Proposed Legislation to Gut Whistleblower Provisions of Dodd-Frank

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Last week, Representative Michael Grimm (R,C-NY) along with House Financial Services Capital Markets Subcommittee Chair Scott Garrett (R-NJ), Rep. John Campbell (R-CA), and Rep. Steve Stivers (R-OH) introduced new legislation to amend the whistleblower provisions of the Dodd-Frank Act.  The proposed bill, entitled the Whistleblower Improvement Act of 2011 (H.R. 2483) would make it more difficult for whistleblowers to report corporate misconduct, and decrease protection and rewards for those that do so.

The Project on Government Oversight along with other groups representing consumers, investors, taxpayers, employees, and whistleblowers wrote a letter to the House Financial Services Committee and the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, calling the bill “an extreme approach that would silence would-be whistleblowers, endanger critical inside informants, undermine investigations, hamstring enforcement at the SEC and CFTC, and provide lawbreaking financial firms with an escape hatch from accountability”.

Ironically titled, Grimm’s bill would seriously dam the channels through which whistleblowers may come forward; forcing them first to report the fraud within the company before a claim can be brought before the SEC. The bill would favor corporations who deal with fraud internally. It would also eliminate the minimum reward given for those who provide information leading to successful civil or criminal penalties of more than $1 million.  Lastly, it would allow for retaliation against those who contact the SEC by stripping whistleblower protections.

On his website, Rep. Grimm says the bill is an improvement to Dodd-Frank, because it will “[preserve] the internal reporting standards used by companies to catch criminal activity early, before it spirals out of control” and that an already overburdened SEC will benefit from the improvements to the whistleblower provisions which at the moment “have the potential to cause more harm than good.”

Resulting from a May 11th hearing of the House Financial Services Committee, a draft of the bill was revised to eliminate a provision that would have banned whistleblowers from obtaining representation on a contingency basis.

The full text of the bill can be found here.

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If you have information concerning a violation of the SEC or the commodities market, contact an attorney at The Young Law Group today for a free confidential consultation at 1-800-590-4116.

IRS Funding Cuts Hurt Taxpayers

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Trying to save money, the federal government is cutting funding for the IRS. The result may be a loss of revenues costing taxpayers untold billions. By the end of Fiscal Year 2010, $330 billion dollars in federal taxes will remain uncollected. In context, $330 billion dollars represents nearly 9 times the projected savings of the recently agreed upon budget. However, in the recent budget agreement, lawmakers decided that no additional funds would be used to hire new IRS agents.

Although there is evidence that for every dollar spent on enforcing the tax code the investment results in up to ten dollars of revenue for the government. Politicians, fearing to align themselves with the tax man, have shown reluctance in supporting funding for additional IRS agents.

The idea is particularly troublesome in that the federal deficit continues to mount and broader compliance of the already existing tax code would help relieve the burden of an exploding deficit. Egan Young’s recent case is a prime example of the need for a strong IRS. An anonymous Whistleblower client of Egan Young received the very first mandatory tax fraud reward under the 2006 IRS Whistleblower rules. The program which had been in place since the end of 2006, had taken nearly five years to distribute its first mandatory reward. The IRS acting on the tip of the Whistleblower, and the advocacy of attorney Eric Young, netted in excess of $20 million in unpaid federal taxes. This recent case highlights the need for a strong IRS. $20 million from one case represents near 2/3 of the savings the federal government cut in its recent budget negotiations. The addition of IRS agents, resources for the whistleblower office, and increased investment in IRS infrastructure would be a nearly 10 to 1 investment in paying down the exploding federal deficit.

Senate Bill would post every physician’s Medicare billing data on Internet

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Aiming to curtail Medicare fraud, Senator Charles Grassley (R, Iowa) introduced a program integrity measure before a Senate Finance Committee hearing on Medicare and Medicaid fraud on March 2nd.

The bill in part would require the Department of Health and Human Services by the end of 2012 start publishing Medicare claims and payment data on the website USAspending.gov. n prohibited by a court ruling for more than 30 years. But some lawmakers recently stepped up their efforts to lift the ban and bring Medicare billing data to light to prevent fraud.

By increasing transparency, the government hopes to prevent billions Medicare and Medicaid Fraud each year. Senator Grassley said, the “more transparency about billing and payments increases public understanding of where tax dollars go,” Grassley said. “The bad actors might be dissuaded if they knew their actions were subject to the light of day.”

Senator Grassley proposes improved Whistleblower Protections

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U.S. Sen. Grassley: Focuses on update to Whistleblower Protection Act

Senator Chuck Grassley of Iowa, a longtime advocate for strong Whistleblower Protections, recently co-sponsored legislation to provide an update to the Whistleblower Protection Act of 1989 by restoring congressional intent of the original law. Grassley said that whistleblowers are being denied protections they should have under the law because of decisions of the Merit Systems Protection Board, the Federal Circuit Court of Appeals, and the general anti-whistleblower sentiment held by those in executive branch agencies.

