FairWarning » Whistleblowers

U.S. Orders Bank of America to Pay $930,000 for Illegally Firing Whistleblower

Thu, 15 Sep 2011 17:09:42 +0000

(Reuters)

Labor Department officials have ordered Bank of America to pay damages and reinstate a former executive they say was illegally fired for reporting fraud at the company’s Countrywide Financial Corp. unit.

The award of $930,000 to former Countrywide vice president Eileen Foster follows a ruling by an administrative law judge that her firing violated whistleblower protections under the Sarbanes-Oxley law, which aims to fight accounting fraud.

Foster led internal investigations that revealed widespread fraud involving employees of Countrywide, the Calabasas, Calif., based mortgage giant, which merged with Bank of America in July, 2008.

Whistleblowers who tried to report forged documents, faked data and other questionable activities inside the nation’s largest mortgage lender were fired, according to Foster. Foster herself was fired shortly after the merger.

“It’s clear from our investigation that Bank of America used illegal retaliatory tactics against this employee,” said Assistant Secretary of Labor for OSHA Dr. David Michaels in a news release. “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”

As the Center for Public Integrity’s iWatchNews reports, Countrywide’s management protected sales staffers who inflated borrowers’ incomes on loan applications and falsified paperwork in order to push through a high volume of risky mortgages.

Asked about the ruling, Foster told iWatchNews: “I don’t want to comment at this time, considering that I may be returning to Bank of America as an employee.”

Bank of America says it plans to appeal the ruling.

Shirley Norton, a bank spokesperson, said the decision to fire Foster was “solely based on issues with the employee’s management style and in no way related to the employee’s complaints and the allegations made in the complaint.”

The case was investigated by the Occupational Safety and Health Administration, the labor department branch that enforces whistleblower provisions of 21 diverse federal statutes, ranging from the Occupational Safety and Health Act and Sarbanes-Oxley to laws on airline, trucking and food safety and environmental protection. Under the statutes, it is illegal to retaliate against employees for reporting violations of law.

Both Foster and Bank of America can appeal the monetary damages to the Labor Department’s Office of Administrative Law Judges within 30 days of receiving the findings.

LILLY FOWLER

Health Care Firm to Pay $150 Million for Defrauding U.S., State Agencies

Tue, 13 Sep 2011 18:32:29 +0000

Maxim Healthcare Services has agreed to pay $150 million to settle criminal and civil charges that it fraudulently overbilled federal and state health-care benefits programs.

The Columbia, Md.,-based company also entered into a criminal deferred prosecution agreement with the U.S. Attorney’s office in Newark, which conditionally allows it to avoid a potential health care fraud conviction. Federal authorities said the company, one of the nation’s largest providers of home health care services, admitted to conspiring to defraud Medicaid and the Department of Veterans Affairs programs out of more than $61 million between 2003 and 2009.

The settlement includes a $20 million criminal fine and the payment of $130 million to resolve civil allegations made by the federal government and 43 states. As Bloomberg reports, authorities called it the biggest civil recovery ever in a home health care fraud.

Since 2009, nine people, including eight former Maxim employees, have pleaded guilty to felony charges related to the case. Authorities said the fraud included, among other things, billing government programs for services that weren’t provided as well as submitting falsified claims to conceal work performed by unlicensed offices.

In a news release, Brad Bennett, Maxim’s chief executive, said the company takes “full responsibility” for the charges outlined in the deferred prosecution agreement.

The investigation of Maxim stemmed from a whistleblower lawsuit filed under the U.S. False Claims Act by a 63-year-old New Jersey man with muscular dystrophy. He said that Maxim claimed more than 700 hours of services over a 15-month period in 2003 and 2004 that never were provided. He will collect a $15.4 million award under the act, which is intended to encourage people to report fraud.

“It is our hope that Maxim, in cleaning up its own house, will be a lighthouse influencing best practices across the industry,” J. Gilmore Childers, New Jersey’s acting United States attorney, said in a news release.

TIMOTHY BELLA

Union Pacific Told to Pay $615,000 for Retaliation Against 3 Workers

Fri, 26 Aug 2011 08:00:39 +0000

Union Pacific Railroad faces penalties of more than $615,000 based on a finding by federal authorities that the company fired two workers, and suspended another, in retaliation for reporting workplace safety concerns and a work-related injury.

The Occupational Safety and Health Administration called for Omaha-based Union Pacific to pay $400,000 in punitive damages, $90,315 in compensatory damages, $34,900 in attorney fees and more than $90,000 in back wages to the three workers.

“Workers have the right to report work-related injuries and safety concerns without fear of retaliation,” David Michaels, OSHA’s chief, said in a news release. “Union Pacific Railroad has created a climate of fear instead of a climate of safety.”

Union Pacific spokesman Mark Davis said the company will appeal. He called the OSHA finding “inconsistent with the facts and ignores provisions of our collective bargaining agreements.”

The company previously was cited by OSHA for retaliating against employees reporting injuries in separate cases last year and earlier this year.

The decision OSHA announced Thursday covered two conductors based in Kansas City, Mo., and a locomotive engineer from Tucson, Ariz.

One of the conductors, the agency found, was fired after making repeated complaints to the company’s hotline about safety concerns, including missing and obstructed roadway signs, and for noting that a supervisor violated safety procedures during a field test. The railroad also cited the conductor for having a tattoo that it deemed as creating a hostile work environment — even though the employee had the tattoo, commemorating his military service, before joining the company in 2004. OSHA called for his reinstatement to his old position.

The other conductor, OSHA said, was suspended without pay from his job for five days after making several complaints to the company’s hotline about rough spots on the track. And the agency said the engineer, a 32-year employee, was fired after reporting a workplace injury.

