Can a government employee receive a whistleblower award? The answer is often yes! While we rarely see these cases, there is nothing wrong, immoral or illegal with government agents filing claims. There are exceptions depending on the program, however. IRS agents, for example can’t receive an award under the IRS Whistleblower Program.
For this post, we visit a case from Texas. In early 2006, Randall Little and Joel Arnold filed two qui tam lawsuits against Shell Exploration and Shell Deepwater. The cases were brought under the federal False Claims Act, a Civil War era law. The False Claims Act allows ordinary individuals to file lawsuits in the name of the U.S. government.
At the time they filed their lawsuits, Little was a senior auditor employed by the U.S. Mineral Management Service. Arnold was a supervisory auditor with the same agency. The two claimed that Shell had defrauded the Department of Interior of $19 million. Specifically, they say that Shell fudged expense number to avoid paying millions of dollars of oil and gas royalties to the government.
If you or I discovered this scheme and filed a False Claims Act claim, no one would question our receipt of a whistleblower award. This case is different, however. Little and Arnold are auditors whose very job is to uncover fraud in the government’s royalty programs.
Little and Arnold’s Efforts to Collect a Whistleblower Award
Under the False Claims Act, whistleblowers must file a lawsuit in federal court. The case is “sealed” meaning it is secret. The government then can investigate and take over the case if it chooses to do so. If not, the whistleblower’s own lawyers can prosecute in the government’s name. At that time the case is unsealed and is no longer sealed.
The government declined to prosecute. That meant Little and Arnold could proceed on their own. As soon as they did, however, Shell challenged their ability to bring the case. At issue was their status as government employment employees.
In 2011, the trial court judge dismissed the case. Prior to dismissing, the government filed its own brief and said government employees who discover wrongdoing in the scope of their duties should not be entitled to receive a whistleblower award. Although the government didn’t agree with Shell’s alleged wrongdoing, they agreed that government employees should not collect an award.
Case over? No.
The question of government auditors collecting a whistleblower award was one of first impression in the Fifth Circuit Court of Appeals. That court oversees federal courts in Texas, Louisiana and Mississippi.
Before deciding the case, the court noted that all but one of the federal appeals courts that have considered the issue permitted government employees to receive False Claims Act awards. (The one exception is the First Circuit which covers Maine, New Hampshire, Massachusetts, Rhode Island and Puerto Rico.)
At issue is the language of the False Claims Act itself. The law says that a “private person” may bring a whistleblower lawsuit. Shell and the government argued that Congress’ use of the term “private person” makes it clear that government employees are excluded. Another reading, however, is that the term “private person” was used to differentiate from actions brought by the “Attorney General” or “armed services” personnel (which are precluded from bringing claims in certain instances.)
So who is right? The appeals panel in Little and Arnold’s case agreed with the majority of other courts and ruled that the two men were not precluded from collecting an award.
Ironically, the case didn’t earn here. When a federal appeals court issues a ruling, the case is returned to the trial judge. Although the issue of whether or not a government employee can receive a whistleblower award was decided by the appeals court, the trial judge tossed the men’s case yet again. This time the court dismissed claiming the case was barred because the information giving rise to the complaint was “publicly disclosed.”
The False Claims Act only pays awards for original source information. As an example, if you read information in the newspaper, you can’t use that information to receive a whistleblower award.
Even though they lost twice before the trial court, Little and Arnold appealed again. In April 2015, the Court of Appeals again reversed. This time they also took the very rare step of ordering a different judge be assigned to the case. In the words of the court, “we reasonably expect that the current [trial] judge would have ‘substantial difficulty’ in setting aside his previously-expressed views, given that he failed to follow our previous mandate.”
Clearly, the concept of government workers collecting awards doesn’t sit well with some people. In most states, however, the practice is legal. The case is still ongoing but today its looking better for the whistleblowers. Given their extensive auditing experience, we expect they certainly know fraud when they see it. [We remind readers that Shell has not yet been found to have defrauded the government.]
Whistleblower Awards and the False Claims Act
This case has been pending for a decade and has gone up to the court of appeals twice. Both men still work for the Minerals Management Service and are patiently waiting for the case to finally reach trial or settle. (Most False Claims Act cases settle once the defendants have exhausted procedural attempts to dismiss the case.)
Why would Little and Arnold go through all this hassle? Besides being the right thing to do, the False Claims Act pays a whistleblower award of up to 30% of whatever the government collects. If the men are correct, they stand to earn $6 million or more.
With triple damages, the awards can mount up quickly. (Our clients recently received over $100 million in awards!)
Interested in receiving an award and stopping greed and corruption? Give us a call. There is no obligation and all inquiries are protected by the attorney – client privilege. For more information, contact attorney Brian Mahany at or by telephone at (direct). You can also visit our False Claims Act information page.
MahanyLaw – America’s Whistleblower Lawyers