In 1989, Grassley and Senator Carl Levin of Michigan co-authored the original Whistleblower Protection Act. The law provided protection for federal employees who expose waste, fraud and abuse in federal agencies. Grassley introduced the update with Senators Daniel Akaka of Hawaii; Susan Collins of Maine and Joe Lieberman of Connecticut.

“Whistleblowers are key to unlocking the secrets deep in the closets of our bureaucracy. They’ve helped me uncover untold amounts of waste, fraud and abuse across the federal government,” Grassley said. “This important update to the Whistleblower Protection Act will restore the congressional intent of the law and also includes a provision we worked out in the last Congress to provide employees in the intelligence community whistleblower protections for the first time.”

The Iowa senator has been an ardent supporter for individual whisteblowers- regardless of party or the bureaucracy in the way. tagon, the FBI, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the IRS, the Interior Department, the Department of Health and Human Services, the Food and Drug Administration, and the Securities and Exchange Commission.

The updated legislation would:

• clarify that “any” disclosure of gross waste or mismanagement, fraud, abuse, or illegal activity may be protected, but not disagreements over legitimate policy decisions;
• suspend the Federal Circuit Court of Appeals sole jurisdiction over federal employee whistleblower cases for five years;
• extend Whistleblower Protection Act coverage and other non-discrimination and anti-retaliatory laws to all employees of the Transportation Security Administration;
• clarify that whistleblowers may disclose evidence of censorship of scientific or technical information under the same standards that apply to disclosures of other kinds of waste, fraud, and abuse;
• codify and strengthen the anti-gag provision that has been part of every Transportation-Treasury Appropriations bill since 1988;
• allow jury trials under certain circumstances for a period of five years;
• provide the Merit Systems Protection Board with authority to consider and grant summary judgment motions in certain cases for a period of 5 years;
• clarify that employees protected by the Whistleblower Protection Act may make protected classified disclosures to Congress using the same process as intelligence community employees;
• establish protections for the intelligence community modeled on existing whistleblower protections for FBI employees;
• establish a process within the executive branch for review if a security clearance is allegedly denied or revoked because of a protected whistleblower disclosure;
• establish Whistleblower Protection Ombudsmen to educate agency personnel about whistleblower rights; and
• provide the Office of Special Counsel with the independent right to file “friend of the court” briefs, or amicus briefs, with federal courts.

It Is About Time!

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For years, powerful lobbyist for corporate America have successfully impeded government intervention with regard to wide-spread violations of state and federal wage protection laws. Well, times have changed. Yesterday, Senator Sherrod Brown and Representative Lynn Woolsey introduced the Employee Misclassification Protection Act which is aimed at helping millions of workers who are misclassified by their employers as independent contractors, often as an excuse to avoid paying federal and state payroll taxes. This scheme allows unscrupulous employers’ to cut cost by as much as 30 percent—and gives them an unfair advantage over law-abiding competitors, driving down labor standards for all workers.

For workers affected by this practice—construction workers, hospitality workers, broadcast technicians, stage hands, musicians, home health care workers and day laborers, among many others—this bill offers a pathway to receiving labor protections that most Americans take for granted, like being paid the minimum wage and receiving overtime pay after 40 hours of work, or workers’ compensation when they are hurt on the job. Workers wrongly classified as independent contractors also are denied pension or and health benefits, and are told they aren’t protected by civil rights laws.

The bill would require employers to classify workers as employees, using a well-defined test that has existed since 1947, and it establishes a penalty for failing to do so. It applies common sense to the workplace, requiring that employers tell workers if they have been classified as independent contractors and how they can challenge that classification. The bill also protects workers who do challenge misclassification from retaliation.

Workers should be paid what the law says they are due. Misclassification has cost workers untold millions in wages and has cost the federal and state governments many millions in unpaid income, Social Security, unemployment and workers compensation taxes and premiums. New York City construction industry losses in payroll taxes and social insurance premiums due to misclassification are estimated at $170 million a year. In Ohio, the attorney general estimates annual costs from worker misclassification may be $100 million for unemployment insurance, more than $510 million in workers compensation premiums and almost $180 million in forgone state income tax revenues. Misclassification, he says, cost cities and villages more than $100 million in local income tax revenues in 2006, and cost school districts $7.8 million in 2008. Many other states report a similar impact. In fact, the Internal Revenue Service reported that in 1984, almost 20 percent of construction industry employers misclassified workers; a number that has surely grown.

This bill is a step in the right direction to protect workers, make sure that the country’s labor standards are upheld and place all employers on a level playing field. We look forward to working with Senator Brown and Representative Woolsey and their colleagues on this important piece of legislation. It is a crucial component in our ongoing campaign to ensure that all jobs are good jobs.

Eric L. Young, is a seasoned trial lawyer who specializes in wage and hour litigation and whistleblower litigation. Mr. Young can be contacted at 800-590-4116 or eyoung@young-lawgroup.com.

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