Security Agencies and Whistleblowers

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Security Agencies and Whistleblowers – New Presidential Directive

On Wednesday, October 10, 2012, President Obama issued a Presidential Policy Directive with regard to security agencies and whistleblowers, extending whistleblower protections to national security and intelligence employees. For whistleblowers and their advocates, this is an important victory.

The directive outlines actions like:

  1. A prohibition on retaliation in the intelligence community. This can include demotions, transfers, reassignments, performance evaluation, testing, and more.
  2. A prohibition on retaliation by affecting eligibility for access to classified information. This is a form of retaliation somewhat unique to the intelligence community.
  3. Allowing employees who feel they have been retaliated against to request an investigation by an external review panel.
  4. Issuing policies and procedures to all intelligence community employees on whistleblowing and protections against retaliation within one year.

At the end of September, the House of Representatives passed the Whistleblower Protection Enhancement Act – it is now awaiting Senate approval in November. This act will strengthen protections for federal employees who report waste and/or fraud and experience retaliation by supervisors. However, it does not cover members of the intelligence community.

The Presidential Policy Directive issued on October 10, 2012 does what the Whistleblower Protection Act does not: it allows employees with access to classified information a safe and effective way to report waste, fraud, and abuse. Within 270 days, intelligence agencies like the Central Intelligence Agency (CIA) and the National Security Agency (NSA) must establish a review process that allows employees to appeal retaliatory actions. The Federal Bureau of Investigations (FBI) is not included in this Presidential Policy Directive.

Until those review processes are in place, however, whistleblowers will not have any protections against retaliation in place. Some whistleblower advocates worry about review processes and regulations written by the very agencies accused of retaliating against whistleblowers – and would rather see national security whistleblower protections in legislation.

On the positive side, this Presidential Policy Directive does require each intelligence agency’s review process to be consistent with policies and procedures in the Whistleblower Protection Act. Where claims of retaliation are substantiated, victims can expect reinstatement and compensatory damages. And these directives protect free-speech rights – even where classified information is concerned.

To learn more about whistleblowing and for a free confidential consultation, contact Eric Young at Young Law Group today at 800-590-4116 or email to eyoung@young-lawgroup.com.

Whistleblower Exposes Foreign Currency Manipulation at BNY Mellon

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In the past few weeks, we have heard about the ongoing state and federal investigations into the manipulation of foreign currency costs for pension funds by the Bank of New York Mellon. The investigations were brought about as a result of whistleblower Grant Wilson, who was a foreign exchange trader for BNY Mellon and was privy to information about these fraudulent pension costs. In response to these allegations and new lawsuits, BNY Mellon appears to be working towards a settlement with the US Attorney Preet Bharara and New York’s Attorney General Eric Schneiderman.

What BNY Mellon is accused of doing boils down to a charge of defrauding the public and investors. It is alleged that the bank overcharged state and local pension funds by providing unfavorable currency-exchange rates for over a decade. With the information provided by whistleblower Wilson, the states of Florida, Virginia, and New York filed lawsuits alleging that the bank told the pension funds and its other clients that it would trade the currencies at “the best rate of the day”. Instead, the bank traded at the worst possible rate and absorbed the difference for profit. All of this was done because the banks were able to convince their clients to use a “standing-instruction” program which gave control of the foreign exchange to BNY Mellon. The fact that these practices were carried on over a decade just goes to show how much the bank profited off of programs built to provide for hard working Americans.

The whistleblower in this particular action was especially adept at building a case against his employer’s fraudulent activities. He recorded the amount of detail and the extensive steps that the bank took to grow its profits while at the same time providing the information to a legal team that would eventually bring about formal charges. The allegations stem from his line of work as a foreign exchange trader, so he was in a unique position to provide his expertise to the litigation. According to the Princeton Review, the foreign exchange trader that has the “most information, the best contacts, and the strongest decision-making skills will come out ahead”. In this case, the review appears to be right in their assessment. Wilson was in the best position to help the government combat fraud and he made the decision to take a stand and pitch in. His story should be a model for other would-be whistleblowers that if you witness and are party to fraudulent and illegal activities, you should not be afraid to stand up and help bring about the necessary justice.

