Regulatory Compliance: It’s the Little Things…

At some point, nearly every regulatory client has asked me, in a tone of incredulity, why “such a little thing” mattered to a regulating agency. Often the client also asks why a government regulator focuses on the “little guy” when big business appears to skate through regulatory compliance with no issues. The second answer is far simpler but answering it first leads us to part of the answer for the first question. How Big Businesses Treat Regulatory Compliance Big businesses appear to skate through regulatory matters without issues, in a sense, because they are big. Being big, they hire regulatory compliance experts to eliminate issues and quickly correct any problems that do come up. They have support personnel to do the actual work. The proactively address most problems before they get to the point of administrative sanctions or lawsuits. This is not to say big businesses don’t have regulatory problems: many do. Some businesses simply don’t bother to comply and have problems as a result. But most big businesses place an emphasis on regulatory compliance. They recognize that compliance failure can be a business-ending proposition. They place a priority on regulatory compliance. Simply making regulatory errors can put a company under heightened scrutiny, causing more frequent examinations and other disruptive and costly consequences. A series of errors, or repeated errors, may also raise questions that lead to more serious investigations or prosecutions. Each situation drags at a company’s bottom line and pulls focus from the company’s mission and vision. As a result, most big businesses solve their regulatory issues quickly. They hire staff to address compliance. They include it...

False Claims Act Whistleblower

The False Claims Act provides that ¨Any employee who is discharged; or demoted; or suspended; or threatened; or harassed; or in any manner discriminated against is entitled to bring an action for reinstatement with same seniority; 2 times back pay with interest; special damages; emotional distress; attorneys’ fees and costs. No punitive damages are available. An “employee” includes: temporary worker; and demoted worker; and discharged worker. An independent contractor is not an employee. A false claims act whistleblower should expect harassment in the form of counterclaims filed in the retaliation action; industry blackballing; unprovable but real retaliation; reassignment for ostensibly unrelated reasons; other non-compensatable harassment; possible losing the case; and paying attorney fees and costs if the retaliation case is deemed frivolous. More on False Claims Act Whistleblower Protection Washington State False Claims Act Qui Tam (False Claims Act) procedure False Claims Act (statute) Share...

Environmental whistleblower

The Importance of Being Earnest: An Environmental Whistleblower’s Guide to Protection Under SOx § 806 and Dodd-Frank By John J. Tollefsen 1The author practices law in Oregon, Washington, and New York. He has been lead counsel on several SOx § 806 cases including Tides v. The Boeing Co., 644 F.3d 809 (C.A.9, Wash. 2011), cert. den. 132 S.Ct. 518 (2011) and Reid v The Boeing Co., 2009-SOX-27 (ARB Mar. 30, 2012). The Sarbanes Oxley Act of 2002 (“SOx”) § 8064SOx § 806 is codified as 18 U.S.C. § 1514A(a)(1).protects certain employees who reasonably believe they are reporting a violation of a law, rules, or regulation listed in § 806. Their belief must be subjectively and objectively reasonable.2E.g., Tuttle v. Johnson Controls Battery Div., 2004-SOX-76 (ALJ Jan. 3, 2005), an ALJ explained: “Protected activity is defined under SOX as reporting an employer’s conduct which the employee reasonably believes constitutes a violation of the laws and regulations related to fraud against shareholders. While the employee is not required to show the reported conduct actually caused a violation of the law, he must show that he reasonably believed the employer violated one of the laws or regulations enumerated in the Act. Thus, the employee’s belief ‘must be scrutinized under both subjective and objective standards.’ Melendez v. Exxon Chemicals Americas, 1993-ERA-6 (ARB July 14, 2000)”. The employee must earnestly and sincerely believe in good faith that there is a violation. The courts and administrative law judges (“ALJs”) have been generally hostile to § 806, adding additional barriers to recovery with the result that few claimants have been protected. This paper argues that claims under...