The OSHA investigation, by the agency’s offices in Kansas City and San Francisco, determined that the company had violated the whistleblower protection provisions of the Federal Railroad Safety Act.

ROBERT T. NELSON

Regulators Probe Whether Utility Ignored Warnings of Potential Gas Leaks

Tue, 09 Aug 2011 20:31:41 +0000

California regulators have begun looking into allegations that Pacific Gas & Electric ignored warnings from the company’s former manager of investigations about “potentially explosive gas leaks.”

The preliminary state probe is yet another examination of the company’s safety practices in the years before the explosion last September of a PG&E gas pipeline that killed eight people, and destroyed dozens of homes, in San Bruno, Calif.

The new probe by the California Public Utilities Commission, the San Jose Mercury News reports, stems from charges in a 2008 lawsuit recently brought to light by the newspaper. In the suit, which was settled confidentially, James Redeker said he was laid off by the utility in 2006 after six years as the investigations manager in retaliation for complaining about the potential leaks, falsified records and other alleged problems.

His allegations are in line with previously reported assertions by several other current or former PG&E employees. They said that the utility repeatedly ignored safety concerns raised by workers and sometimes punished them for speaking up.

An official with the utilities commission, Michelle Cooke, said her agency was beginning a preliminary investigation based on the Redeker suit. “It does certainly call into question PG&E’s corporate culture. The allegations imply a pattern of cover-up and disregard for safety,” she said.

Along with claiming that he was fired in retaliation for raising safety concerns, Redeker made other allegations. He charged that the utility falsified internal reports about gas leaks, conspired to bill ratepayers nearly $2 million after it mistakenly overpaid that amount to another company and paid an “exorbitant” $60,000 for a former chief executive, Peter Darbee, to take a rountrip flight to Florida on a private jet.

A company spokesman declined to comment on the suit’s specific claims, but said PG&E thoroughly investigates safety issues raised by employees and notifies regulators if “there is any truth to those concerns.”

PG&E has been the target of an array of investigations related to the September explosion. Along with a separate examination by the utilities commission, the investigations include a review by the National Transportation Safety Board and a criminal inquiry led by the U.S. Department of Justice.

STUART SILVERSTEIN

OSHA Unveils Plans to Boost Protection of Whistleblowers

Tue, 02 Aug 2011 08:00:50 +0000

Facing sharp criticism of its whistleblower protection program, the U.S. Occupational Safety and Health Administration has announced measures to improve training and avoid long delays in completing investigations.

The program has been ripped by the Labor Department’s inspector general and by the Government Accountability Office which, in a report released last year, cited training lapses among its glaring weaknesses. As FairWarning has reported, other problems include a serious lack of staff, with investigators being overwhelmed by huge caseloads and a steady expansion of new laws to enforce. The program is responsible for protecting whistleblowers under 21 different federal statutes covering everything from workplace and transportation safety to pollution control and accounting fraud.

As part of the measures announced Monday, OSHA will hold a mandatory training conference in September to be attended by all whistleblower investigators as well as by Labor Department lawyers who work on whistleblower cases.

“The ability of workers to speak out and exercise their legal rights without fear of retaliation is crucial,” OSHA chief David Michaels said in a news release. “The new measures will significantly strengthen OSHA’s enforcement of the 21 whistleblower laws that Congress charged OSHA with administering.”

Other changes include having the program report directly to the OSHA chief, rather than to the enforcement division, which handles safety inspections and has been accused of neglecting whistleblower protection. OSHA said it is also issuing a revised investigations manual and will strengthen audits “to ensure that complaints are properly handled on a timely basis.”

The GAO found that nearly 40 percent of whistleblower investigators had not not taken or even registered for a required basic training course on the statutes they are supposed to enforce. “According to one senior official,” the report said, “some regions are unwilling to send investigators to mandatory training, citing a lack of need for such training.”

OSHA recently hired more than 25 new investigators to deal with heavy caseloads. But citing past experience, the GAO warned that without adequate central controls, the new hires could be diverted by regional officials to other tasks.

MATTHEW HELLER

Bill Seeks to Restrict Corporate Whistleblowers in Financial Cases

Mon, 16 May 2011 08:50:37 +0000

House Republicans have launched a business-backed effort to block corporate whistleblowers from going directly to financial regulators with reports of wrongdoing.

At the center of the effort is a bill drafted to amend last year’s Dodd-Frank financial oversight law by requiring whistleblowers to report problems internally before going to the Securities and Exchange Commission. The bill would modify an SEC proposal, developed as part of the Dodd-Frank legislation, that would financially reward whistleblowers who provide detailed tips leading to enforcement actions that result in sanctions of over $1 million.

“The changes in Dodd-Frank open the floodgates to frivolous claims and costly penalties by allowing whistleblowers to go directly to the SEC,” the bill’s author, Rep. Michael Grimm R-N.Y., said in a news release. “Companies can’t effectively address a problem if they don’t know about it.”

Grimm’s position was supported by a representatives of the U.S. Chamber of Commerce and others who appeared before a House subcommittee on the issue last week, Reuters reports. But Geoffrey Rapp, a law professor at the University of Toledo, countered that the provisions in Dodd-Frank are vital and that whistleblowers typically still will report wrongdoing internally first because they see themselves as “loyal employees.”

The push for Grimm’s measure follows a recent legal setback for corporate whistleblowers. On May 3 a federal appeals court ruled that two auditors who helped expose violations in Boeing’s financial reporting practices were not entitled to whistleblower protections because they leaked the information to a Seattle Post-Intelligencer reporter.

The 9th Circuit Court of Appeals found that the federal law that applied in the case, the Sarbanes-Oxley Act, provided protection for whistleblowers who provide information to regulators, Congress or supervisors with authority to investigate misconduct, but that no such protection exists for disclosures to journalists.