BNY Mellon’s price manipulation practices are just another example of how the big banks are trying to game the system and as a result, negatively impact the average American worker. On the other hand, this case also highlights the positive aspects of the whistleblower programs we have in place and should be a call to arms for stronger whistleblower protections. Who knows, if it weren’t for Grant Wilson’s actions, would these foreign exchange rate practices have continued for another decade? If this whistleblower’s actions bring about a settlement with the government, then justice can only be done if it makes sure that the public will be guarded against any return to these fraudulent practices by BNY Mellon in the future.

Young Law Group, P.C., Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or email to eyoung@young-lawgroup.com.

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Whistleblower Paid $9,243,251 For Exposing False Claims Scheme

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On June 7, 2012, the Department of Justice reported that it had recovered $34,234,263 from Orthofix Inc., a Texas-based manufacturer of medical devices, to settle allegations under the civil False Claims Act relating to the company’s sale of bone growth stimulator devices. The Justice Department awarded whistleblower Jeffrey Bierman $9,243,251 for his contribution in providing the U.S. Government with insider information on the false claims scheme. The Justice Department also announced that the company had agreed to plead guilty to a felony of obstruction of a federal audit and to pay a $7,765,737 criminal fine.

The whistleblower suit alleged that the “company improperly waived patient co-payments, thus misstating their true cost and resulting in overpayments by federal programs; paid kickbacks to physicians and their staffs in the form of “fitter fees,” referral fees and other comparable fees, to induce the use of Orthofix products; caused the submission of falsified certificates of medical necessity; and failed to advise patients of their right to rent rather than purchase Orthofix products.”

Stuart F. Delery, Acting Assistant Attorney General for the Civil Division stated that “the Justice Department has longstanding concerns about kickbacks and the routine waiver of co-payments, because they can impose significant costs on federal health programs that are not medically justified.” “The resolution of this matter yielded a substantial recovery for taxpayers, and should deter other companies from engaging in such conduct in the future.”

The Justice Department stated that the company’s criminal guilty plea involved its failure to disclose information concerning its practices regarding certificates of medical necessity to a Medicare contractor where five individual Orthofix employees previously plead guilty to criminal charges in connection with this matter. U.S. Attorney for the District of Massachusetts,Carmen M. Ortiz, stated that “this resolution, and the entire investigation, which has involved prosecution of a number of individuals, including a high level executive, demonstrates the government’s unflagging commitment to prosecuting corporate and individual medical device fraud, and particularly to protecting Medicare from those who prey on it by fraudulent means.”

Susan J. Waddell, Special Agent in Charge of the Office of Inspector General of the U.S. Department of Health and Human Services New England region stated that “criminals intent on placing profits from federal health programs over and above compliance should expect to tangle with authorities” and that “Orthofix blatantly ordered sales staff to disregard Medicare rules, and conveniently looked away when medical records were altered and even forged.”

The False Claims Act allows private citizens to act as whistleblowers and sue on behalf of the government and share in the amounts the government recovers through legal action.The False Claims Act allows the government to recover treble damages and $5,500 to $11,000 for each false or fraudulent claim filed. The whistleblower in this case was paid approximately 27% of the proceeds from the government settlement.Whistleblower rewards typically range from between 15-30% for claims brought under the False Claims Act.

Young Law Group, P.C., Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or email to eyoung@young-lawgroup.com.

SOURCE: http://www.justice.gov/opa/pr/2012/June/12-civ-724.html

Doctors receive $130k for Exposing Illegal Medicare Kickback Scheme

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Medicare Kickback Scheme

On August 14, 2012, the Department of Justice reported that it had recovered $650,000 and settled claims against Dr. Jack L. Baker, a prominent Houston radiologist, for allegations that he violated the False Claims Act, the Anti-Kickback Statute, the Stark Act and the Texas Medicaid Fraud Prevention Act. The Justice Department awarded two doctors, Drs. Philip Blum and David Spinks, $130,000 for their contribution in providing the U.S. Government with insider information on Dr. Baker’s illegal payment compensation scheme to doctors to induce them to refer patients to Fairmont Diagnostic Center and Open MRI Inc.

