Can a Fired Employee Be a Whistleblower in a False Claims Act Case?

On Behalf of | April 28, 2017 | Whistleblower Law

The answer to the question is YES.  A fired employee may be a whistleblower and file a Federal and/or State False Claims Act case. By doing so, the employee would play a key role in assisting the government in uncovering fraud and prosecuting companies who commit fraud. The employee may also be able to receive a share of the government’s recovery and compensation for retaliatory wrongful termination.

The Federal False Claims Act (FCA) is often referred to as the Lincoln Law.  The FCA earned this nickname because the law was created by President Abraham Lincoln during the Civil War. President Lincoln sought to protect the Union from being cheated when it purchased goods and services during the Civil War. For example, “For sugar it [the government] often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the ruse of shops and foreign armories.” United States ex rel Newsham v. Lockheed Missiles and Space Co., Inc., 722 F.Supp. 607, 609 (N.D. Cal. 1989) (quoting 1 F. Shannon, The Organization and Administration of the Union Army, 1861-1865, at 5456 (1965) (quoting Tomes, Fortunes of War, 29 Harpers Monthly Mag. 228 (1864)).  Time after time, the government did not receive the goods for which it contracted and paid.  The Federal False Claims Act provided a law that enabled the government to seek out and receive significant compensation when it did not receive what it bargained for. During the Civil War, this often meant receiving the horse it contracted for and not the donkey that was provided instead. In modern times, it can mean treble damages and mandatory statutory penalties.

To encourage whistleblowers to step forward and inform the government of the fraud, and appreciating the risk to the whistleblower himself, in the 1980s, Congress added an incentive to the Federal False Claims Act known as the qui tam law. This qui tam provision enabled the person who informed the government of the fraud to receive a percentage of the government’s financial recovery. That percentage ranges from 15% to 30% of the total recovery pursuant to the Federal False Claims Act. Congress understood that often, the person who knows how a company is cheating the government is an employee of that very same company.  Congress also recognized that an employee who stepped forward and informed the government of how his employer is cheating the government may suffer retaliation by his or her employer, up to and including wrongful termination. The company often labels the employee who identifies the fraudulent behavior as a “disgruntled employee” and then retaliates by firing the employee. Therefore, in order to provide the employee an incentive to come forward, Congress provided a level of compensation to the employee for taking such a risk by awarding the employee a percentage of the recovery. Many state False Claims Act statutes have similar provisions that award employees who assist the state in making a recovery a percentage of the financial recovery. The amount of that percentage varies based upon the various state statutes.

Many successful Federal and State False Claims Act cases have been successfully resolved as a result of the information provided by a fired employee. For example, David Sherwin, the whistleblower in the case of State of California, et al. ex rel David Sherwin v. Office Depot, Inc. was fired by Office Depot after he alerted his supervisors at that the company was overcharging various state government entities in violation of the contract. Mr. Sherwin contacted me seeking representation after he had reported his concerns about Office Depot’s overcharging to his supervisors and had already been fired. Mr. Sherwin looked on the internet for a Qui Tam attorney and selected me because I had previously settled a False Claims Act case against Office Depot. I retained Mr. Sherwin. His case, The State of California et al ex rel Sherwin v. Office Depot, settled for  $77.5 million.  As the whistleblower, Mr. Sherwin was awarded a significant percentage of the $77.5 million recoveries.