On July 30, 2014, the House Judiciary Committee Constitution and Civil Justice Subcommittee held a hearing on proposals by the U.S. Chamber of Commerce to substantially weaken the False Claims Act (FCA). The FCA is the most effective whistleblower law and allows those with evidence of fraud against federal programs or contracts to sue the wrongdoer on behalf of the United States Government. Employees are in the best position to witness fraud and report it to the government.

The Chamber has launched an attack to weaken the FCA because the FCA is effective at combat corporate wrongdoing, and whistleblower claims under the FCA help the U.S. Government recover about $4 billion a year from U.S. government contractors who cheat the taxpayers by double billing the government or committing other frauds.

Stephen M. Kohn, Executive Director of the National Whistleblower Center, submitted written testimony countering the validity of the Chamber’s so-called “reforms” to the FCA. The Chamber’s proposals would force whistleblowers to report internally before they can bring a claim under the FCA and reduce penalties for corporate wrongdoing under the. Kohn noted that the Chamber’s proposals, as outlined in the National Whistleblowers Center’s report, “Saving America’s ‘Most Important Tool to Uncover and Punish Fraud,’” taken together, would cripple a key “tool” for uncovering and punishing fraud against the taxpayers.

Kohn’s written testimony warned that the Chamber’s bid to create incentives for companies to enhance corporate internal compliance programs and its vision of how these programs work is “highly misleading.” Kohn further explained: “The Chamber does not use the term “compliance” as it is ordinarily understood. Instead, the “compliance” programs advocated by the Chamber are merely part of a company’s law department, and they are designed to protect the company from liability. The Chamber’s vision of a “compliance” program increases the ability of a company to cover up fraud from government investigators. Chamber-backed compliance programs operate in secret and are permitted to use information obtained from the compliance investigation to discipline or discredit the very whistleblowers that raise concerns within the company.”

Senator Chuck Grassley, author of the 1986 qui tam amendments to the False Claims Act, testified at the hearing in support the whistleblowers and the FCA. In response to the proposals offered by the Chamber he testified, “They lack details on who would create the program, who would enforce the program—basically, everything about it. But they want you to believe that once this pipe dream is in place, it will magically increase the amount of taxpayer dollars the government recovers.”

Sen. Grassley testimony also referred to Kohn’s written testimony which lays out how forcing whistleblowers to report to internal compliance programs is a set-up to enable corporations to silence whistleblowers. Grassley stated:

“Further, as the testimony that Stephen Kohn has submitted for today’s record illustrates, corporations have already been using compliance programs as a trap for whistleblowers. By making their compliance program an arm of their legal department, anything a whistleblower reports is protected as confidential by attorney-client privilege. Back in March, the Chamber joined others in submitting a strongly-worded amicus brief arguing for such confidentiality for whistleblowers who take the internal compliance route. Many corporations also require employees who provide tips to their compliance departments to then sign non-disclosure agreements. In addition to the chilling effect this has on whistleblowers contemplating filing a False Claims Act suit, any whistleblower brave enough to file then finds themselves the subject of legal action claiming they have violated attorney-client privilege or non-disclosure agreements. Is this how we want to treat whistleblowers? Internal compliance is not the one-size-fits-all solution this report would have you think it is.”

After the hearing Sen. Grassley released the following statement:

“I’ve long advocated companies developing strong internal compliance programs. However, having one isn’t a reason to receive a ‘get out of jail free’ pass. I’m skeptical that companies will self-report violations, and certification of a compliance program won’t turn up the cold hard facts on whether they do or don’t self-report. That’s why the False Claims Act relies on whistleblowers, and no other law has proven as effective at recovering taxpayer dollars that would otherwise be lost. Before the 1986 amendments which incentivized whistleblowers, $40 million was being recovered each year. At that rate, it would have recovered only $1 billion in the past 25 years. Now, thanks to courageous whistleblowers who know where the skeletons are buried, the law has recovered $42 billion since 1986.”

Related Links:

NWC Report

Kohn Testimony

Grassley Testimony

Big Business Launches a New Attack on Whistle-Blowers