Whistleblower Protection Law for Employees of Government Contractors and Grantees
The whistleblower protection provision of the NDAA provide robust protections to employees of federal contractors, subcontractors and grantees who report waste, fraud or abuse. It also extends these protections to personal services contractors working on defense or civilian contracts or grants.In moving to pass the bill, Rep. Jason Chaffetz, R-Utah, chairman of the House Committee on Oversight and Government Reform, stated:
[W]histleblowers are invaluable to the oversight work of Congress. We rely on people who are on the front lines seeing things as they truly are to provide information and blow the whistle when they see something going awry. They are one of our best sources of information about waste, fraud and abuse within the federal government.
As an institution, we should try to do everything we can to encourage them to come and speak with us, and when they do, to make sure that they have the proper and adequate protections.
The anti-retaliation provisions of the National Defense Authorization Act for Fiscal Year 2013 (NDAA) will be a powerful tool to combat waste, fraud and abuse in government contracts and grants, which total about half a trillion dollars annually.
NDAA Whistleblower Protection Law
Two provisions of the NDAA protect whistleblowers: Section 827, codified at 10 U.S.C. § 2409, covers individuals working on contracts with the U.S. Department of Defense or NASA; and Section 828, codified at 41 U.S.C. § 4712, covers individuals working on contracts or grants funded by other federal agencies. Section 827 amended an existing law that protects employees of DOD contractors, but Section 828 was enacted as a new pilot program and would have expired in 2017 absent the enactment of S. 795.
The scope of coverage is broad and includes all individuals performing work on a government contract or grant, including personal services contractors and employees of a contractor, subcontractor, grantee or subgrantee. The NDAA whistleblower provisions do not apply, however, to work performed for intelligence agencies, including the Federal Bureau of Investigation, the Central Intelligence Agency, the Defense Intelligence Agency, the National Geospatial-Intelligence Agency, the National Security Agency, the Office of the Director of National Intelligence, and the National Reconnaissance Office.
Protected Whistleblowing under the NDAA
Both NDAA anti-retaliation provisions protect disclosures about:
- Gross mismanagement of a federal contract or grant, which is “a management action or inaction which creates a substantial risk of significant adverse impact upon the agency’s ability to accomplish its mission.” Kavanagh v. Merit Systems Protection Board, 176 F. App’x 133, 135 (Fed. Cir. April 10, 2006) (citing White v. Department of the Air Force, 63 M.S.P.R. 90, 95 (1994));
- A gross waste of federal funds, which is “more than [a] debatable expenditure that is significantly out of proportion to the benefit reasonably expected to accrue to the government.” Chambers v. Department of the Interior, 515 F.3d 1362, 1366 (Fed. Cir. 2008) (quoting Van Ee v. Environmental Protection Agency, 64 M.S.P.R. 693, 698 (1994));
- An abuse of authority relating to a federal contract or grant, which is “an arbitrary or capricious exercise of power … that adversely affects the rights of any person or that results in personal gain or advantage to … preferred other persons.” Doyle v. Department of Veterans Affairs, 273 F. App’x 961, 964 (Fed. Cir. April 11, 2008) (quoting Embree v. Department of the Treasury, 70 M.S.P.R. 79, 85 (1996)); or
- A “substantial and specific danger to public health or safety” (alleging the nature and likelihood of the harm, as well as when the harm may occur), or a “violation of law, rule or regulation” related to a federal contract. See Chambers, 515 F.3d at 1367, 1369.
To be protected, a disclosure must be made to a member of Congress or a congressional committee; an inspector general; the Government Accountability Office; a federal employee responsible for contract or grant oversight or management at the relevant agency; an authorized official of the U.S. Department of Justice or other law enforcement agency; a court or grand jury; or a management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover or address misconduct.
Broad Scope of Adverse Personnel Actions
Similar to the text of Section 806 of the Sarbanes-Oxley Act, the NDAA whistleblower-protection provisions bar a broad range of retaliatory acts, including discharging, demoting or “otherwise discriminat[ing] against a whistleblower.” The latter, catchall category of retaliatory adverse employment actions will likely be construed to encompass the Burlington Northern material-adversity standard — i.e., prohibited retaliation likely includes actions that well might have dissuaded a reasonable worker from engaging in protected conduct. See Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. 53, 67–68 (2006).
