said. The unnamed whistleblower will receive between $1.4M and $1.6M, the SEC said.
SEC Fines KBR for Restricting Potential Whistleblowers via Confidentiality Agreements
On April 1st, the SEC fined KBR Inc. over confidentiality agreements that, according to the SEC, could have silenced potential whistleblowers. In a first-of-its-kind enforcement action, the SEC announced a $130K settlement with KBR over confidentiality statements that the company required employees to sign if they served as witnesses in certain internal investigations. The confidentiality pacts threatened discipline if employees discussed the internal probes, which included inquiries into possible securities law violations, without permission from KBR’s legal department. Pointing to those provisions, the SEC alleged that the agreements could keep would-be whistleblowers from speaking up.
The SEC noted that there was no evidence that KBR’s agreements have actually silenced whistleblowers. But, the agency said, blanket confidentiality provisions like KBR’s can have “a potential chilling effect on whistleblowers’ willingness to report illegal conduct.” In addition to a fine, KBR agreed to change the wording of its confidentiality statements to clarify that employees aren’t blocked from—and can’t face retaliation for—going to the SEC or other agencies with information about potential violations. KBR insisted that its confidentiality agreements were never intended to impede potential whistleblowers, but rather to help the company retain attorney-client privilege when it comes to internal investigations.
SEC Awards $600K to Whistleblower in Retaliation Case
At the end of the month, the SEC gave a former Paradigm Capital Management employee a 30% cut of the money that his employer had to pay the agency for retaliating against him. The agency said the tipster was awarded “over $600K.” You likely recall that the SEC last year charged the hedge-fund advisory firm with engaging in “prohibited principal transactions and then retaliating against a whistleblower”, who had reported the activity to the SEC, in the first-ever whistleblower retaliation case against a company under the Dodd-Frank whistleblower program.
Albany, NY-based Paradigm and owner Candace King Weir, who was charged with causing the improper principal transactions, agreed to pay $2.2M to settle the charges without admitting or denying wrongdoing. The award is 30% of that settlement, which is the maximum amount a whistleblower can get under the program. The agency said the “unique hardships” the whistleblower faced were a factor in the size of his award. “We appreciate and recognize the sacrifice this whistleblower made and the important role the whistleblower played in the success of the SEC’s first anti-retaliation enforcement action,” said Andrew Ceresney, the agency’s enforcement director.
Two Biolabs Settle with DOJ for $50M in Massive Kickback Whistleblower Lawsuit
Two cardiac biomarker laboratories have agreed to pay a total of nearly $50M on allegations that they paid doctors kickbacks in exchange for sending them blood samples from patients that could be used in testing. Health Diagnostic Laboratory Inc. will pay $47M and Singulex Inc. will pay $1.5M to settle civil allegations filed by the DOJ accusing them of billing Medicare for testing that was not medically necessary and paying doctors for patient blood. Former HDL CEO Tonya Mallory was named in whistleblower lawsuits, as was BlueWave Healthcare Consultants Inc., a contractor that marketed the blood tests to doctors. Both companies denied wrongdoing but agreed to sign on to corporate integrity agreements with the Office of Inspector General in the Department of Health and Human Services.
Mallory resigned as the CEO in September after a previous Wall Street Journal article made the allegations that doctors were being paid off. HDL allegedly paid doctors $20 for each sample of blood they submitted and billed Medicare for hundreds of millions of dollars for performing tests on the samples, which the company claimed were necessary to detect heart disease. Mallory and BlueWave, HDL’s former sales and marketing contractor, have been excluded from the settlement agreement. The DOJ will join whistleblowers in lawsuits against them as well as third laboratory company, Berkeley HeartLab Inc., which was acquired by Quest Diagnostics in 2011.
Doctor Fired in Retaliation for Exposing Misconduct Files Whistleblower Lawsuit Against IU Health & HealthNet
A federal whistleblower lawsuit claims IU Health and Indiana’s largest midwifery practice bilked the government of millions of dollars and compromised patient safety by letting nurse midwives care for hundreds of high-risk, low-income pregnant women who should have been seen by doctors. The suit, filed by a doctor who served as director of women’s services at HealthNet as well as medical director of OB/GYN services at IU Health Methodist Hospital, says that HealthNet and Indiana University Health shunted Medicaid high-risk patients to less-expensive nurse midwives. Then, the providers submitted bills as though doctors had treated the women. If the suit is successful, potential damages could reach around $100M for IU Health, the Indiana’s largest health system, and HealthNet, an IU Health affiliate that serves poor patients through eight inner-city clinics. Dr. Judith Robinson, the former employee who filed the suit, claims she was terminated in 2013 after reporting this activity. Her suit claims doctors often never saw HealthNet patients with high-risk pregnancies or were called in only on an emergency basis, sometimes when it was too late. The suit alleges a lack of doctor involvement may have contributed to one mother’s death, and brain damage in children.