The Stark Statute and the Anti Kickback Statute disallows Medicare providers from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions. United States Attorney Kenneth Magidson stated that “improper financial relationships between health care providers and their referral sources can corrupt a physician’s judgment about the patient’s true healthcare needs” and such arrangement “incentivize physicians to make referrals for unnecessary tests.”

In this case, Dr. Baker had entered into improper financial relationships with approximately 17 physicians to induce them to refer patients to Fairmont Diagnostic Center for a wide variety of imaging studies. The prohibited financial relationships included, sham personal services contracts (medical directorships) and contracts to pay the salaries of employees in physicians’ offices.

The False Claims Act allows private citizens to sue on behalf of the government and share in any amounts recovered through legal action.For their work, Drs. Blum and Spinks received 20% of the proceeds of the settlement. Dr. Baker also agreed in the settlement to a voluntary suspension from the Medicare and Medicaid programs for a period of six years and will not be allowed to bill these programs for treating Medicare and Medicaid beneficiaries.

Young Law Group, P.C., Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or contact one of our other False Claims lawyers.

SOURCE: http://www.justice.gov/usao/txs/1News/Releases/2012%20August/120814%20Baker.html

First SEC Whistleblower Paid $50,000 For Exposing Securities Fraud

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On August 12, 2012, the Securities and Exchange Commission reported that it had recovered $150,000 thousand so far out of a Court order $1 million in sanctions against the perpetrators of securities fraud scheme.  The Securities and Exchange Commission awarded the whistleblower, who wishes to remain anonymous, $50,000 for his/her contribution in providing the U.S. Government with provided documents and other significant information that allowed the SEC to investigate, move quickly, and prevent the fraud from ensnaring other victims.  Any additional amount collected will increase the payments to the whistleblower.

SEC Chairman Mary L. Schapiro, stated that “[w]e’re seeing high-quality tips that are saving our investigators substantial time and resources” and that “[t]he whistleblower program is already becoming a success.”  Robert Khuzami, Director of the SEC’s Division of Enforcement stated that “[h]ad this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”  He also said that “[t]his whistleblower provided the exact kind of information and cooperation we were hoping the whistleblower program would attract.”  The SEC stated they get about 8 tips per day.

The Dodd-Frank Act allows the SEC to reward individuals who offer high-quality original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered.  The whistleblower in this case was paid approximately 30% of the amount the government recovered.  The SEC issues rewards between 10% and 30% of the money collected.  “The law specifies that the SEC cannot disclose any information, including information the whistleblower provided to the SEC, which could reasonably be expected to directly or indirectly reveal a whistleblower’s identity.”

SOURCE: http://www.sec.gov/news/press/2012/2012-162.htm

For additional information about the SEC whistleblower program, please contact one of our SEC whistleblower lawyers.

IRS TAX FRAUD WHISTLEBLOWER AWARDED $104 MILLION

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Philadelphia, PA September 12, 2012 – Whistleblower Attorneys for Bradley Birkenfeld, a jailed former Swiss banker, announced that the Internal Revenue Service (IRS) will award him a $104 Million as a tax whistleblower reward for detailed information he turned over to the U.S. government concerning the detailed inner workings of Swiss bank UBS’s secretive private wealth management division and illegal offshore banking scheme.

It is believed that this reward – the largest ever single reward paid to an IRS tax whistleblower – is the 4th reward paid to date since the IRS Whistleblower Program went into effect in 2006.The first IRS whistleblower award of $4.5 million was issued to an anonymous accountant in April 2011 after he exposed that his employer, a Fortune 500 financial services firm, was skimping on taxes.Since that time, the IRS has been under intense scrutiny due to the apparent lack of progress with respect to its handling of IRS whistleblower claims including scathing reports by the Government Accountability Office and the Treasury Inspector General for Tax Administration.

Senator Charles Grassley, the Iowa Republican who spearheaded the legislation that led to the creation of the IRS Whistleblower Office and who also has been vocal about his unhappiness with regard to the IRS’s slow approach to whistleblower tips, declared today, “This case provides evidence about how the whistle-blower program can be effective because the IRS is saying its work against this kind of tax fraud would not have been possible without the whistle-blower.”