Favorable Causation Standard for NDAA Whistleblowers
The NDAA applies the burden-shifting framework and causation standard set forth in the Whistleblower Protection Act (WPA). Under that standard, a complainant prevails merely by demonstrating that the protected disclosure was a contributing factor in a personnel action, which can be accomplished by using the knowledge-timing test (i.e., by showing that the person taking the personnel action knew of the disclosure and that the personnel action occurred within a period of time such that a reasonable person may conclude that the disclosure was a contributing factor in the personnel action). A whistleblower need not demonstrate the existence of a retaliatory motive to establish that protected conduct was a contributing factor in a personnel action. Marano v. Department of Justice, 2 F.3d 1137, 1141 (Fed. Cir. 1993).
Once a whistleblower has proved contributing-factor causation by a preponderance of the evidence, his or her employer can defeat the NDAA claim only by showing by clear and convincing evidence that it would have taken the same challenged action in the absence of the protected disclosure. Under the WPA, the law upon which the NDAA anti-retaliation provision is modeled, courts consider three factors in determining whether an agency meets this onerous burden:
- “The strength of the agency’s evidence in support of its personnel action”;
- “The existence and strength of any motive to retaliate on the part of the agency officials who were involved in the decision”; and
- “Any evidence that the agency takes similar actions against employees who are not whistleblowers but who are otherwise similarly situated.”
Carr v. Social Security Administration, 185 F.3d 1318, 1323 (Fed. Cir. 1999).
Remedies for Prevailing NDAA Whistleblowers
Remedies include reinstatement, backpay, uncapped compensatory damages (emotional distress damages) and attorney’s fees and costs.
Procedures Governing NDAA Whistleblower-Retaliation Claims
An NDAA reprisal claim must be filed initially with the Office of Inspector General of the agency that awarded the contract or grant about which the employee disclosed wrongdoing. The statute of limitations is three years after the date of the reprisal. Unless the OIG determines that the complaint is frivolous, fails to allege a violation of the NDAA, or has previously been addressed in another federal or state judicial or administrative proceeding, the OIG shall investigate the complaint and, upon completion of such investigation, submit a report to the head of the agency.
The agency head can issue an order denying relief or require the contractor to take affirmative action to abate the reprisal and provide make-whole relief to the whistleblower. If the whistleblower has not obtained relief within 210 days of the filing of the complaint, then he or she may bring an action de novo in federal district court and try the case before a jury.
Where an NDAA complaint is removed to federal court, the whistleblower can add a claim under the anti-retaliation provision of the False Claims Act, which affords the whistleblower an opportunity to recover double backpay. The False Claims Act protects “lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under [the FCA],” as well as “other efforts to stop one or more [FCA] violations.” 31 U.S.C. § 3730(h)(1). FCA-protected conduct includes internal reporting of fraudulent activity to a supervisor and steps taken to investigate a potential FCA action.
Are disclosures about consumer financial fraud protected under federal whistleblower laws?
Yes, the anti-retaliation provision of the Consumer Financial Protection Act provides a cause of action for corporate whistleblowers who suffer retaliation for raising concerns about potential violations of rules or regulations of the Consumer Financial Protection Bureau.
OSHA has issued final rules implementing the whistleblower protection provision of the Consumer Financial Protection Act(CFPA). Enacted as Section 1057 of the Dodd-Frank Act, the CFPA’s whistleblower protection provision provides robust protection to employees who disclose fraud related to consumer financial protection services.
Banking Industry Employees Protected by the Consumer Financial Protection Whistleblower Law
The term “covered employee” means “any individual performing tasks related to the offering or provision of a consumer financial product or service.” The CFPA defines a “consumer financial product or service” to include “a wide variety of financial products or services offered or provided for use by consumers primarily for personal, family, or household purposes, and certain financial products or services that are delivered, offered, or provided in connection with a consumer financial product or service . . . Examples of these include . .. residential mortgage origination, lending, brokerage and servicing, and related products and services such as mortgage loan modification and foreclosure relief; student loans; payday loans; and other financial services such as debt collection, credit reporting, credit cards and related activities, money transmitting, check cashing and related activities, prepaid cards, and debt relief services.”
Scope of Protected Whistleblowing About Consumer Financial Protection Violations
The CFPA protects disclosures made to an employer, to the Consumer Financial Protection Bureau or any State, local, or Federal, government authority or law enforcement agency concerning any act or omission that the employee reasonably believes to be a violation of any CFPB regulation or any other consumer financial protection law that the Bureau enforces. This includes several federal laws regulating “unfair, deceptive, or abusive practices . . . related to the provision of consumer financial products or services.”
Prohibited Whistleblower Retaliation
The CFPA whistleblower law proscribes a broad range of adverse employment actions, including terminating, “intimidating, threatening, restraining, coercing, blacklisting or disciplining, any covered employee or any authorized representative of covered employees” because of the employee’s protected whistleblowing.
