Famous Examples of Whistle-Blowers
The “whistle-blower” is a concept well-known to the general public through such Hollywood film as “Silkwood.” The movie, starring Cher, told the story of Karen Silkwood, a woman who worked at the Kerr-McGee nuclear power plant in Oklahoma. She complained to the Atomic Energy Commission about major violations of health and safety violations that endangered the workplace. She mysteriously died after threatening to take evidence to the New York Times.
A whistle-blower is someone who decides to reveal misconduct of a company or employer. The misconduct typically involves fraud or corruption intentionally perpetuated for financial profit. The U.S. government is one of the largest victims of intentional fraud perpetrated by unscrupulous contractors. The amount of money lost by the federal government and U.S. taxpayers is simply astronomical.
The False Claims Act and Qui Tam
The False Claims Act, also referred to as the Lincoln Law, was created in 1863 to punish persons or companies who defraud the U.S. government. The law includes a “qui tam” provision that allows a person to file a suit on the government’s behalf. Qui tam, as a legal concept, dates back to 13th-century England. The False Claims Act encourages people to come forward by offering a financial incentive. The person filing the suit, referred to as the “relator” or “whistle-blower,” is entitled to 15 to 30 percent of the money recovered by the federal government.
The False Claims Act was originally established to protect the U.S. government against military contractor fraud during the Civil War. The False Claims Act has been has amended several times since its inception, but 1986 marked a watershed year: Congress took measures to strengthen the law out of concern for rampant fraud in the military contracting industry. The number of qui tam actions has risen dramatically as a result of the amendments.
High-Profile Whistle-Blower Cases
Quest Diagnostic (2009)
In a huge case, Quest Diagnostic, the giant medical lab company, paid a $302-million settlement. This constitutes the largest amount ever paid by a medical lab company for a faulty product. A subsidiary, Nichols Institute Diagnostics Inc., was charged with selling faulty blood test kits to medical testing companies and covering up evidence that the results of the kits were inaccurate. The qui tam case was filed under the False Claims Act by a California biochemist. The whistle-blower was awarded 18 percent of the $253-million settlement.
Northrop Grumman (2009)
Northrop Grumman is a major aerospace and defense technology company. A whistle-blower, Robert Ferro, along with the U.S. government, filed a qui tam suit against Northrop Grumman. The company was accused of selling faulty electronic equipment to the government for military satellites. The $325-million settlement is the largest settlement paid by a defense contractor in a qui tam case. Ferro received $48.7 million for his participation in the case.
Pfizer, Inc (2009)
John Kopchinski, a sales representative for Pfizer, brought a qui tam suit against Pfizer for fraudulent marketing practices with Bextra. The suit alleged that Pfizer systematically violated the federal Anti-Kickback statute by reimbursing Bextra through federal and state government programs, including Medicare and Medicaid. Pfizer pled guilty and paid $2.3 billion in fines. This was the largest criminal fine ever imposed in the United States. Pfizer was also forced to pay $1.195 billion in the qui tam action, making it the largest civil fraud settlement against a pharmaceutical company. Kopchinski and six other whistle-blowers shared $102 million.