The Birkenfeld case is an indication by the IRS that it takes whistleblower claims seriously while encouraging others to report fraudulent activity.Attorney Eric L. Young, of the nationally renowned Whistleblower Attorney Firm, Young Law Group, who represented the accountant who received the first ever IRS tax whistleblower award, congratulates Mr. Birkenfeld and his attorneys, “I know first-hand the challenges faced by people like Mr. Birkenfeld when stepping forward to report serious fraudulent activity.In this extreme case, Mr. Birkenfeld arguably paid the ultimate price – time in jail – after deciding to come forward.Blowing the whistle on corporate fraud and misconduct is not for the faint of heart and that is why the government pays rewards.It also underscores the importance of hiring experienced IRS whistleblower attorneys.My hat goes off to Mr. Birkenfeld and his attorneys who did a tremendous job in not only ensuring that UBS AG was held accountable for helping tax cheats, but in bringing attention to scope of efforts by wealthy U.S. citizens to evade taxes by way of off-shore bank accounts.”

Young Law Group (“YLG”) is a nationally renowned law firm specializing in the representation of whistleblowers and individuals in fraud and class action litigation. Our attorneys have litigated cases resulting in recoveries exceeding $2 Billion against corporate giants including Anheuser-Busch, Pfizer, Ikon, Cephalon, Johnson & Johnson, Fresenius, Merck, Aramark, and others.

To learn more about whistleblowing and how we can help protect your rights please complete our online form to the right or call us at 800-590-4116.

Update: Young Law Group is now operating as McEldrew Young. Links in the press release have been updated with our new website address.

IRS Whistleblowing Potential

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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.

Fear of Political Pressure Influences IRS Resistance to Whistleblower Cases

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In recent years, whistleblower cases have proven to be essential to the battle against tax fraud in the United States. In 2006, Congress passed a provision that would allow citizens to file claims with the Internal Revenue Service (IRS) to recover lost tax revenue that had been fraudulently withheld. The Tax Court could intervene on behalf of a relator, or whistleblower, but only in reviewing the awarded damages. Since Congress only authorized the review of the award rather than the merit of the cases, many are turned down by the IRS. One example of the IRS’ resistance to pursing whistleblower cases is in William Prentice Cooper, III v. Commissioner, 136 T.C. No. 30 (June 20, 2011). The IRS declined the relator’s request to pursue a case because the agency believed it did not meet the criteria required for litigation. The IRS cannot be expected to take every whistleblower case that comes through the door, but in the current climate of fiscal uncertainty, it could be worth millions to the government to re-evaluate certain cases and subject them to closer scrutiny.

As noted by Finch McCranie, LLP, whistleblowers have recovered $97 million for the U.S. government WITHOUT the help of the Justice Department. That is more than the combined salaries of both the members of the United States Senate and House, according to Pat Burns of Taxpayers Against Fraud. This was done without the Justice Department because the government declined to pursue the cases, even when presented with meritorious information. If the IRS has the opportunity to recover tax funds for the government, which it is required to do, why is the agency passing on the opportunity to increase the chances of a successful lawsuit?

The Internal Revenue Service says in its mission statement that it seeks to ensure that citizens meet their tax responsibilities and enforce the laws that Congress passes to ensure fairness and integrity for all. As a result, the IRS is subject to the mercy of Congress, even though its responsibilities are supposed to be nonpolitical.

This political control over the IRS also showed itself when the agency caved to Republican pressure over private campaign donations as gifts.

As noted by Dan Froomkin of the Huffington Post, in this case Republican members of the Senate Budget Committee and the House Ways and Means Committee believed that the IRS was pursuing a liberal agenda by auditing the gifts of donors who have contributed to 501(c)(4)s. They tried to justify their argument by noting that the provision the IRS cited had not historically been enforced. Even if this is the case, it only highlighted the IRS’ failures in the past, but not the present. When Congress passes a law, all of its provisions must be enforced by the IRS. If the provision for declaring gift contributions was never intended to be enforced, then Congress should not have included it in the legislation.

The IRS will always be subject to the laws of Congress, and as a result, the business of politics will get in the way of the agency’s ability to effectively carry out its mission. With Republican donors traditionally holding interests in private companies and firms, they are more inclined to put pressure on the IRS to decline whistleblower cases, seeing as they have the potential to have an adverse effect on these companies. Is it right to allow fraud to continue and additional government revenue to be lost as a result of political interests? More attention should be given to whistleblower since they are not only privy to information that could expose illegal actions, but also they could bring in the additional tax revenue that would help this country combat the devastating fiscal crisis that we are inching closer and closer towards today.