Proving CFPA Whistleblower Retaliation
To prevail under a CFPA whistleblower claim, the whistleblower need only prove that his or her protected conduct was a contributing factor in the adverse employment action, i.e., that the protected activity, alone or in combination with other factors, affected in some way the outcome of the employer’s decision.
Filing a Consumer Financial Whistleblower Retaliation Claim
CFPA complaints are filed with OSHA, and the statute of limitations is 180 days from the date when the alleged violation occurs, which is the date on which the retaliatory decision has been both made and communicated to the whistleblower.
The complaint need not be in any particular form and can be filed orally with OSHA. A CFPA complaint need not meet the stringent pleading requirements that apply in federal court, and instead the administrative complaint “simply alerts OSHA to the existence of the alleged retaliation and the complainant’s desire that OSHA investigate the complaint.” If the complaint alleges each element of a CFPA whistleblower retaliation claim and the employer does not show by clear and convincing that it would have taken the same action in the absence of the alleged protected activity, OSHA will conduct an investigation.
OSHA investigates CFPA complaints to determine whether there is reasonable cause to believe that protected activity was a contributing factor in the alleged adverse action. If OSHA finds a violation, it can order reinstatement of the whistleblower and other relief.
Whistleblower Lawyers Representing Employees in the Banking Industry
The whistleblower lawyers at Zuckerman Law, a Washington DC firm representing whistleblowers nationwide, have extensive experience representing whistleblowers in the financial services industry, including whistleblowers who worked at JP Morgan Chase, Wells Fargo, Bank of America, Deutsche Bank, Riggs Bank, and other financial institutions and hedge funds.
SEC Sanctions: Whistleblower Reference Guide
The SEC Whistleblower Program offers awards to individuals who provide original information that leads to enforcement actions with total civil penalties in excess of $1 million. A whistleblower may receive an award of between 10-30 percent of the total sanctions imposed. The table below identifies some of the largest SEC sanctions.
According to the SEC Whistleblower Office’s 2016 Annual Report to Congress, the office received more than 4,200 tips in FY2016. The majority of tips related to corporate disclosures and financial schemes, offering fraud and market manipulation. Other notable areas of tips included insider trading, trading and pricing schemes, foreign bribery, unregistered offerings, fraud in municipal securities and public pensions.
Since the law went into effect, the SEC Whistleblower Office has awarded more than $149 million to 41 whistleblowers. In FY2016 alone, the office issued more than $57 million in awards to whistleblowers, including six of the ten largest whistleblower awards in the program’s history.
If you have information that you would like to report to the SEC Whistleblower Office, contact the experienced SEC whistleblower attorneys at Zuckerman Law for a free, confidential consultation about your case by calling 202-262-8959.
|UBS Securities LLC, et al.||Dec. 2008|| $23 billion||UBS misled investors regarding the liquidity risks associated with auction rate securities (ARS) that they underwrote, marketed and sold.|
|Merrill Lynch, Citigroup, Wachovia, Bank of America, RBC, Deutsche Bank||Aug. 2008|| $20 billion||The banks misrepresented to customers that ARS were safe, highly liquid investments equivalent to money market instruments and cash.|
|WorldCom Inc.||July 2003|| $2.3 billion||Misled investors by overstating its income as a result of undisclosed and improper accounting.|
|American International Group, Inc. (AIG)||Feb. 2006|| $1.6 billion||AIG was charged with improper accounting, bid rigging and practices involving workers’ compensation funds.|
|Adelphia Communications Corporation, et al.||Apr. 2005||$715 million||According to the SEC's compliant, Adelphia: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operating statistics and inflated earnings to meet Wall Street estimates; and (3) concealed rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds for purchases of Adelphia stock and luxury condominiums.|
|CR Intrinsic Investors||Mar. 2013|| $601 million||Participated in an insider trading scheme involving a clinical trial for an Alzheimer's drug.|
|Goldman, Sachs & Co., Fabrice Tourre||July 2010|| $550 million||Goldman Sachs misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.|
|BP p.l.c.||Nov. 2012||$525 million||Securities fraud during Deepwater Horizon oil spill.|
|Federal National Mortgage Association||May 2006||$400 million||Fannie Mae engaged in a financial fraud involving multiple violations of Generally Accepted Accounting Principles ("GAAP") in connection with the preparation of its annual and quarterly financial statements,|
|INVESCO Funds Group, Inc., et al.||Oct. 2004||$377 million||Facilitated widespread market timing trading in mutual funds with which each entity was affiliated.|