Former Georgia Lottery Official Files Whistleblower Suit
A former Georgia Lottery official has filed a whistleblower lawsuit against his former employer saying he was fired in retaliation for refusing to present inflated sales projections. In the past year, Georgia has settled at least four whistleblower cases after former state workers sued top officials. In the latest case, Kenneth Knight, the former lottery VP for financial management, says he was fired because he refused to give into his boss’s requests to give false sales projections. Knight said he was pressured by lottery president and CEO Debbie Alford.
The Georgia Lottery Corporation said in a statement the lawsuit was “baseless” and they “look forward to defending the case in court.” Since last year, the state has paid out more than $3M in whistleblower cases. Last year, a jury awarded more than $1M to former ethics commission head Stacey Kalberman after she won her whistleblower lawsuit. She had argued she was pushed out for aggressively looking into ethics complaints against Governor Deal. Another lawsuit brought by three other ethics commission staff members was settled for about $2M in June 2014. And last month, the state agreed to pay about half a million dollars to a former public affairs chief with the Georgia National Guard.
Russia Considering Whistleblower Reward Law
The Russian Duma is considering amendments to the anti-bribery law to bring the country’s law into compliance with anti-corruption international principles. One proposed amendment addresses the regulation of whistleblowing activity. The Ministry of Labor developed the draft amendment called “On the protection of persons reporting on corruption offenses.” The amendment would entitle a bribery whistleblower to an award up to 15% of alleged damages to the state budget, capped at RUR 3M (roughly $50K). The whistleblower award would cover reports by a public official, defined in the amendment as any person holding a legislative, executive, administrative or judicial office of the state, whether appointed or elected, permanent or temporary. A public official would also include any other person who performs a public function, including functions for a public agency or public enterprise. The whistleblower law does not extend to reports by the personnel of non-state employers.
Russia does not have a history of whistleblower rewards or protections. But in addition to the move by the Duma for a federal law, at least one regional government is also considering a whistleblower scheme. The Novosibirsk region is considering a local law for remuneration up to 10% (capped at RUR 1M max or about $16,500) for reporting corruption offenses. The regional law provides legal protections for whistleblowers. It also covers both official and non-official employers.
Denmark Decides No Whistleblower Law Needed
A committee commissioned by the Danish government one and a half years ago to review public employees’ freedom of expression and the possible introduction of mandatory whistleblower protections, concluded that a whistleblower law is not necessary for the country. Instead it recommends making it optional for public bodies to give whistleblowers regulatory safeguards. The committee’s report comes as a blow to supporters of greater protections for whistleblowers. Justice Minister Mette Frederiksen said that the report’s recommendations would now be sent for consultation to a range of public agencies, with a deadline of June 5th, but government insiders also believed the new report had dealt a death blow to the proposed new whistleblower rules.
Have you considered rolling out an anti-retaliation campaign? Perhaps all of your employees completed a Code of Conduct refresher training in January, but it’s been a few months, and as the above stories show, retaliation is a serious problem. Beyond the actual act of retaliation, the fear of retaliation can be a primary reason why employees choose not to report misconduct they witnessed. Consider using a short video training (such as our anti-retaliation vignette, “Can I Get Fired for Speaking Up?”) in conjunction with a discussion group between supervisors and their employees. We’ve found these discussion groups to be remarkably popular in our clients’ companies. Not only do they allow for employees to develop a closer relationship with their supervisor, but it’s an opportune time to talk through the reporting process and allay any fears employees may have. Documenting these meetings could provide further defense in case of any troubles down the road.
If you take nothing else away from this post, let it be this: don’t be Batman.
Share Your Thoughts with Us
We’d love to hear from you! What are your thoughts on the Denmark’s decision not to implement a whistleblower law? What do you think about Russia’s proposed whistleblower reward law? How has your company ramped up the anti-retaliation message in your compliance training?
For More Information About Anti-Retaliation Compliance Training, Check Out These Resources:
- Blog Post: March Whistleblower News Digest | Is Your Anti-Retaliation Compliance Training Program Ready?
- Blog Post: 3 New Developments in Whistleblower Retaliation
- Webcast: The 4 Lever Formula: Elevating Your Compliance Training Effectiveness
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