Qui Tam Law Overview

The traditional name for cases which attempt to recover money defrauded from the king is “Qui Tam” litigation. Qui Tam is pronounced “kee tam” or “kway tam”) and is an abbreviation from the Latin “qui tam pro domino rege quam pro sic ipso in hoc parte sequitur” meaning “who as well for the king as for himself sues in this matter.” History of Qui Tam Laws in the United States Qui tam legal actions can be traced back as far as 13th Century England where they were used by private citizens to gain access to the king’s court. The U.S. legal system, derived from the British system, allowed qui tam actions since the nation’s founding in 1776. They were rare. During the Civil War, Congressional hearings investigated widespread instances of military contractor fraud including defective products, substitution of inferior material, and illegal price gouging. At the urging of Abraham Lincoln, a former practicing lawyer, Congress enacted the Civil False Claims Act in 1863 as a weapon to fight procurement fraud. This law has also been known as the “Lincoln Law” and the “Informer’s Act.” The False Claims Act was designed to entice whistleblowers to come forward by offering them a share of the money recovered. Even though this Act was enacted to combat military contractor fraud, it was applicable to all government contractors, federal programs and any other instances involving the use of federal revenue. The Act allowed any person to act as a “private attorney general” and sue for recovery of the money taken. The named plaintiff on the action is the United States Government. The one filing...

Qui Tam Legal Theories

Qui Tam Legal Theories Used in Litigation Some of the more common theories used to prosecute False Claims Act cases are: 1.) Violations of Contract Provisions: “[P]arties that contract with the government are held to the letter of the contract – irrespective of whether the contract terms appear onerous from an ex post perspective, or whether the contract’s purpose could be effectuated in some other way – – under the maxim that ‘men must turn square corners when they deal with the Government.'” “[T]he mere fact that the item supplied under the contract is as good as the one contracted for does not relieve the defendants of liability” if the item does not in fact conform to the express contract terms. Failure to comply with: Military Specifications (MIL-SPECS): Specific Military Standards for processes and designs usually incorporated into military contracts for equipment. Failure to Test: Many government contracts call for items to be tested in a specific manner. Often items are tested in a less strenuous manner, the tests are manipulated so the item passes, or the item is not tested at all. Failure to Inspect: Contracts with the government often require specific inspections to be performed at certain intervals in the manufacturing process. 2.) Procurement: Any false certification that items furnished under a contract with the government are “of the quality specified and conform in all respects with contract requirements, including specifications . . . .” constitutes an FCA violation. Such certifications are often required on documents submitted to the government for payment. 3.) Engineering Changes and Pricing: When a government contractor wants to alter the design of...

SOX Protection Poor

Sarbanes Oxley Whistleblower Protection Deficient The Sarbanes Oxley Act (“SOX”)  provides protection for certain whistleblowers of public companies who report violation of SOX, mail fraud, wire fraud or SEC law and have a reasonable belief there is a violation.1See Section 806 of SOX. It was designed to prevent another Enron. The whistleblower only has 180 days after the retaliation to file a complaint with OSHA. 806 (b)(2)(D). The initial results have been dismal. Sox protection poor: “The Wall Street Journal reported on September 4 [2008] that out of 1,273 complaints filed with the Department of Labor under this whistleblower protection provision since 2002, the government has ruled in favor of the employee only 17 times and has dismissed 841 cases. Many of these cases have apparently been dismissed on the grounds that the employee worked for a corporate subsidiary, because the Department takes the position that subsidiaries are not covered by the statute. * * * . . . [W]e can clearly state that it was by no means our intention to restrict these important whistleblower protection to a small minority of corporate employees or to give corporations a loophole to retaliate against those who would report corporate fraud by operating through subsidiaries.” From September 9, 2008 letter from Senators Patrick Leahy and Charles Grassley to Secretary of Labor Elaine Chao. The Labor Department started allowing whistleblowers to attempt to prove that the subsidiary they worked for was an “agent” of the public company. Tollefsen Law has litigated several SOX whistleblower cases. The brief we filed requesting a Writ of Certiorari in the United States Supreme Court covers the...