|Banc of America Securities LLC, et al.||Feb. 2005||$375 million||Allegedly entered into improper and undisclosed agreements that allowed favored large investors to engage in rapid short-term securities trading known as market timing.|
|Siemens AG||Dec. 2008||$350 million||Siemens violated the FCPA by engaging in a widespread and systematic practice of paying bribes to foreign government officials to obtain business.|
|Merendon Mining (Nevada) Inc., et al.||Nov. 2010||$310 million||The SEC's complaint alleged that they architected a Ponzi scheme that persuaded more than 3,000 investors across the U.S. and Canada to invest their savings, retirement funds and even home equity.|
|Time Warner Inc., et al.||Mar. 2005||$300 million||Time Warner allegedly was materially overstating online advertising revenue and the number of its Internet subscribers.|
|J.P. Morgan, et al.||Nov. 2012||$297 million||Misleading investors in offerings of residential mortgage-backed securities|
|Citigroup Global Markets, Inc., et al.||Oct. 2011||$285 million||Citigroup mislead investors about a $1 billion collateralized debt obligation (CDO) called Class V Funding III (Class V III).|
|Prudential Equity Group, LLC, et al.||Aug. 2006||$270 million||According to the SEC's press release, Prudential's registered representatives defrauded mutual funds by concealing their identities, and those of their customers, to evade mutual funds' prospectus limitations on market timing.|
|Bear Stearns & Co., Inc.||Mar. 2006||$250 million||Securities fraud for facilitating unlawful late trading and deceptive market timing of mutual funds by its customers and customers of its introducing brokers.|
|Qwest Communications International, Inc.||Oct. 2004||$250 million||Qwest fraudulently recognized over $3.8 billion in revenue and excluded $231 million in expenses as part of a multi-faceted fraudulent scheme to meet optimistic and unsupportable revenue and earnings projections.|
|AXA Rosenberg Group, LLC, et al.||Feb. 2011||$242 million||Securities fraud for concealing a significant error in the computer code of the quantitative investment model that they use to manage client assets. The error caused $217 million in investor losses.|
|Computer Associates International, Inc., et al.||Sep. 2004||$225 million||Securities fraud charges for allegedly keeping its books open to record revenue from contracts executed after the quarter ended in order to meet Wall Street quarterly earnings estimates.|
|Morgan Keegan & Company, et al.||June 2011||$200 million||Fraud charges related to subprime mortgage-backed securities. Specifically, it failed to employ reasonable pricing procedures and nevertheless published the inaccurate daily NAVs and sold shares to investors based on the inflated prices.|
|Roys Poyiadjis, Lycourgos Kyprianou, et al.||June 2005||$200 million||According to the SEC's complaint, AremisSoft issued fraudulent statements in public filings and press releases, including reporting millions of dollars in sales to entities that either did not exist as operating businesses or did not purchase product from AremisSoft.|
|JPMorgan Chase & Co.||Sep. 2013||$200 million||Financial fraud in JPMorgan's portfolio of credit derivatives known as the Synthetic
|Bristol-Myers Squibb Company||Aug. 2004||$150 million||Allegedly overstated sales and earnings to meet or exceed financial projections.|
|J.P. Morgan Chase & Co.||July 2003||$135 million||Aiding and abetting Enron Corp.'s securities fraud|
|Credit Suisse||Nov. 2012||$133 million||Misleading investors in mortgage offerings related to the financial crisis of 2008.|
|Mizuho Financial Group, et al.||July 2012||$127 million||Allegedly misleading investors in a collateralized debt obligation (CDO) by using “dummy assets” to inflate the deal’s credit ratings.|
|Royal Dutch Petroleum Company||Aug. 2004||$120 million||Shell overstated proved reserves reported in its 2002 Form 20-F by 4.47 billion barrels of oil equivalent.|
Law Firm Representing Virginia, Maryland and Washington DC Employees in Non-Compete Litigation
Is my non-competition agreement with my former employer enforceable?
When determining whether a non-compete agreement is enforceable, a court will assess the following issues:
1. Is the restriction no greater than is required to protect the employer’s legitimate interest?
2. Is the geographic scope of the non-compete overly broad?
3. Would it preclude the employee from working in his or her profession?
4. Would it violate a clear mandate of public policy?
For advice on the enforceability of a non-competition agreement in Washington DC, Maryland, or Virginia or for representation in litigation about a non-competition agreement, call the employment lawyers at Zuckerman Law at 202-262-8959.
Strategies for Defending Against Non-Compete Litigation
For a summary of strategies for defending against non-compete litigation, click here. Such strategies include:
- File a Declaratory Judgment Against the Employer
- Assert the “Unclean Hands” Defense
- Bring a Counterclaim of Tortious Interference with a Business or Contractual Relationship