Egan Young, Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to eyoung@eganyoung.com.

SEC Approves Whistleblower Rules

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The SEC has approved the rules regarding the submission of SEC whistleblower claims pursuant to the Dodd-Frank legislation that was passed last year.

As reported By David S. Hilzenrath, here, The SEC approved rules Wednesday that could make it highly lucrative for Wall Street whistleblowers and other corporate insiders to alert the agency to securities violations. The agency was acting at the behest of Congress and President Obama, who mandated the rewards last year in legislation responding to the mortgage meltdown.

Whistleblowers will be entitled to receive 10 percent to 30 percent of the money they help the SEC collect through enforcement actions. Corporations had lobbied intensely for rules that would impose constraints on whistleblowers. But a majority of SEC commissioners rejected pleas by business groups that, before going to the SEC, whistleblowers should be required to notify the companies they are accusing and give those companies a chance to address the allegations.

“For an agency with limited resources like the SEC, I believe it is critical to be able to leverage the resources of people who may have first-hand information about potential violations,” Schapiro said in her prepared text. “And, it is especially important to investors whose savings or retirement funds may hinge on our ability to stop an ongoing fraud or obtain hidden evidence,” Schapiro said. Schapiro, an independent, and two Democratic commissioners voted for the rules over the opposition of two Republican commissioners.Republican commissioner Kathleen Casey said the SEC was overestimating its ability to triage and manage complaints from tipsters while underestimating the extent to which the rules will undermine companies’ efforts to police themselves through internal compliance programs.

The rules can be read in entirety by clicking here.

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This is a victory for whistleblowers and investors alike.  If you have information concerning a violation of the SEC or the commodities market, contact an SEC whistleblower attorney at McEldrew Young today for a free CONFIDENTIAL consultation at 215-367-5151.

McKessy Named Head of SEC Whistleblower Office

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The Securities and Exchange Commission recently announced that Sean McKessy will oversee the new Whistleblower Office in the Division of Enforcement. The Office will consolidate existing resources to administer the whistleblower provisions called for by The Dodd-Frank Wall Street Reform and Consumer Protection Act.

In that role, Mr. McKessy will lead a program charged with working with whistleblowers, handling their tips and complaints, and helping the Commission determine the awards for individuals who provide the agency with information that leads to successful enforcement actions.

Mr. McKessy rejoins the SEC, where he was a Senior Counsel in the Division of Enforcement from 1997 to 2000. More recently, Mr. McKessy served as corporate secretary for both Altria Group, Inc. and AOL Inc., and as securities counsel for Caterpillar, Inc. In these roles, Mr. McKessy developed and supervised internal compliance and reporting programs related to the federal securities laws, served as corporate compliance officer, and coordinated the reporting of potential violations to boards of directors.

“Sean is uniquely positioned to oversee the Commission’s whistleblower program,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The Enforcement Division and whistleblowers alike will greatly benefit from Sean’s first-hand experience in bringing enforcement cases, handling whistleblower complaints and understanding the workings of internal corporate compliance programs.”

Mr. McKessy said, “I am excited to return to public service and rejoin the dedicated staff of the Enforcement Division in this critical role. Whistleblowers often provide invaluable information that can help uncover securities fraud and protect investors.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC whistleblower program to pay rewards to individuals who voluntarily provide the Commission with original information that leads to successful SEC enforcement actions and certain related actions. The Commission is in the process of developing rules that will guide the whistleblower program.

The SEC deferred plans to set up a whistleblower office in December in anticipation of a budget battle with congressional Republicans, most of whom opposed the law. The SEC stated that the office will “consolidate existing resources” to administer the new program.

The Obama administration’s fiscal 2012 budget plan calls for 43 new positions “to expand investigations of tips received from whistleblowers.”

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Brandon J. Lauria, Esquire, represents whistleblowers nationwide.  If you would like to speak with Mr. Lauria or one of our other SEC whistleblower attorneys, please email him directly at blauria@young-lawgroup.com or cal 215.367.5151 for a free consultation today.

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